W. Tyler MellingEstate Planning AttorneyCedar City, UT ·
You don't have enough information here to provide a proper response. However, generally, trustee behavior, absent fraud, does not affect the assets of the trust. The grantor on the other hand may expose trust assets if the assets were transferred with intent or knowledge to defraud creditors or evade taxes, among other things. I suggest you meet with a trusts attorney if you have any questions about irrevocable trusts.
Tax problems of a trustee who is not also a grantor of the trust should not affect the trust. A person giving away assets is the grantor, and grantor trusts are ordinarily subject to the creditors of the grantor, except in specific situations only available in limited jurisdictions. Normally, a grantor can't give away their assets to a trustee or hide them to avoid their own creditors. Ultimately, the IRS can trace assets back to the original owner when transfers are done for the intent to hide assets from them. Attempting to hide assets from the IRS may even be a crime. An attorney experienced in creating asset protection trusts and IRS issues can assist and advise what is legal in order to avoid additional issues with the IRS besides the current issues, whatever they may be.
I concur with my colleagues. Your situation is complicated and deserve a professional 'look-see'. I'd recommend a sit-down meeting with an experienced Estate Planning attorney to lay out the best options and to consider what you can do to overcome this challenge. Good Luck.