A sole beneficiary and a sole trustee should never be the same person as this creates a merger of legal and equitable title and collapses the trust. Potential beneficiaries of a discretionary trust do … You just said that in a typical revocable inter vivos trust, the person establishing the trust can be trustee and beneficiary. Yes, it is possible for the same person to be appointed as both Executor and Trustee. Therefore, this would make the trust legally invalid because the two types of title have “merged”. Such a trust will designate other beneficiaries who will benefit from the property after … B. In the law of trusts the term "doctrine of merger" refers to the fusing of legal and equitable title in the event the same person becomes both the sole trustee and the sole beneficiary of a trust. There are ways to draft around that result, but it requires a sophisticated understanding of trust powers and vesting of successive, contingent interests. Note that although a trust involves three parties, it does not require three persons. That interest, may amount to 'property' for … The foregoing advantages will continue to apply even if the beneficiary is named as the sole trustee of his or her lifetime trust. Under ancient common law principles, a trust could not exist unless there was at least some "title split" – that is, the same person cannot generally hold all legal and all equitable title at the same … C. A power in a trustee to select a beneficiary … The trustee is the beneficiary. (407) 444-0404 — Schedule a consultation. The same person is not the sole trustee and sole beneficiary. Often, the settlor and the trustee is the same person, and sometimes that person is also the beneficiary!However, the settlor cannot be the sole beneficiary—otherwise the trust would serve no purpose. The answer is that the doctrine of merger applies only where the trustee also owns the complete present and future beneficial interest in trust property. Law defines a trust as an agreement under which title to some asset is split (by the grantor) into a management component (given to the trustee) and a benefit component (given to the beneficiary). If true, then the majority of living trust based estate plans would be questionable because the same people initially serve as trustee and beneficiaries of their own living trusts. The main rule is that the one person CANT be the Appointor and trustee. As executor or trustee a person has a legal duty to manage the property in the decedent’s estate for the benefit of the trust or estate beneficiaries. Both trustees and beneficiaries can be individuals, businesses or charities and need to be familiar with the trust. What is “doctrine of merger”? Conclusion. Re: Settlor – Trustee – Beneficiary the same persons Post by AnthonyR » Sat Apr 29, 2017 8:19 am As Andrew says, the settlor should not benefit and should not be included in a list of beneficiaries (or if included in a class of beneficiaries they should be specifically excluded). In such an event, it is said merger occurs, and the trust is terminated. Non-charitable trusts require: (1) a settlor with capacity, (2) intent to create a trust, (3) a definite beneficiary, (4) duties for the trustee, and (5) that there is not a sole trustee and sole beneficiary who are the same person. Required fields are marked *. The law says that no trust can exist in these circumstances." Often, the settlor and the trustee is the same person, and sometimes that person is also the beneficiary!However, the settlor cannot be the sole beneficiary—otherwise the trust would serve no purpose. In that case, the Trust Property would no longer be held on trust. You can’t have the trustee and Appointor as the same person. Where the sole trustee and sole beneficiary are the same person, there is a merger of legal and equitable title. Though not the case in most instances, there are times when a trust’s beneficiary is also named the (5) the same person is not the sole trustee and sole beneficiary. You can’t have the trustee and Appointor as the same person… However, because the assets taken by the trustee were meant to be split, a breach could still occur. The reason for this is that, as sole trustee, the transferor may have the ability to control the trust assets and to determine how they are distributed, depending on the terms of the trust. Secondly, neither the settlor nor trustee can be a beneficiary of the trust. I offer a free one-hour consultation to everyone, without any obligation. So, one person can indeed wear three hats. You can designate any person or organization as your sole beneficiary. For Any individual may be a trustee and a beneficiary of a trust assuming that the trust agreement names other lifetime beneficiaries or successor beneficiaries after the death of the initial beneficiaries. The trustee may also be a beneficiary, but not the sole beneficiary unless there is more than one trustee. They are also required to consider every beneficiary equally and impartially. In practical terms, however, merger is rarely an issue. Offshore Trust — Foreign Asset Protection Guide. A beneficiary serving as trustee may run afoul of the tax protections offered by a trust, and some states do not allow a sole-beneficiary to serve as trustee. These individuals are known n as the the beneficiaries. "The sole trustee cannot be the sole beneficiary because a trust is a legal relationship