About 20 years ago my mother set up a trust in South Carolina. At that time her estate planning attorney told her that an individual cannot be the Trustee of his/her own Trust. Also, he said that any person who is the beneficiary of a trust cannot also be the Trustee for that Trust. However, recently, I spoke to an estate planning attorney in Georgia who said that it is acceptable and completely legal for the person who establishes a trust to be the Trustee of that trust. He also said that a beneficiary of a Trust can serve as the Trustee for that Trust.. Which is the correct regarding who can be the Trustee for a Trust? Have the laws regarding who can and cannot serve as a Trustee changed in recent years? Do the laws regarding Trusts vary greatly from state to state or do the laws change often from year to year?
A lot depends on the type of trust and the purpose for which it is created. If your mother created an irrevocable trust 20 years ago and was trying to keep the assets held by the trust out of her estate for estate tax purposes, then no, she should not have been the trustee of that trust or a beneficiary, because if she were it could defeat the estate tax sheltering purpose of the trust. However, if she was setting up a revocable trust for other estate planning purposes, and she was to be the main beneficiary of the trust during her lifetime, then she definitely could have been her own trustee without it creating any kind of legal or tax problems. As for her then-attorney's statements that a beneficiary of a trust could not be the trustee- that's not really true, and it wasn't true 20 years ago, but it was the more conservative way to plan. If a beneficiary of a trust is also the trustee of the trust, then the beneficiary's ability to handle the trust and make distributions to the beneficiary or his own dependents needs to have certain limits placed on it (I don't have nearly enough room here to detail all of that) OR the trust will effectively end up treated as if it were the beneficiary's own property for various purposes, including estate taxes, income taxes, and creditor protection purposes. But with the right limits in place, yes, a beneficiary can be trustee of his own trust and still accomplish many of the benefits the trust might be intended to provide. However, if creditor protection is really critical, it may be desirable for the beneficiary not to be his own trustee, and in some cases, such as one where the beneficiary is disabled or needs protection from himself for some reason, then you would not want the beneficiary to be his or her own trustee.
The rules have not changed in this regard in the past 20 years. But your mother's old attorney may have been much more conservative (or perhaps not as well-informed) as her new attorney. She could also be misremembering his advice.
Trust laws do vary from state to state, although there is a trend towards making them more standard, but the rules I've discussed above generally aren't that different from state to state.
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