A Qualified Settlement Fund (“QSF”) is a distinctive financial tool that plays a crucial role in litigation or non-litigation dispute settlements. A QSF is a tax-efficient financial mechanism that allows the parties settling a dispute to manage their funds effectively and securely.
This white paper focuses on the question of ownership of the QSF and its property. Specifically, this white paper deals with who owns a QSF and who owns the property within the Qualified Settlement Fund.
An extensive list of case law dealing with the topics is included at the end of this document.
A Qualified Settlement Fund is a statutorily authorized “fund, account, or trust…”1 that allows a defendant in a dispute to assign its associated financial liability to the QSF. Although not required to be trusts, QSFs are typically created under an irrevocable trust structure rather than as a non-trust-based fund or account. A QSF may not be established or operated as a revocable (grantor) trust – unless the single defendant establishes the trust pursuant to § 1.468B-1(K). Because of this, traditional trust rules and laws apply—including provisions addressing trust asset ownership and asset title. QSFs are a valuable tool available to quarreling parties in the dispute settlement process. Qualified Settlement Funds afford beneficial tax consequences to the parties, serve as a controlled distribution mechanism, allow for fairness and transparency, and allow flexibility in the complex world of modern-day dispute resolution.
A QSF trust must be created as a “statutory trust” and approved by a “Governmental Authority” as defined by § 1.468B-1(c) and, as mentioned above, established under state trust law. The regulations in § 1.468B-1 cover aspects such as transfers to the fund, income earned by the Qualified Settlement Fund, and distributions made by the fund. Although not required to settle a dispute, the parties to the dispute may choose to use a QSF, or the Court having jurisdiction over the matter itself may order a QSF. When a QSF is established for settlement purposes, the defendant or their insurer transfers the agreed settlement or judicial award amount into the Qualified Settlement Fund.
Pro Tip:
A court is not required to approve the trust. Any “governmental authority defined by 1.468B-1(c)(1) may authorize the creation."
Qualified Settlement Fund trust property consists of the assets the defendant (or their insurance carriers) transferred into the settlement trust to resolve one or more claims arising from an event or a related series of events against the defendant. QSF trust property can include cash, real estate, or tangible or intangible property such as bank accounts or business interests. A QSF trust can hold any property transferred into it. It is important to note that while a settling party (or their insurance carrier) may have transferred settlement funds into the QSF trust, the funding of the QSF trust does not create an ownership interest in the plaintiffs (claimants), their attorneys, agents, or any other third party.
Like any other trust, a QSF trust has the following characteristics:
Once assets are transferred to the Qualified Settlement Fund trust and titled as the legal property of the trustee, such assets are held in trust for the future beneficial expectations of claimants once allocated and vested by the trustee.
Pro Tip:
26 U.S. Code § 468B(b)(3)(C) plainly states that “the fund shall be treated as the owner of the property in the fund (and any earnings thereon).” There can be no question of ownership based on the black-letter law established by Congress. Building on the statute, numerous court cases have upheld and expanded this portion of the law. You now have the silver bullet answer, but you can keep reading for additional reasons that reinforce the statutory provision and why the ownership of a QSF is not held by the claimants or their attorneys.
It is important to note that in a properly constructed QSF, the mere potential of a future benefit from a trust does not confer ownership. In North Carolina Dept. of Revenue v. Kimberley Rice Kaestner 1992 Family Trust, the Supreme Court of the United States held that when a trustee maintains control of the trust, the mere expectation of a benefit from the trust does not imbue the beneficiaries of a trust with the right to “control, possess, or enjoy the trust assets.”2 It is hornbook law that the ability to request via a petition that the trustee considers an action does not constitute control, possession, or enjoyment of trust assets.
Additionally, note that well-drafted QSF trust documents are vital in ensuring trust ownership. Well-drafted sample language regarding ownership might read something like:
For the purpose of clarity and the avoidance of confusion; (i) the sole ownership of the Assets of the Trust resides with the trust, and (ii) the trustee has the sole authority, control, and absolute discretion over the funds held within the trust, their disposition and the application of the Claw Back (Reversion) provision, and (iii) the trustee has the sole authority, control and absolute discretion over the operation of the Trust subject to the continuing jurisdiction of the Governing Authority.
Understanding the difference between a vested interest and a contingent interest is central to the question of ownership. When a person or entity has only a contingent interest in the property (such as in a QSF), they lack absolute and unconditional ownership rights. In the case of a QSF, the trustee must vest the right to such property by such action —to create absolute and unconditional ownership rights to the property.