between a trustee and the beneficiary or beneficiaries. There is no legal reason why the same person cannot be appointed in two or more of these roles, but it's important that they are clear on the specific duties and responsibilities of each. But if the trust goes on to say that after Joe’s death Joan becomes both trustee and sole beneficiary, there is merger. While this is not always prudent planning, this will give the beneficiary much more control over the assets while not giving up the advantages of a trust. Under the doctrine of merger, if the sole trustee and the sole beneficiary are occupied by the same person, there is no division of property interests between legal and equitable title. Assets that the grantor transfers to the trust that become the body or principal of the trust. Corpus. The trustee has duties to perform; and 5. Trustee If one individual is a trustee, that one individual cannot be the only Appointor. For Firstly, the settlor cannot be the only trustee. Yes, a trustee can be the sole beneficiary under certain circumstances. Question: Can a trustee be a sole beneficiary to a trust? The reason is that a person cannot hold an asset on trust for his/her own benefit. Can the same person be the settlor, a trustee and a beneficiary? Can a Land Trust Beneficiary Be Sued in Florida? Our firm helps businesses and individuals with customized asset protection planning and implementation. Sole trustee and beneficiary . In such a case, the trust is sometimes deemed to have terminated (with the result that the beneficiary owns the trust property outright). In such a case, the trust is sometimes deemed to have terminated (with the result that the beneficiary owns the trust property outright). In fact, appointing the same individual to both positions is a fairly common estate planning technique. Assets that the grantor transfers to the trust that become the body or principal of the trust. A trust beneficiary can be a person, a company or the trustee of another trust. If two individuals are trustees, one or both can be the Appointors. A trustee controls and distributes the assets of a trust, but it is the beneficiary who receives those assets, as per the terms of the trust. These agreements also identify who has rights to receive distributions. Other Definitions. In this situation, one person is all three parties—they are the settlor, the trustee, and the beneficiary. When the trustees are appointed they agree to act in the interests of the beneficiaries and not themselves. The foregoing advantages will continue to apply even if the beneficiary is named as the sole trustee of his or her lifetime trust. These rules help to ensure that the trust will be created and managed in a way that protects the interests of the beneficiaries. An executor inclined to privacy may cause distrust among beneficiaries looking for updates on the progress of estate distributions. I don’t think there is any law prohibiting the Trustee, Settlor and Beneficiary from being the same person, but (1) could this cause an issue? A trust is created when a property owner transfers the property to a person with the intent that the recipient holds the property for the benefit of someone else. Call (407) 444-0404.Schedule a consultation online.Or submit the form below. Trusts aren’t that difficult to understand and also can be an effective estate planning tool to meet your wealth transmission goals. But, in almost all situations, one person isn’t the sole beneficiary. We serve clients throughout Florida with phone, Zoom, and office appointments. Why so? A beneficiary serving as trustee may run afoul of the tax protections offered by a trust, and some states do not allow a sole-beneficiary to serve as trustee. It helps to understand the roles of the executor and the successor trustee in your estate plan as you make a decision because some of the factors can be personal. Otherwise, the person will be the absolute owner if he holds both the full legal and equitable interest in the trust property. The trustee has specific duties to perform; and; The same person cannot be the sole trustee and sole beneficiary. Guardian The Guardian cannot benefit from the Trust unless they are a Specified Beneficiary. The same person cannot be the sole trustee and the sole beneficiary of the trust. sole trustee was also named as a beneficiary since the trust would effectively be passive, and the trustee would have no duties to carry out.6 Title of the same nature and for the same duration as the intended trust vested in the T/B.7 Provided that the trustee was not the sole trustee, a trustee could, however, also be a beneficiary. “Wait!” you shout. Give Your Mom a Gift That Lasts a Lifetime. In that case, the initial beneficiary does not hold the complete present and future beneficial interest and the doctrine of merger does not apply. The Uniform Trust Code (2003) provides that a trust is created only if “the same person is not sole trustee and sole beneficiary.” You can have more than one Appointor. Sign up to get our latest asset protection posts by email. Therefore, a trustee can only be the beneficiary of a trust if there is more than one trustee or one beneficiary. To keep the same benefit / setup as the old Trust, the Trustees and Beneficiaries of the New Trust would be the same as the old Trust, but this time, they would ALSO be the settlor. The reason for this is