Can a grantor be a trustee?
The Irrevocable trust is one of the most valuable tools for estate planning and Florida asset protection that is available. These trusts are not only a great way to pass assets outside of probate, but also allow assets to be protected from creditors. For an irrevocable trust to be valid, a person or entity must serve as the trustee, or manager, of the trust. The Trustee is a person who is responsible for accounting and managing the trust’s assets for the beneficiaries of the trust. Naturally, a question our firm often receives is can I (the grantor/creator of the trust) serve as the trustee?
Can a grantor be a trustee of an Irrevocable Trust? The now outdated school of thought was that a grantor should never serve as the trustee because it could potentially make the trust’s assets available to the grantor’s creditors – thus defeating the asset protection benefits offered by an irrevocable trust. The belief came from section 2036 of the tax code, which states any trust where the grantor retains the right to possess or enjoy the property or designate who will possess and enjoy the trust property will make the principal of the trust includable in the grantor’s estate at death for estate tax purposes.