Third parties (such as a law firm’s contingent fee interest or a hospital medical lien) asserting a claim to property in the QSF trust do not have a vested interest in such property – they only have a claim against the underlying client. In a properly constructed Qualified Settlement Fund, the trustee is the only authorized party who may vest a benefit and qualify a claimant as a “distributee,” as defined by the state trust code. A law firm, on behalf of a claimant or other party, may petition the trustee to consider vesting a right in trust assets and distributing them. However, the trustee, in their discretion, may approve or deny the request based on various factors such as unresolved liens, ongoing litigation, other claims, or other uncertainty or factors. Only when the trustee approves the petition for distribution is the party making the petition vested in that property.
It is helpful to note that well-drafted Qualified Settlement Fund trust documents are crucial. Well-drafted sample language regarding ownership might read something like:
“Vested Right” – Means: that the trustee may, in its sole authority and absolute discretion, elect to vest a right to a portion of the Trust Assets for a Distribution to a Claimant. Prior to the trustee vesting a right to any portion of the Trust Assets, no Claimant has a Vested Right to any Trust Assets. All Trust Assets are Unvested Rights and only constitute a mere future expectancy until the trustee grants the benefit as a Vested Right in its sole authority and absolute discretion. Upon a Claimant obtaining a Vested Right, they become a Distributee, as defined herein, only to the extent of that specific Vested Right and Distribution, and such claimant shall remain an unqualified Claimant relative to any other potential future benefit expectancy. Only the trustee may confer a Vested Right, and no provision of this Trust Administration Agreement and the Trust Agreement shall confer any absolute Vested Right. The Vested Right provision is a Material Purpose of the Trust.
AND
Trustee may from time to time, in its sole authority and absolute discretion, after granting a Vested Right, thereby qualifying the claimant as a Distributee as defined herein, disburse to a Claimant a vested interest in the trust as follows:
(a) Distribute directly to the claimant; and/or
(b) Distribute to the IOLTA account of the Law firm or Attorney representing the Claimant; and/or
(c) Distribute to the Claimant’s Guardian, Conservator, Parent, Family member or another person who has assumed responsibility for the care of such claimant, for his or her suitable support, maintenance, welfare, education or other appropriate needs; and/or
(d) Hold in a Trust and distribute by direct application in such amounts for the benefit of the claimant; and/or
(e) Assign into a “first party” Special Needs Trust to preserve the government benefits of the claimant; and/or
(f) Distribute or assign in such manner as the trustee, in its sole authority and absolute discretion, deems appropriate or necessary.
There is often the question of whether attorneys (or other such agents) have an ownership right in the Qualified Settlement Fund trust or the assets held in such trust. The answer is a resounding NO.
The United States Supreme Court addressed this question in Commissioner v. Banks. There, the Court held that a “lawyer is not a joint owner of his client’s claim in the legal sense any more than the commission salesman is a joint owner of his employer’s accounts receivable.”3 The reasoning for this holding was based on the basic premise of agency law that, even when the agent is acting independently and without the consultation of the principal, the agent is still obligated “to act solely on behalf of, and for the exclusive benefit of, the client-principal, rather than for the benefit of the attorney or any other party.”4 The Court specifically stated that attorneys (or other such agents) who may have contingent-fee agreements (or other payment agreements) with the plaintiffs might be entitled to secondary claims against the claimants by contract with the claimants), but they are certainly not entitled to claim ownership rights over those assets.5
In sum, attorneys and other plaintiffs’ agents do not have ownership rights in assets held in a QSF trust. Still, they may claim a security interest in such assets. It is helpful to think of a security interest like a lien levied against someone else’s property—you do not own the property in question, but you can assert a claim against it at the appropriate time and through the proper mechanisms.
To avoid imputed ownership by triggering the constructive receipt or economic benefit doctrines, noted tax commentators have suggested that funds held in a QSF should be disbursed within twelve (12) calendar months of resolving all associated secondary matters. This recommendation is to avoid using a Qualified Settlement Fund as a mere tax deferral scheme. Platforms like QSF 360 provide integrated management of the associated QSF duration.