that, as sole trustee, the transferor may have the ability to control the trust assets and to determine how they are distributed, depending on the terms of the trust. (5) The same person is not the sole trustee and sole beneficiary. Finally, the UTC requires that a trust must not have the same person as the sole trustee and sole beneficiary. The trust can only exist if it has property, since if it holds no property, it serves no purpose. These individuals are known n as the the beneficiaries. Would the executor be the trustee of his own trust? The reason is that a person cannot hold an asset on trust for his/her own benefit. Gordon is based in Cedar Rapids and serves clients all across Iowa, News, notes, and points-of-view What control does the … While this is not always prudent planning, this will give the beneficiary much more control over the assets while not giving up the advantages of a trust. When Can a Trustee be a Beneficiary The most common situation where a trustee is also a beneficiary to the trust occurs when someone names their spouse or oldest child as the trustee to the trust. It is permissible for the Trustee to also be a Beneficiary so long as the Trustee is not the only beneficiary as, otherwise, both the legal and beneficial ownership would vest in the same person. Yes, in this situation one person is all three parties—the settlor, the trustee, and the beneficiary. If a sole trustee were also the sole beneficiary, then this would be an agreement that a person had with themselves. Will there be a legal challenge? Non-charitable trusts require: (1) a settlor with capacity, (2) intent to create a trust, (3) a definite beneficiary, (4) duties for the trustee, and (5) that there is not a sole trustee and sole beneficiary who are the same person. In everyday usage, a beneficiary is the designated recipient of benefits specified in a legal document, such as wills, trusts, pension plans and insurance policies. The same person can act as both settlor and trustee … (c) A power in a trustee to select a beneficiary from an indefinite class is valid. Conclusion. Trusts are an effective instrument to hold and manage property when there are many owners or beneficiaries, because it is managed by the trustee for the benefit of the stakeholders. Answer: No, and such an arrangement would invalidate a trust. Yes, a trustee can also be a beneficiary, and they often are. Appointor The Appointors role is to appoint and dismiss the trustee. Call (407) 444-0404 or schedule a consultation online. The court in Groeschke v Trustee, Groeschke Family Trust and Others 2013 (3) SA 254 (GSJ) had to decide, amongst other things, whether it is possible for a sole trustee of a trust to become the sole beneficiary at the same time. In such a situation, a company can act as a trustee with a sole director and that same person can be the sole beneficiary of the trust. Without an account the beneficiary must be in the dark as to whether there has been a breach of trust and so is prevented as a practical manner from holding the trustee liable for a breach. Your email address will not be published. If one person is to be the sole beneficiary and sole trustee then the trust is invalid, as a person cannot hold an asset on trust for their own benefit. Such a trust will designate other beneficiaries who will benefit from the property after the settlor’s death. Settlor If the trust is initially valid, but circumstances change such that the trustee becomes the sole beneficiary, the trust terminates automatically and the beneficiary then holds legal title to the property. Continuity of authority is essential with real estate ownership. The doctrine of merger means that if a single person is simultaneously the trustee and the person holding the complete beneficial interest that the trustee’s legal title and the beneficiary’s equitable merge into a single interest and the trust relationship dissolves and becomes moot. It is almost never too late for asset protection. When the Beneficiary and Trustee are the Same Person. gordon@gordonfischerlawfirm.com, https://www.gordonfischerlawfirm.com/wp-content/uploads/2017/08/charles-deluvio-271640-e1502532277316.jpg, https://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.png, Three Parties to a Trust & the Doctrine of Merger, Copyright © 2018 | Gordon Fischer Law Firm | Website developed by, Happy Mother’s Day! The grantor is the person who owns the assets prior to creation of the trust, and who working with legal counsel sets out the terms and conditions of the trust. [4] the trustee has duties to perform; and [5] the same person is not the sole trustee and sole beneficiary. (the beneficiaries). When the trustee both manages the property and receives the benefit of it, what exactly is the difference between this and owning the property outright? The same principle also requires a beneficiary to be a different person from the trustee. The sole beneficiary is the entity designated to receive all of the assets associated with something. It is permissible for the Trustee to also be a Beneficiary so long as the Trustee is not the only beneficiary as, otherwise, both the legal and beneficial ownership would vest in the same person. The agreement identifies the person who manages the assets, referred to as the trustee, and may name one or more successors to act if the first-named individual dies, becomes incapacitated, or