What Is the Summit Trust? A Compliant Legal Strategy for Asset Protection and Estate Planning

The Summit Irrevocable Trust represents an advanced level of estate planning offered by Cutler | Riley, building on foundational documents (Level 1) and basic asset protection (Level 2) to provide robust creditor shielding and multi-generational legacy planning for professionals, investors, and business owners. This article explains how the Trust works, its key features, and its limitations, with a strong emphasis on full compliance with the Internal Revenue Code (IRC) and state law. Unlike non-compliant structures, this Trust does not claim improper tax deferral and ensures all undistributed income is taxed at the trust level.

What Is the Summit Irrevocable Trust and How Does It Work?

The Summit Irrevocable Trust is a non-grantor, irrevocable, discretionary spendthrift trust governed by Utah law (including the Utah Uniform Trust Code, §§ 75-7-101 et seq.) and federal tax regulations under Subchapter J of the IRC (§§ 641-685). It is structured as a separate taxable entity, with all undistributed income subject to taxation at compressed trust rates under IRC § 641.

Key Classifications and Benefits

  • Irrevocable: Once formed and funded, the Trust cannot be revoked or materially altered by the creator (Settlor), providing permanence for asset protection.

  • Non-Grantor: Treated as its own taxpayer under IRC § 641, with no income attributed to the Settlor or asset sellers, ensuring separation under §§ 671-678.

  • Discretionary: The Trustee has sole authority over distributions, allowing flexibility while protecting assets from forced payouts.

  • Spendthrift: Includes provisions shielding Trust assets from beneficiaries' creditors, as enforceable under Utah Code § 75-7-502.

The Trust is funded through arm's-length purchases of assets at fair market value (FMV), often via secured promissory notes with market-rate interest. A nominal third-party Settlor creates the Trust, while a Trustee (e.g., a family member or professional) manages it, overseen by an independent Trust Protector. Beneficiaries (e.g., family members) receive support only as needed, without vested rights.

How It Protects Your Assets and Builds a Legacy

The Summit Irrevocable Trust is designed to safeguard family wealth from risks like lawsuits, divorce, or creditors, while facilitating efficient estate transfer across generations.

Features

  • Creditor Protection: Trust assets are insulated from beneficiaries' personal debts or claims, preventing attachment until distributions are made.

  • Shielding of Personal Assets: Properly funded assets are removed from personal estates, reducing exposure to probate or judgments.

  • Legacy Planning: Enables controlled distributions to heirs, avoiding probate and supporting long-term family goals without mandatory payouts.

Who Should Consider a Summit Irrevocable Trust?

This Trust is suitable for:

  • Professionals and business owners seeking creditor protection for accumulated assets.

  • Families focused on multi-generational planning and avoiding probate.

  • Individuals with significant real estate, investments, or business interests needing separation from personal liability.

  • Those prioritizing compliance and asset preservation over aggressive tax strategies.

It is not appropriate for those seeking tax deferral on undistributed income or full control over assets.

How It Handles Taxes - In Full Compliance

The Summit Irrevocable Trust is taxed as a separate entity under IRC § 641, with income computed similarly to an individual's. Undistributed income (e.g., rents, dividends, capital gains) is fully taxable to the Trust at its rates, regardless of allocation to principal under IRC § 643(b) or state law. Distributions may shift taxation to beneficiaries via DNI (§§ 651-662), but no deferral is claimed on retained amounts.

The Trustee allocates receipts between income and principal per Utah's Uniform Fiduciary Income and Principal Act, affecting only DNI for distribution purposes—not overall taxable income. This ensures transparency and avoids misinterpretations flagged by the IRS (e.g., in AM 2023-006).

Staying Legal: What the Summit Trust Doesn’t Do

Cutler | Riley adheres strictly to IRS guidance, including AM 2023-006, which warns against abusive trusts claiming improper deferral. The Summit Irrevocable Trust is not designed or marketed to:

  • Defer or eliminate tax on undistributed income through fictitious allocations.

  • Hide or underreport income to the IRS.

  • Involve sham transactions or below-FMV transfers.

  • Provide “zero tax” outcomes via misclassification.

All income is reported on Form 1041, with taxes paid promptly.

Schedule a Free Consultation with Cutler | Riley

The Summit Irrevocable Trust requires careful customization to fit your needs while ensuring IRC compliance. Our estate planning attorneys can assess if it's right for you, guide setup, and confirm tax alignment.

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.

Disclaimer: This article is for educational and informational purposes only and does not constitute legal, tax, or financial advice. Trusts must comply with IRS regulations and state law. Cutler | Riley does not promote unlawful tax strategies; always consult a licensed tax professional or estate attorney for your specific situation.