Discretionary Withdrawals by Beneficiaries Will Clause (1 Page)
ISSUE: Discretionary Withdrawals by Beneficiaries.
A testator may wish to create a trust in a Will for a beneficiary with all of the limitations on distributions that a trust typically provides, but may also wish to allow that beneficiary to have a limited right of withdrawal from the trust that is not subject to the discretion of the trustee. If such a right is drafted too broadly, it may constitute a general power of appointment over the trust which would cause the trust property to be included in the estate of the beneficiary. The law does provide an exception, called a “five and five” power which allows the beneficiary to withdraw limited amounts of property from the trust annually without being deemed to possess a general power of appointment over it.
1 Clause To Address The Following Issues:
CLAUSE 1: “Five and Five” Withdrawal Power of a Beneficiary.
Discretionary Withdrawals by Beneficiaries Will Clause - 1 Clause
- “Five and Five” Withdrawal Power of a Beneficiary
A testator may wish to create a trust in a Will for a beneficiary with all of the limitations on distributions that a trust typically provides, but may also wish to allow that beneficiary to have a limited right of withdrawal from the trust that is not subject to the discretion of the trustee. If such a right is drafted too broadly, it may constitute a general power of appointment over the trust which would cause the trust property to be included in the estate of the beneficiary. The law does provide an exception, called a “five and five” power which allows the beneficiary to withdraw limited amounts of property from the trust annually without being deemed to possess a general power of appointment over it.
Author:
Steven G. Siegel is president of The Siegel Group, a Morristown, New Jersey - based national consulting firm specializing in tax consulting, estate planning and advising family business owners and entrepreneurs. Mr. Siegel holds a BS from Georgetown University, a JD from Harvard Law School and an LLM in Taxation from New York University.
He is the author of several books, including: Planning for An Aging Population; Business Entities: Start to Finish; Taxation of Divorce and Separation; Income Taxation of Estates and Trusts, Preparing the Audit-Proof Federal Estate Tax Return, Putting It Together: Planning Estates for $5 million and Less, Family Business Succession Planning, Business Acquisitions: Representing Buyers and Sellers in the Sale of a Business; Dynasty Trusts; Planning with Intentionally-Defective Grantor Trusts; The Federal Gift Tax: A Comprehensive Analysis; Charitable Remainder Trusts, Grantor Trust Planning: QPRTs, GRATs and SCINs, The Estate Planning Course, The Retirement Planning Course, Retirement Distributions: Estate and Tax Planning Strategies; The Estate Administration Course, Tax Strategies for Closely-Held Businesses, and Tort Litigation Settlements: Tax and Financial Issues.
Mr. Siegel has lectured extensively throughout the United States on tax, business and estate planning topics on behalf of numerous organizations, including National Law Foundation, AICPA, CCH, National Tax Institute, National Society of Accountants, and many others. He has served as an adjunct professor of law at Seton Hall and Rutgers University law schools.
The Siegel Group provides consulting services to accountants, attorneys, financial planners and life insurance professionals to assist them with the tax, estate and business planning and compliance issues confronting their clients. Based in Morristown, New Jersey, the Group has provided services throughout the United States. The Siegel Group does not sell any products. It is an entirely fee-based organization.
Contact the Siegel Group through its president, Steven G. Siegel, e-mail: [email protected].