Decanting is creating a new trust or sub-trust and transferring the trust property and terms into a segregated version of the original trust. Decanting is not a distribution; it does not vest ownership or a distribution to any beneficiary and usually does not trigger constructive receipt or economic benefit doctrines. In the case of a QSF trust, decanting is the transfer (as a look-through, secondary transfer) of the defendant’s liability and the associated assets into a new QSF trust or a Sub-QSF trust. The act of decanting related to a Qualified Settlement Fund often results in multiple ongoing funding events as various recoveries from carriers or defendants are received over time. Remember, when a trust is decanted (whether into a new trust or sub-trusts), the same terms and conditions of the original trust apply to new or sub-trusts.
In general, all states allow for trust decanting, but the definitions and requirements differ by state, as the below examples indicate.
In Virginia, “decanting power” is defined as the power of an authorized fiduciary to distribute property from one trust to another or modify the first trust’s terms.6 Additionally, § 64.2-779.12 of the Virginia code sets out some limitations on decanting power, such as limiting the fiduciary’s ability to exercise its decanting power if the first-trust instrument expressly prohibits it.
In Michigan, “trust decanting” is defined as the process of transferring property from one trust to another.7 The statute also sets out two conditions that must be met for the transfer to be valid. First, the terms of the second trust must not materially change the beneficial interests of the beneficiaries of the first trust. Second, the governing instrument of the subsequent trust must not be inconsistent with the tax planning that informed the first trust.
In Florida, the term “decanting” is not specifically defined, but the statute allows for a trustee with absolute power to distribute trust property to distribute some or all of the property to a second trust.8 The statute has additional requirements, such as requiring the trustee to notify all qualified beneficiaries in advance of such distribution and requiring that the beneficiaries of the second trust must include only beneficiaries of the first trust.9
Thus, decanting is not an act by the trustee to vest any benefit, nor is it a determination of an unqualified right as a distributee. It is merely the transfer of all or a part of a trust which continues the original intent of the original trust into one or more subsequent trusts. In the case of a Qualified Settlement Fund trust, the trustee may decant a portion of the settlement to facilitate a more rapid administration of the QSF.
Well-drafted sample language regarding decanting might read something like:
“Decant” (a.k.a. Decanting) - Means: the distribution of part or all of the Assets of the Trust or a subsequent Trust into a recipient trust pursuant to the terms of this Trust Administration Agreement and the Trust Agreement as an exercise of the trustee’s sole authority and absolute discretion. Specifically, the trustee may invade the principal of the trust to create another Trust for the claimant’s best interests, welfare, comfort or happiness which for the purpose of the trust constitutes an “absolute power” under the laws of the Principal Place of Administration.
Qualified Settlement Fund trusts may have multiple claimants and other third parties with adverse interests who assert claims against the QSF trust. During the administration, the trustee and/or the trust administrator (as applicable) may use notational workpapers to administer the Qualified Settlement Fund and maintain records of claims asserted against the QSF trust. These notational workpapers or related documents do not vest any benefits nor change the ownership status of the QSF trust or its assets. Many trusts include within their terms and conditions a stipulation that administrative notational utility records or worksheets do not constitute a record of a vested right.
As noted previously, it is only when the trustee, in their sole authority and absolute discretion, (i) vests a claimant to a right in QSF trust assets; (ii) qualifies a claimant as a beneficiary-distributee; and (iii) the trustee does, in fact, disburse the funds to the vested and qualified claimant-beneficiary that a claimant becomes an owner of the funds.
Accordingly, notational allocation worksheets do not constitute a trustee’s affirmative action to vest a right.
Well-drafted sample language regarding notational accounting might read something like:
For the purpose of clarity and the avoidance of doubt, it is conclusively stipulated that interim worksheets, interim allocations, interim calculations, interim working papers and interim ministerial sub-accounts of the trust are solely for the administrative and ministerial convenience of the Trustee and Trust Administrator, are only notational and do not convey or establish any Vested Right, constructive receipt or economic benefit to or on any respective Claimant. Further, interim notional allocations may change from time to time at the discretion of the trustee.
A Power of Appointment is a type of power that the grantor of a trust confers to another person (the “Power Holder”). A Power of Appointment allows the Power Holder to direct the distribution of property to any person or entity subject to the terms and conditions specified in the trust’s documents. The Power of Appointment can be general or limited, but we will not delve into the differences in this paper as the distinction does not affect ownership of QSF trust assets.
In a well-constructed Qualified Settlement Fund, only the trustee will have a Power of Appointment, thereby allowing the trustee, in its sole authority and absolute discretion, to vest beneficial rights in claimants to trust assets.
