Legal Question in Wills and Trusts in New York

Irrevocable Trust

My mother created an irrevocable trust before she past. The intention was to send her life insurance benefits ($500K) into the trust to be managed by the trustee for her youngest child.

What happened is that she was advised to change her life insurance beneficiary to be in the name of her youngest child. So upon death the insurance company will write a check in the name of her youngest child.

I realize that the beneficiary should of been the trust. However, this is not the case for whatever reason.

If the beneficiary is willing to sign and deposit the check into the irrevocable trust so that the trustee can carry out his mothers wishes, is this a problem?

Are we facing any gift taxes when the beneficiary sends the money into a irrevocable trust in which he is the beneficiary anyway?

Thanks


Asked on 10/14/07, 2:27 am

2 Answers from Attorneys
Anthony Park Anthony S. Park, PLLC

Re: Irrevocable Trust

The beneficiary should be able to deposit the check with the irrevocable trust. Yes, there is the potential for a gift tax issue. You should also closely examine whether the trustee had the power, under the trust terms, to name herself or her estate the insurance beneficiary. If not, the change in beneficiary may be voided. You should have an attorney review the trust document to give a more thorough analysis.

You may contact my office by email or phone for a brief consultation on this matter.

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Answered on 10/15/07, 10:40 am
Walter LeVine Walter D. LeVine, Esq.

Re: Irrevocable Trust

I am unfamiliar with the language of the trust, so while the funds may be added, there may or may not be gift tax problems, currently or in the future. It may be that the language of the trust can be changed, which might be beneficial to all parties, and this should be reviewed. The probability is that only future gift tax may be involved (worst case scenario) presuming the beneficiary still has his/her lifetime exclusion, but a complete review of the document and the beneficiary's personal situation by an experienced trust/estate attorney, like myself, is recommended. If you could get me the document, I could review it and make suggestions for amendments, if allowed.

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Answered on 10/14/07, 1:05 pm


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