Section 59 Other Changes

• Library: Trust and Estate Legislation 2012

Modifications that:

· do not “shift a beneficial interest in the trust to any beneficiary who occupies a lower generation (as defined in section 2651) than the person or persons who held the beneficial interest prior to

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the modification”; and

· do not “extend the time for vesting of any beneficial interest in the trust beyond the period provided for in the original trust,”

will not cause a grandfathered GST exempt trust to lose its exemption. Treas. Reg. § 26.2601-1(b)(4)(i)(D)(1).

Under this safe harbor, the modification (including a trustee’s discretionary distribution, a settlement, or a trust construction that does not “fit” within the first three safe harbors) can be a judicial or nonjudicial reformation (as long as it is valid under state law). Id. Significantly, unlike the first safe harbor, there is no requirement that the decanting must have been permitted at the time that the trust became irrevocable. Accordingly, the analysis of whether the decanting in Missouri is “valid” is the same analysis applied to the decanting statute...