Can the Grantor of an Irrevocable Trust Access the Principal From the Trust?
When a grantor establishes an irrevocable trust, he gives up all rights of ownership to the property. The grantor no longer retains withdrawal rights over the trust principal. Dependent on the drafting language in the trust agreement, the grantor may have the right to request principal from the trustee based on terms outlined in the trust agreement.
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Grantor As Beneficiary
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For irrevocable grantor trusts established with the grantor as the primary beneficiary, it is possible that the trust agreement may contain language allowing the grantor to invade principal based on certain standards. Trusts set up this way are typically for the grantor's protection, but they can contain standards for principal distributions for support, health and maintenance of the grantor. If the trust agreement contains this language, the grantor sends a formal written request to the trustee who will consider whether the distribution is appropriate under the terms of the trust.
Grantor Not a Beneficiary
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Irrevocable grantor trusts established for other parties, such as children or other family members, usually do not have the trust grantor as a permissible beneficiary. If the trust agreement is not for the grantor's benefit, then principal distributions are not permissible from the trust to the grantor. It does not matter that the grantor created and funded the trust.
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Grantor Irrevocable Charitable Trust
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If the irrevocable grantor trust is for the benefit of charity, then the grantor would have received tax concessions at the time the trust was established. The grantor will have no rights under the trust since the grantor forfeits rights of ownership when the trust is established. The grantor cannot receive principal distributions from this type of irrevocable grantor trust.
Options
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If a grantor has economic circumstances that have created a hardship, he should consult a trust attorney. It is possible that the grantor may be able to dissolve the irrevocable grantor trust, but a court action will be required and the beneficiaries of the trust will receive notice and have to agree to the termination. Since the grantor is still alive and if all parties agree, chances of trust termination are better than for an irrevocable trust with a deceased grantor.
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