QSF trust language here again provides clarity:
The trustee shall solely possess a general power of appointment to allocate, resolve and settle all claims and obligations of this Trust and the associated Settlement Agreement which the trustee may exercise from time to time, in its sole authority and absolute discretion. For the purpose of clarity and avoidance of confusion; no Claimant holds any general or specific power of appointment nor may they exercise such within the meaning of § 2041 and § 2514 of the Internal Revenue Code.
The constructive receipt and economic benefit doctrines help determine whether a taxpayer has taxable income in a given year and under certain circumstances. We address these concepts in this paper because they can indicate whether a taxpayer has “income” or access to income from a given source, thereby triggering an ownership claim.
As noted by Robert Wood, a distinguished tax attorney and the foremost authority on Qualified Settlement Funds:
“The benefits of a QSF are enormous and provide a firewall to the fundamental tax concepts of constructive receipt and economic benefit. QSFs promote dispute resolution and are specifically authorized by section 468B and the regulations. The constructive receipt and economic benefit rules are non-IRC tax doctrines borne in the case law. Constructive receipt broadly stands for the proposition that a taxpayer with a legal right to receive money who simply chooses not to receive it is still taxed because he could have received it. The economic benefit doctrine is similar. It stands for the concept that when money is irrevocably set aside for someone and will inure to his benefit, he should be taxed on it, even if he cannot receive it immediately. If waiting is the only impediment, the IRS can tax it. QSFs bypass both these rules, but they do so for valuable policy reasons: dispute resolution.”10
The doctrine of constructive receipt states that if funds are set aside for a taxpayer, credited to the taxpayer’s account, or “otherwise made available so that [the taxpayer] may draw upon it at any time…” even though the taxpayer may not have possession of those funds, such funds will be considered constructively received by the taxpayer and thus taxable.11 However, the federal regulations clearly state that “income is not constructively received if the taxpayer’s control of its receipt is subject to substantial limitations or restrictions.”12 In essence, if funds have been set aside for a taxpayer, such as a plaintiff via a QSF trust, but the taxpayer’s access to or control of those funds is subject to substantial limitations or restrictions, there is no constructive receipt, no taxable income, and thus no ownership claim. In the instance of a QSF trust, a defendant (or their insurance carriers) will assign their liabilities to the QSF trust and fund it with settlement funds. However, as has been repeatedly stated, there are a multitude of persons and entities that can make a claim (or petition for distribution) on QSF trust assets, but it is ultimately the trustee—subject to various terms and conditions, secondary claims, and various other contingencies—that has the power to vest a claimant and make distributions of QSF assets. Because of this, claimants’ control of receipt of funds is subject to substantial limitations or restrictions.
The economic benefit doctrine was established in case law, with Sproull c. Comm’r. of Internal Revenue being the seminal case for this doctrine. In Sproull, the Court held that a taxpayer received an economic benefit when his employer placed a bonus in trust for the taxpayer’s sole benefit.13 The tax court reasoned that since the taxpayer had nothing to do but assert his claim against the trust, the trustee’s only duties were to hold the monies in favor of the taxpayer, and “the trust agreement contained no restriction whatever on [taxpayer’s] right to assign or otherwise dispose…” of the trust’s assets, the taxpayer had an economic benefit.14 Out of this case came the Sproull elements—when all of the following three are present, there is an economic benefit.
“(1) There must be some fund in which money or property has been placed;
(2) The fund must be irrevocable and beyond the reach of the creditors of the party who transferred the funds to the escrow or trust; and
(3) The beneficiary must have vested rights to the money, with receipt conditioned only on the passage of time.”15
In the case of a Qualified Settlement Fund, the first two elements are easily found to be present. However, the third element is not present in a properly structured QSF trust. As has been discussed, the rights of a beneficiary (plaintiff) of a QSF trust and any other party claiming assets in the QSF trust are not vested, and the receipt of funds is not conditioned only on the passage of time; it is in the trustee’s sole and absolute discretion and authority—based on several conditions—to determine when and if to vest beneficiaries and make disbursements of funds.
Thus, in a properly constructed QSF, there is no constructive receipt or economic benefit, and, as such, there is no receipt or ownership of funds.
The ability to structure or assign from a Qualified Settlement Fund is well-established and widely implemented. A structure requires that the QSF trust assign the defendant’s original settlement obligation (which was transferred to the QSF), its liability, and associated assets to a third party (an insurance carrier or assignment company). If a claimant or attorney had ownership or control over the Qualified Settlement Fund assets, there would be actual receipt of funds and thus no ability to structure or assign. Because of this, no insurance carrier or assignment company would agree to any such assignments. Accepting this proposition would render decades of court precedent, tax precedent, IRS precedent, and business structures null and void—a ludicrous proposition.
