Question 5. What can I do about an heir with a large outstanding tax liability?

Answer. In such a situation a carefully drafted estate plan should involve, at a minimum, a Living Trust which contains discretionary spendthrift distribution provisions that would NOT enable this heir to access income or assets under any circumstances UNLESS such a distribution was made in the SOLE discretion of the Trustee among other very important drafting considerations. If the heir is prohibited from compelling the distribution of such funds, then the courts have ruled that the state and/or Internal Revenue Service can NOT force such a distribution NOR collect the heir's liability from the Trust.

However, if the person who creates the trust, or a trust beneficiary, lives in a state that has adopted the new Uniform Trust Code, it may be wise to create the trust in a much more favorable trust law jurisdiction such as Alaska, Delaware, Nevada or South Dakota.