The IRS issued a ruling in 1995 that allowed a beneficiary to fire and replace the trustee of their trust without having the assets of the trust included in their estate. These provisions, which have a number of technical requirements to work in accordance with the IRS rulings, can give almost effective control by the beneficiary over the trust, and some call these types of trusts “Beneficiary Controlled Trusts.” In these types of trusts, the Trustee is often given the power to distribute all the assets to the beneficiary, for any reason. Additionally, since the beneficiary can fire the Trustee for any reason, then the beneficiary now has a “check and balance” over the Trustee. A spouse or child who is given such a power will be able to regard the trust as a “transparent” inconvenience, but a tool which provides asset and divorce protection, as well as possibly estate and generation skipping tax protection.

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