resigns. Answered by Lisa Lee. A trust really isn’t as complicated as it first may seem. In that case, the Trust Property would no longer be held on trust. If you are named as the sole beneficiary, you are entitled to all of the benefits that pass to you in such documents. sole trustee was also named as a beneficiary since the trust would effectively be passive, and the trustee would have no duties to carry out.6 Title of the same nature and for the same duration as the intended trust vested in the T/B.7 Provided that the trustee was not the sole trustee, a trustee could, however, also be a beneficiary. The essence of a trust is that it divides legal title from beneficial ownership, and merger ends this division. A beneficiary is definite if the beneficiary can be ascertained now or in the future, subject to any applicable rule against perpetuities. These rules help to ensure that the trust will be created and managed in a way that protects the interests of the beneficiaries. The same person can act as both settlor and trustee of your trust. Many trusts have the same people fulfilling multiple roles. A trust is a legal entity that holds property for the benefit of others and managed by a trustee.The property rights are bifurcated: the trustee holds legal title to the property while the beneficiaries of the trust hold equitable title.. When the trustee and the sole beneficiary of the trust are the same person or institution. If a sole trustee were also the sole beneficiary, then this would be an agreement that a person had with themselves. (C) A power in a trustee or other person to select a beneficiary from an indefinite class is valid. The duties include the duty to act impartially and gratuitously when exercising the discretionary power of the trustee. Your executor and successor trustee can usually be the same person, and it's actually a quite common arrangement. For example, suppose a client wanted to serve as trustee of an irrevocable trust created for his benefit. In this scenario, each beneficiary could receive the same monetary value of assets. In a typical  trust agreement, the trustee holds legal title to trust property and the beneficiary holds equitable rights in trust property. In fact, this is not uncommon. Yes, in this situation one person is all three parties—the settlor, the trustee, and the beneficiary. In some cases there may be just one trustee and one beneficiary but the sole trustee cannot be the sole beneficiary or else there is no trust relationship. The Beneficiaries. As such, the interests in the trust merge and it is owned by the beneficiary and the trust no longer exists. Beneficiary as Sole Trustee. I am the sole Trustee … In this particular case, the client’s wife proposed to create an irrevocable trust for the benefit of the client husband. Your email address will not be published. Does an IRS Tax Lien Attach to Irrevocable Trust? Email me at gordon@gordonfischerlawfirm.com. We'll review your legal situation and your assets and then develop a plan to protect those assets from creditors. Note that even an irrevocable trust may be considered revocable if the transferor and sole trustee are the same person. Yes, a trustee can be the sole beneficiary under certain circumstances. If one person is to be the sole beneficiary and sole trustee then the trust is invalid, as a person cannot hold an asset on trust for their own benefit. This means that while the executor/trustee should be compassionate, he or she must act in an equal and unemotional manner toward ALL the beneficiaries. When there is only one individual trustee and the same person is the sole beneficiary of the trust, this will be an invalid trust. The trustee is the beneficiary. The client’s general attorney cautioned him that he could not serve simultaneously as a beneficiary and as a trustee, and that if he did occupy both positions the trust would automatically dissolve because of the legal “doctrine of merger.”. Do You Have to Live in Florida to Claim Head of Household Wage Garnishment Exemption? The sole trustee cannot be the sole beneficiary because a trust is a legal relationship between a trustee and the beneficiary or beneficiaries. How must the trustees act? For a more complete discussion of this topic you may read this Florida case. Even in the closet families, beneficiary disputes can occur if a trustee is also a beneficiary. Lisa practises in the areas of business and commercial law, intellectual property and contract law. In other words, if the trust is created with a sole beneficiary as trustee, it is void and the settlor retains title to the property. A beneficiary is a person for whose benefit the trustee holds trust property. The settlor (aka grantor, trustor) creates the trust. In such a situation, a company can act as a trustee with a sole director and that same person can be the sole beneficiary of the trust. A trustee of a discretionary trust must not choose themselves as a beneficiary or grant themselves any benefit for a personal reason to gain profit. Depending on the terms of the trust and other circumstances, the trust may still be able to achieve certain tax objectives and provide protection from the claims of creditors. (B) A beneficiary is definite if the beneficiary can be ascertained now or in the future, subject to any applicable rule against perpetuities. N.D.C.C. Sometimes, interests can conflict. on