Discretionary Trust Interest Held Subject to Federal Tax Lien

Code Section 6321 imposes a federal tax lien for unpaid taxes upon “all property and rights to property, whether real or personal” that belong to the delinquent taxpayer. Is a beneficiary’s interest in a trust a property right that the IRS can lien?

This turns on state law, and the rights of a beneficiary and the obligation of the trustee under that law. However, there are some general rules. If amounts are distributable only in the discretion of the trustee, the lien will not usually attach. If the trust provides for mandatory distributions or distributions required under a discretionary standard, then the lien probably applies…

Duckett v. Enomoto, U.S. District Court, D. Arizona (April 18, 2016)

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