What Is the Summit Trust? A Compliant Legal Strategy for Asset Protection and Tax Deferral

The Summit Trust™ represents the third and most advanced level of estate planning offered at Cutler | Riley. While Level 1 focuses on essential planning documents and Level 2 adds asset protection, Level 3 builds upon asset protection and introduces strategic tax deferral and legacy planning for high-income earners, investors, and business owners. This article explains how the Summit Trust works, what it can and cannot do, and why compliance matters.

What Is the Summit Trust and How Does It Work?

The Summit Trust is an irrevocable, non-grantor, complex, discretionary, spendthrift trust governed under Delaware law and relevant IRS regulations. These classifications carry key benefits:

  • Irrevocable: Once formed, the trust cannot be revoked by the Settlor.

  • Non-Grantor: The trust is treated as its own taxpayer under IRC § 641.

  • Complex: The trust may retain income and accumulate it rather than distributing it annually.

  • Discretionary: The trustee has sole discretion over distributions.

  • Spendthrift: The trust includes language that protects the trust assets from beneficiary creditors.

How It Protects Your Assets and Builds a Legacy

The Summit Trust is designed to protect family wealth across generations:

  • Creditor Protection: Beneficiaries’ creditors cannot reach trust assets.

  • Shielding of Personal Assets: When funded correctly, assets in the trust are not subject to personal lawsuits or judgments.

  • Legacy Planning: Trust assets can be strategically distributed to children or grandchildren on terms you choose.

Who Should Consider a Summit Trust?

The Summit Trust is ideal for:

  • High-income professionals with non-W2 income (e.g., investors, business owners)

  • People planning to sell highly appreciated real estate, stock, or a business

  • Families concerned about long-term tax exposure and generational wealth planning

  • Anyone looking for both asset protection and strategic tax deferral

How It Can Help Defer Taxes — Legally

One of the Summit Trust’s most powerful features is its ability to defer taxation of passive income in specific situations. Under IRC § 643(b) and related Treasury Regulations, a trustee may lawfully allocate certain types of income—such as capital gains or extraordinary dividends—to corpus (principal).

When income is properly allocated to corpus, it is not included in Distributable Net Income (DNI) and therefore not immediately taxable to beneficiaries. However, this income is still taxed at the trust level, or deferred until it is actually distributed. This structure may offer significant tax savings when distributions are timed strategically across multiple years or generations.

It’s important to note: This is not a tax elimination strategy. The trust still pays tax on retained income unless deferred legally under the IRC and reported properly.

Staying Legal: What the Summit Trust Doesn’t Do

Cutler | Riley follows the latest IRS guidance, including IRS AM 2023-006, which warns against aggressive or abusive trust structures. The Summit Trust is not designed or marketed to:

  • Eliminate tax liability through fictitious allocations;

  • Hide income from the IRS;

  • Transfer assets in a sham transaction or below fair market value;

  • Provide “zero tax” strategies through improper classification of income.

We ensure that every trust is structured, documented, and administered to comply fully with federal and state tax laws.

Schedule a Free Consultation with Cutler | Riley

The Summit Trust™ is not a one-size-fits-all tool. It requires careful customization and professional administration to achieve the desired benefits.

At Cutler | Riley, our experienced estate planning attorneys will help you understand whether this type of trust aligns with your goals, how to structure it properly, and how to remain compliant over time.

Want to see how the Summit Trust fits into your overall estate plan?
Read: The 3 Levels of Estate Planning

Schedule your free consultation today to learn more about how the Summit Trust can protect your legacy, reduce risk, and provide long-term financial advantages for your family.

This article is for educational and informational purposes only. It does not constitute legal, tax, or financial advice. The Summit Trust must be established and maintained in accordance with current IRS regulations and state law. Cutler | Riley does not promote any form of unlawful tax avoidance. You should consult directly with a licensed tax professional or estate attorney regarding your specific situation before taking any action.