If it were correct that the claimants owned funds in a QSF, then “Actual Receipt” would occur upon the funding of the QSF, triggering immediate taxation and eliminating the ability to structure or assign the settlement proceeds. Pattern and practice demonstrate that this is not the case. In the multiple decades of the history of QSFs, the IRS has never found nor asserted ownership (actual receipt) of funds held in an adequately constructed QSF. The IRS’ past Private Letter approvals and audits of QSFs show no corresponding enforcement action by the IRS. Accordingly, the notion of ownership of the Qualified Settlement Fund funds by the claimants is unsupported by fact, history, and legal doctrine. The IRS’ consistent actions demonstrate beyond any possible argument the falsity of claimants asserting ownership of the Qualified Settlement Fund or its property.
Regarding QSF ownership, Congress has expressed its intent in § 468B, so the IRS’ determination will be controlling. The IRS has issued a regulation stating that “if a fund, account, or trust that is a qualified settlement fund could be classified as a trust within the meaning of § 301.7701–4 [of the CFR], it is classified as a qualified settlement fund for all purposes of the Internal Revenue Code...”16 Section 301.7701–4 of the CFR says that a “‘trust’ as used in the Internal Revenue Code refers to an arrangement created…by an inter vivos declaration whereby trustees take title to property …”17
Pursuant to the plain language of the statutes and regulations, and with the over three decades of IRS precedent clearly showing the IRS’ interpretation of “ownership” for QSF purposes, the matter of ownership of the QSF and its assets is fully settled and establishes that the claimants are NOT the owners of the QSF or its assets. No reasonable court would find that the trustee of a QSF Trust is not the owner of the QSF Trust’s assets.
Qualified Settlement Funds are a valuable and common-place settlement tool, but it is essential to understand these trusts’ ownership structure. Assets held in a QSF trust are statutorily established to be owned by the QSF, not the claimants nor their attorney agents. Said QSF assets are “legally titled” in the name of the trustee. Further, a QSF trustee is solely empowered to vest rights to Qualified Settlement Funds assets in beneficiaries in the trustee’s sole and absolute discretion. Additionally, because the sole act of funding a QSF does not vest any party with rights to such assets, the constructive receipt and economic benefit doctrines are not triggered. Finally, a QSF’s duration under § 1.468B-1 is defined by the time taken to fulfill its intended purpose and resolve all related secondary matters such as liens, secondary litigation, appeals, and other conditional matters. This flexible duration, combined with the safeguards of a QSF, offers a comprehensive solution for managing settlement funds. A Qualified Settlement Fund enjoys the status and protection of a trust and does not convey ownership to the claimants until the trustee has resolved applicable secondary claims and allocated and vested a right to a distribution.
1 26 CFR § 1.468B-1(a).
2 139 S. Ct. 2213, 2221 (2019).
3 Commissioner v. Banks, 543 U.S. 426, 436-37 (2005)
4 Id., at 436, internal citation omitted.
5 Id., at 437.
6 Va. Code § 64.2-701.
7 Mich. Comp. Laws § 700.7820a.
8 Fla. Stat. § 736.04117(2).
9 Fla. Stat. § 736.04117(8).
10 Robert W. Wood, Qualified Settlement Fund Tax Myths, 104 TAX NOTES FED. 913, 917 (2022).
11 26 CFR § 1.451-2(a).
12 Id.
13 Sproull v. Comm’r of Internal Revenue, T.C. 244 (U.S.T.C. 1951).
14 Id., at 248.
15 Thomas v. U.S., 45 F. Supp. 2d 618, 620 (S.D. Ohio 1999).
16 26 CFR § 1.468B-1(b).
17 26 CFR § 301.7701-4(a), emphasis added.
