Power to appoint successor trustee does not subject trust property to estate tax - again.
Author | Mathers, Robert A. |
In Rev. Rul. 95-58, the IRS has revoked two prior revenue rulings and modified a third as a result of recent court decisions on the right of a grantor to remove a trustee and appoint a new one.
Under Rev. Rul. 95-58, the value of a trust is not includible in the grantor's estate, due to the reserved right to remove the trustee and appoint a successor trustee not related or subordinated to the grantor.
Generally, Sec. 2036 provides for the inclusion in a decedent's gross estate of the value of property that had been transferred at any time and in which the decedent retained the right to its income or the right to designate who shall enjoy the property or its income. Similarly, Sec. 2038 provides for inclusion if the decedent held a power to change the enjoyment of the property through the exercise of a power to alter, amend, revoke or terminate.
The Service has shown concern that, when a trustee has broad discretionary powers to distribute income and effect beneficial enjoyment of trust property, the trustee's control is effective control of trust income and property. To the extent a grantor of a trust can exercise such control, that trust may be includible in a grantor-decedent's gross estate.
In 1977, the IRS issued Rev. Rul. 77-182 in which it concluded that a power to appoint a successor corporate trustee only in the event of the resignation or removal by judicial process of the original trustee did not amount to a power to remove the original trustee and...
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