Section 4.31 Framework for the Use of the Adjustment Power

• Library: Trusts and Powers 2013 Supp

B. (§4.31) Framework for the Use of the Adjustment Power

The Adjustment Power generally applies if certain preconditions are met, including the following:

· Missouri law must govern the trust.

· The trust document may not contain investment restrictions that prevent the trustee from investing as a prudent investor. See § 469.405.1, RSMo Supp. 2005.

· The trust must describe the amount that shall or may be distributed to a beneficiary by referring to income. Id.

· The trust document may not contain a specific prohibition regarding the application of the Adjustment Power. Section 469.405.6.

There are specific limitations regarding the use of the Adjustment Power. The Adjustment Power cannot be used to:

· reduce the income interest in a trust for which a marital deduction would be allowed if the trustee did not have the power;

· “reduce the actuarial value of the income interest in a trust to which a person transfers property with the intent to qualify for a gift tax exclusion”;

· change the...