Can a Beneficiary Relinquish Control of an Irrevocable Trust?
In the estate planning process, using an irrevocable trust can be an effective way to limit estate taxes and provide an inheritance for beneficiaries. If you are the beneficiary of an irrevocable trust, you do not necessarily have to accept the assets that have been left to you if you do not want them.
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Control of Trust
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When you are the beneficiary of an irrevocable trust, it does not necessarily mean that you are in control of that trust. In fact, a trustee is appointed to oversee the trust assets on behalf of the person who set up the trust. The beneficiary is simply the person who will inherit the assets upon the death of the grantor of the trust. In some cases, the beneficiary can change the terms of the trust, but the trustee is still technically in control.
Disclaiming Assets
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If you stand to inherit assets from an irrevocable trust, you do not have to take them. Some beneficiaries disclaim assets when they do not want to inherit them. For example, if you already had plenty of money, you may not want to take assets in a trust because of tax purposes. If this is the case, you can simply elect to disclaim the assets and they will not be passed on to you.
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Contingent Beneficiary
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If you disclaim the assets of an irrevocable trust, they will typically pass on to a contingent beneficiary. A contingent beneficiary is an individual who is named as a secondary beneficiary after the primary beneficiary. If the primary beneficiary does not want the assets or is not alive to accept them at the proper time, the assets will then pass on to the contingent beneficiary. If a contingent beneficiary is not available either, then the issue can become more complicated.
Probate
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Is no beneficiary or contingent beneficiary is available to take the assets from a trust, then the probate court may have to get involved. The probate court is available in each state to help divide property after an individual passes away. The probate court will look over the estate and determine how best to divide the assets among the surviving family members. The court will use applicable state law to determine the division of assets.
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