See associated case law on a trust’s assets being owned by the trustee:
• Lee–Bolton v. Koppers Inc., 848 F. Supp. 2d 1342, 1350 (N.D. Fla. 2011) (“Under Florida law, however, legal title to property that is held in trust is in the name of trustee(s), not the trust itself. See, e.g., Hansen v. Bothe, 10 So.3d 213, 216 (Fla. Dist. Ct. App. 2009) (‘Upon the establishment of a trust, the legal title is held by the trustee”)
• Fred Martin Motor Co. v. LML Technologies, Inc., No. 5:07CV2475, at *2 (N.D. Ohio Mar. 19, 2008) (“It is hornbook law, however, that in Ohio the trustee is the legal owner of the trust res. 91 O Jur 3d Trusts §299 (2008)”)
• Paloian v. Lasalle Bank, N.A., 619 F.3d 688, 691 (7th Cir. 2010) (“In American law, a trustee is the legal owner of the trust’s assets. Wellpoint, Inc. v. CIR, 599 F.3d 641, 648 (7th Cir. 2010); Restatement (Third) of Trusts § 2 comment d, § 42”)
• Vournas v. Fidelity Nat. Tit. Ins. Co., 73 Cal.App.4th 668, 673 (Cal. Ct. App. 1999) (“However, under applicable trust principles, the trustee of the trust is vested with legal title to the trust property.”)
• Swenson v. Nickaboine, 793 N.W.2d 738, 744 (Minn. 2011) (“The federal government clearly “owns or holds” land it holds in trust for the MLBO, and it is a basic principle of trust law that a trustee holds legal title to trust property. See, e.g., Watkins v. Bigelow, 93 Minn. 210, 225, 100 N.W. 1104, 1109 (1904).”)
• Bavely v. Daniels (In re Daniels), No. 18-13837, at *4 n.1 (Bankr. S.D. Ohio Mar. 23, 2022) (“Under Ohio law, the trustee is the legal owner of the trust res”)
• Nevitt v. Robotham, 762 S.E.2d 267, 272 (N.C. Ct. App. 2014) (“t is well-established that the trustee holds legal title to trust property. In re Estate of Pope, 192 N.C. App. 321, 335, 666 S.E.2d 140, 150 (2008) (“There is no dispute that legal title to the trust assets was lodged in the trustees.”); see also Strong’s N.C. Index 4th, Trusts and Trustees, § 236 (2008)”)
• Huntington National Bank v. U.S., No. 5:09 CV 2468, at *15-16 (N.D. Ohio Apr. 6, 2010) (““Who owns the Policy?” the Court’s analysis begins with some basic trust law principles. As a threshold matter, a trust, as such, does not “own” property. It is the trustee of a trust who holds title to the trust assets”)
• Smedberg v. Toste, No. C058031, at *1 (Cal. Ct. App. Sep. 28, 2009) (“Unlike a corporation, a trust is not a legal entity. Legal title to property owned by a trust is held by the trustee, and common law viewed the trustee as the owner of the trust’s property.’”)
• Nielsen v. Field (In re Nielsen), 526 B.R. 351, 355 (Bankr. D. Haw. 2015) (“Hawaii has adopted the common law of England “as ascertained by English and American decisions....” The Restatement (Second) of Trusts defines a trust as a “fiduciary relationship with respect to property....” As another authority put it, “[a] trust may be defined as a fiduciary relationship in which one person holds a property interest, subject to an equitable obligation to keep or use that interest for the benefit of another.” The settlor creates the trust, and the trustee holds the legal title to the trust property”)
• Westfall v. Director of Revenue, 812 S.W.2d 513, 517 (Mo. 1991) (“Missouri trust law further teaches that the principal opinion upholds an unconstitutional application of § 143.331(2). A trust is not a legal entity. The trustee is the legal owner of the trust property, in which the beneficiaries have equitable ownership. See Greenough, supra 331 U.S. at 494, 67 S.Ct. at 1404, and Masterson v. Plummer, 343 S.W.2d 352, 355 (Mo. App. 1961)”)
• Smedberg v. Toste, No. C056578, at *1 (Cal. Ct. App. Dec. 10, 2008) (“Unlike a corporation, a trust is not a legal entity. Legal title to property owned by a trust is held by the trustee, and common law viewed the trustee as the owner of the trust’s property.” (Galdjie v. Darwish (2003) 113 Cal.App.4th 1331, 1343.))
• Middleton v. Commonwealth Bank & Tr. Co., No. 2022-CA-0675-MR, at *32 (Ky. Ct. App. May 26, 2023) (“In such cases, the law recognizes that the trustee is really the absolute owner of the trust assets. Alexander v. Hicks, 488 S.W.2d 336, 338 (Ky. 1972)”)
See associated case law where economic benefit doctrine was not triggered:
• Drysdale v. Commissioner, 277 F.2d 413 (6th Cir. 1960) (taxpayer’s right to receive trust distributions were subject to future conditions, thus no economic benefit).
• Minor v. United States, 772 F.2d 1472 (9th Cir. 1985) (taxpayer’s receipt of trust funds were conditioned on several limitations and conditions).
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