Can I Serve as Trustee and Still Exclude Trust Assets from My Taxable Estate?
I am creating irrevocable trusts for my children and grandchildren about which I have several questions:
- To exclude assets from my taxable estate can I be the trustee during my lifetime?
- If not can I have power to control investments?
- If neither, can my wife be the trustee?
- If answer to all is no, would a limited partnership or LLC provide control with me as general partner with a small ownership and my children and grandchildren as limited partners?
While the exact answer to your questions may depend on the exact words of the trust, the answer is probably “no” to (1) and (2) and “yes” to (3) and (4). You cannot serve as trustee or retain investment control and still remove the property from your estate. But your wife is not you, so she can serve as trustee. In that case, however, she cannot share in the gift to the trust. That won’t matter if you’re making a taxable gift and not intending to use your annual $16,000 gift tax exclusion. All of that said, a limited partnership or LLC might better achieve your goals since, because as you suggest you could maintain management control while removing the property from your taxable estate. You may still want to create the trusts as well if you have other reasons to create them such as divorce and creditor protection for your children and grandchildren or your grandchildren are too young to come into possession of their interests in the underlying property.