Increase of Basis

• Author: Jerold I. Horn
• Profession: Lawyer
• Pages: 181-181

181

If appreciated assets are held in a shelter-style trust under circumstances in which no

shelter is necessary, a beneciary might wish to forgo the shelter and instead seek an

increase in basis by including some or all of the trust estate in his or her gross estate

for purposes of determining the United States estate tax payable because of his or her

death. see Code § 1014. A number of techniques appear available. As a rst technique,

the settlor can permit an independent trustee to grant the beneciary a general power

to appoint by will, similar to the technique that is discussed at length at Subpart 3

of Part Five of Chapter 3, not conned, however, to property with respect to which a

generation-skipping transfer would occur if the beneciary were not to have any power

to appoint by will. A second technique is the same as the rst, except, as in Subpart 3 of

Part Five of Chapter 3, any grant of a general power is limited to property with respect

to which a generation-skipping transfer would occur if the beneciary were not to have

any power to appoint by will. The second technique is not available if the beneciary

is assigned to the same generation as the transferor. According to a third technique, a

beneciary who has a nongeneral power to appoint by will might exercise the power to

create a presently exercisable general power of appointment that can extend the period

of the Rule Against Perpetuities with respect to remoteness of vesting or suspension of

the power of alienation. This subject is treated at length in Chapter 19. A fourth tech-

nique is that an independent trustee can exercise discretion, unlimited by any standard,

to distribute trust property to the beneciary with the effect of including the property

in the gross estate of the beneciary. Many of the forms in this book include the ability

of an independent trustee to do this.

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Increase of Basis