“Per stirpes” is a directive for distribution upon a beneficiary’s death. It means the share of a deceased beneficiary passes down to that beneficiary’s descendants. Therefore, the son’s share does not lapse or go to others; it is divided equally among his two children.

As a fiduciary, you must act prudently and in the beneficiary’s best interest. Outright denial without due diligence could be a breach of duty if the request is reasonable. Distributing without analysis is reckless. The prudent step is to gather sufficient, objective information to make an informed decision, which includes an independent review of the proposal.

The initial step in potential exploitation is often direct, discreet contact with the client. This allows you to verify the client’s intent and awareness without prematurely accusing the new co-trustee. If the client is confused or unaware, it escalates the concern. Internal documentation is critical but is a concurrent or follow-up action, not the first. Filing a SAR may become necessary, but it is typically preceded by internal verification and escalation.

Under the Uniform Principal and Income Act (adopted in most states), realized capital gains are generally allocated to trust principal, not to accounting income. Therefore, unless the trust document specifically states otherwise, the capital gain is retained in the principal of the trust and is not part of the “net income” payable to the income beneficiary.

Under Internal Revenue Code Section 2042, the proceeds of a life insurance policy on the decedent’s life are includible in the gross estate if the decedent possessed any “incidents of ownership” in the policy at death. Ownership of a revocable trust is attributed to the decedent. Therefore, the full death benefit is includible, regardless of the beneficiary being a trust.

An outright bequest or a precatory (non-binding) wish gives the museum full ownership and the legal right to sell. A condition subsequent is problematic as it creates a future interest and potential legal disputes. A dedicated testamentary trust is the most robust tool. The trust, not the museum, holds legal title. The trustee can allow the museum to possess the painting under strict, enforceable terms (e.g., for public display), with clear instructions for what happens if the terms are violated, thus ensuring permanence.

A trustee’s fee must be reasonable for the services rendered. Charging a standard percentage on a highly illiquid, non-income producing asset like a closely-held business may be unreasonable if it requires minimal active management. The trustee should review its fee agreement and practices, and may need to adjust the fee calculation for such assets or be prepared to justify the fee level based on the actual work required, potentially to a court.

For an ILIT to work, the insurance policy must be removed from the grantor’s estate. Premiums must be paid with the grantor’s funds directly to the trustee as gifts, or via “Crummey” powers. If the grantor gives money to the spouse who then pays the premium, the IRS could argue the grantor never made a completed gift to the trust. Instead, it was a gift to the spouse, whose payment may be imputed back to the grantor, keeping the policy in the grantor’s estate—defeating the ILIT’s purpose.

A Charitable Remainder Trust (CRT) is designed to provide an income stream to non-charitable beneficiaries for a term (life or years), after which the remaining assets (the remainder) must pass to qualified charitable organizations. Upon the death of the last income beneficiary (or end of the term), the trustee’s duty is to distribute the principal to the named charity(ies). There is no discretion to distribute to non-charitable parties at this stage.

“Per stirpes” is a directive for distribution upon a beneficiary’s death. It means the share of a deceased beneficiary passes down to that beneficiary’s descendants. Therefore, the son’s share does not lapse or go to others; it is divided equally among his two children.0