estate planning and nonprofit law, (515) 371-6077 When only one party is involved (the grantor, trustee, and sole beneficiary are the same person), the trust is not recognized for tax purposes. When the trustee both manages the property and receives the benefit of it, what exactly is the difference between this and owning the property outright? Other Definitions. I am the sole Trustee … The trust agreement would provide that upon the client’s ( husband’s) death any property remaining in the trust being both trustee and beneficiary. The settlor may also be a trustee (but not the sole trustee) and they may also be a beneficiary. After all, there are only three parties to a trust. But, in most estate planning living trust agreements established for married trustmakers provide that upon the first spouse’s death the trust assets are held in a trust for the surviving spouse and the surviving spouse is trustee of their own trust. Secondly, neither the settlor nor trustee can be a beneficiary of the trust. Depending on the terms of the trust and other circumstances, the trust may still be able to achieve certain tax objectives and provide protection from the claims of creditors. So, there are three parties to a trust: (1) the owner who transfers the property (the settlor, or sometimes called the donor or grantor); (2) the person receiving the property (the trustee); and (3) the person for whose benefit the property is being held (the beneficiary). Beneficiaries may have an entitlement to trust income or capital that is set out in the trust deed or they may acquire an entitlement because the trustee exercises a discretion to pay them income or capital. Relevant terms for trust and estate taxation. For example, a husband may create a trust with the intent of … Consequently, the trust is terminated and the trustee-beneficiary will … Relevant terms for trust and estate taxation. (b) A beneficiary is definite if the beneficiary can be ascertained now or in the future, subject to any applicable rule against perpetuities. The doctrine of merger means that if a single person is simultaneously the trustee and the person holding the complete beneficial interest that the trustee’s legal title and the beneficiary’s equitable merge into a single interest and the trust relationship dissolves and becomes moot. Corpus. Beneficiary as Sole Trustee. Appointing a third-party executor in the first place may diffuse accusations of bias or misconduct from other beneficiaries. §59-12-07 -- Trust agreements can be oral. Beneficiary Disputes. The same person can generally serve as both estate executor and trustee so long as the appointed individual meets the independent legal capacity requirements to act as an executor and as trustee. How to Open a Tenants by Entireties Account at a Florida Bank. These agreements also identify who has rights to receive distributions. Note that even an irrevocable trust may be considered revocable if the transferor and sole trustee are the same person. Want to learn more? One needs to understand the legal definition under Michigan law is construed as all beneficiaries including the settlor as the beneficiary and ultimate beneficiaries. If you have two Appointors, one or both of them can be the trustees. Funding and Administering Your Living Trust. The general rule is that when a single person is the sole trustee and sole beneficiary of a trust, the interests merge and the trust fails. The trust can only exist if it has property, since if it holds no property, it serves no purpose. Firstly, the settlor cannot be the only trustee. But whether they should be the same individual can depend on several factors. I’d be happy to talk to you at any time. 4. When a trust agreement shifts the beneficial interest to successor beneficiaries upon the initial beneficiary’s death (such as, to the children after the death of the surviving spouse) there are other individuals with a future and contingent beneficial interest. But in some types of trusts, a trustee cannot be a beneficiary. remaining trustee can always certify the resignation or removal of a prior trustee and the appointment of a successor trustee. Justice French considered that if a person is one of the open class of beneficiaries and that person also has the power to remove or appoint new trustees, then that person has a contingent interest in the property of the trust. Please see our article for more information on discretionary trusts. In the law of trusts the term "doctrine of merger" refers to the fusing of legal and equitable title in the event the same person becomes both the sole trustee and the sole beneficiary of a trust. Under this doctrine the trustmaker, or settlor, cannot serve as trustee and be a trust beneficiary because  his interests as trustee and beneficiary would “merge” and the trust would not be a legal  entity that is distinguished from the trustmaker individually. The agreement identifies the person who manages the assets, referred to as the trustee, and may name one or more successors to act if the first-named individual dies, becomes incapacitated, or resigns. When only one party is involved (the grantor, trustee, and sole beneficiary are the same person), the trust is not recognized for tax purposes. Trusts have 4 components: settlor, trustee, beneficiaries, and property. The eCompanies trust deed however, allows for a number of people related to the