Fund Refreshments: Stale Trust Funding Revisited

Stale trusts (subtrusts to be created and funded pursuant to a decedent's estate plan as a result of the decedent's death that were not so created and funded) are an ongoing hot topic for CPAs because they raise questions about the CPAs role and responsibility in dealing with them Here are some guidelines designed to help you ask questions that apply to your client's individual circumstances. Let's assume Mom and Dad, a married couple, established the Smith Family Trust. The trust called for the division of its assets into three subtrusts--a Survivor's Trust, a Marital Trust and a Bypass Trust when the first spouse dies, which ended up being dad live years ago. The Survivor's Trust was to be funded with Mom's interest in the trust assets, and Dad's interest was to be divided between the Marital and Bypass trusts. Mom would have full control over the distribution of the assets of the Survivor's Trust upon her death, but would be granted only a limited power to change the distribution of the Marital and Bypass trusts. The Marital and Bypass trusts allow distributions of principal to Mom during her lifetime only if needed for her health, support or maintenance after considering other assets available to her.