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Reg Z Living Trusts-Apply to Irrevocable Trusts?

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Question: 
I'm aware of the 2015 CFPB commentary in Reg. Z stating that living trusts should be treated as natural persons. Would this apply to irrevocable trusts (where the trustors are deceased)? Is there case law or commentary supporting (or not) that irrevocable trusts are estates and provided the organizational exemption under Reg. Z? Thank you.
Answer: 

At issue is comment 3(a)-10.i. to Regulation Z, which addresses trusts for tax or estate planning purposes. One of the key statements in that comment is "During their lifetimes, however, such consumers may continue to use the assets and/or income of such trusts as their property." The "consumers" in that sentence are individuals who have placed the assets in trust. Once those consumers (the trustors or grantors) have died, they clearly cannot "continue to use the assets ...." For that reason, I don't believe that comment 3(a)-10.i. applies after the death of the grantor(s).

I can't point to case law and state law could affect the answer. My best advice is to consult bank counsel.

First published on 08/12/2018

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