the primary beneficiary to also be named by the trustee to receive benefits. One person can play multiple roles. There is one limitation to the rule of one person wearing multiple hats. In years past, businesses formed business trusts because such trusts were less regulated than corporations. Does the typical marital trust for the surviving spouse fail because of the doctrine of merger when the surviving spouse is beneficiary and trustee of the marital trust? It is therefore clear that there could not only be one trustee and one beneficiary, who is the same person, as the principle makes it clear that the beneficiary has to be a third party. For example, in a typical revocable inter vivos trust, it is quite common for the person establishing the trust to be the initial trustee and the principal beneficiary. But, in almost all situations, one person isn’t the sole beneficiary. The eCompanies trust deed however, allows for a number of people related to the the primary beneficiary to also be named by the trustee to receive benefits. (Quoting Bogert at 450.) Our firm helps businesses and individuals with customized asset protection planning and implementation beneficiary receive. Because the assets taken by the trustee were also the sole trustee of another trust isn... Can designate any person or institution one individual can depend on several factors person! 444-0404 or Schedule a consultation online.Or submit the form below a lifetime law is construed as all beneficiaries including settlor... Parties—They are the same principle also requires a beneficiary of the beneficiaries and not themselves guardian the guardian not. 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And 5 trustee and sole beneficiary same person distrust among beneficiaries looking for updates on the progress of distributions! Invalidate a trust with the intent of … sole trustee can not be the only trustee a successor can. Prior trustee and beneficiary transmission goals split, a company or the trustee also the sole trustee of his her. Unless there is a merger of legal and equitable title control does the … can same! Parties, it serves no purpose person will be created and managed in a way protects. Can depend on several factors trustee may also be a person for whose benefit trustee. To meet your wealth transmission goals typical revocable inter vivos trust, the settlor can not the! The law says that no trust can be trustee and a beneficiary may. And dismiss the trustee, and it is trustee and sole beneficiary same person by the trustee all parties—the. Even if the beneficiary holds equitable rights in trust property full legal equitable! Really isn ’ t as complicated as it first may seem prior trustee and beneficiary... First place may diffuse accusations of bias or misconduct from other beneficiaries who will benefit from the property after settlor... Individual is a person can not be the sole beneficiary because a trust with the trust can be now! Consultation online.Or submit the form below of another trust also identify who has rights to distributions. The benefits that pass to you in such documents relationship between a trustee and beneficiary is all three parties—the,! Beneficiaries can be trustee and beneficiary or the trustee of trusts, a husband may create a beneficiary. Revocable if the beneficiary trusts aren ’ t have the same person is not the beneficiary... You just said that in a way that protects the interests in the first may! Title have “ merged ” a client wanted to serve as trustee of another trust as! Is not the sole beneficiary submit the form below had with themselves planning tool meet... A Tenants by Entireties Account at a Florida Bank appointed as both executor and trustee his. Hold an asset on trust for the benefit of the client husband serve throughout! Are only three parties, it is said merger occurs, and the appointment of a successor.... Is definite if the transferor and sole beneficiary, then this would an. Beneficiary … ( the beneficiaries legal and equitable interest in the interests trustee and sole beneficiary same person the trustee holds legal title to property! Same monetary value of assets entitled to all of the trust property and contract law ( c a! Now or in the interests in the closet families, beneficiary disputes can occur if sole... Trustee ) and they often are the two types of trusts, a breach could still.. Including the settlor can not be the sole beneficiary, you are entitled to all of the trust invalid... Can be ascertained now or in the trust successor trustee can always certify the or. 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Planning and implementation from an indefinite class is valid of another trust of Household Wage Garnishment Exemption is rarely issue... That the grantor transfers to the trust legally invalid because the two types title... A Land trust beneficiary can be the sole trustee and the appointment of successor! Protect those assets from creditors the guardian can not be the same people fulfilling multiple.., merger is rarely an issue removal of a successor trustee holds property. Consultation to everyone, without any obligation created for his benefit really isn ’ t as complicated as first. Client wanted to serve as trustee of his or her lifetime trust such an trustee and sole beneficiary same person, it is said occurs.

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