Upcoming Office Hours
I want to thank everyone who participated in the live webinars I conducted on GST tax. There were some minor technical glitches (and slide typos which have been corrected), but if you attended please bookmark the link I provided to the materials. I will be uploading a recording without an audience, as I want to keep names private of those who were on each Zoom call. This link and the materials will be made available to paid subscribers who were not able to attend as well - that should go live in the next two weeks or so.
In terms of office hours, here is a link to group sessions over the next two weeks. One-on-one office hours for paid subscribers are linked after the paywall below.
Continuing Education
It has long been my goal to provide continuing education credits for newsletter readers – especially as a complimentary or reduced-cost benefit to paid subscribers. I am getting close to making this a reality, at least on the CLE side. CPE, and CE for other credentials (such as CFP and CTFA) are in the works but may not be as immediate.
For now, what I will be planning is a 4-6 hour mini-symposium in early December on a variety of topics. I will start polling for topics in the coming weeks, so be on the lookout in the Friday newsletters for opportunities to share your input.
Some of the longer series from my YouTube channel (basics of GST tax, portability, sunset planning, etc.) and series from this newsletter will become pre-recorded webinars you can listen to for credit as well.
This remains fluid, and based on demand I may not be able to get courses approved for CLE in every state, but rest assured that I am continuing to seek ways to add value for you.
Article Summaries
Powers of Appointment and Disinheritance: A Vicious Combination
This article analyzes the recent case of in re Dec. 23, 2002 Restatement of the Vivian Stolaruk Living Tr., 361518, 365004 (Mich. App. Apr 04, 2024).
Long story short, adult children thought they would be receiving pecuniary amounts from the remainder of their deceased mother’s marital trust. But, the marital trust granted their father a testamentary limited power of appointment in favor of charity. The father exercised this power to send all marital trust assets to charity, while also providing for charity in his own revocable trust. This had the effect of disinheriting the children from both parents’ estate plans, leading to this legal action.
This case and article have some valuable pointers not just on drafting powers of appointment and clauses to exercise them, but also on summarizing and illustrating estate plans to beneficiaries. Even though beneficiaries often have a right to the trust itself, there is a question of whether they can reasonably be expected to review the trust in total or might instead rely on a summary of the trust that is offered. In this vein, an incomplete summary can lead to confusion and legal action - even where there is no duty owed to such beneficiaries by the preparer of the summary.
This case also highlighted the commencement and discovery of a cause of action where a power of appointment is involved, and noted that the statute of limitations commenced when the power of appointment was created – not when it was exercised. In this case, almost 20 years separated these two events. This lead to successful defenses of laches and unreasonable delay by the trustee.
2514(e) Crummey Powers: The Ultimate Guide to Form 709
This article is part of my subscription offering.
While Crummey power reporting has been covered in prior articles in this series, the structure of certain Crummey powers (especially those for a spouse) can have trickle-down effects on 709 reporting. For example, spousal powers in excess of certain limitations can delay or prevent allocation of GST exemption.
In this article, I discuss some of these nuances while highlighting a third lesser-used Crummey power that limits the withdrawal to the greater of $5,000/5% of contributions.
GST Tax Carve-Outs Not Found in the Internal Revenue Code
Certain pre-1986 irrevocable trusts may be grandfathered in to the GST tax, as provided in Treas. Reg. 26.2601-1. But, there are some other trusts which are also grandfathered. Unfortunately, a stroll through the Code and Treasury Regulations won’t lead you to the requirements for these trusts.
In this article, I highlight two types of trusts that did not require allocation of GST exemption to be exempt from GST tax. Both involved direct skips in trust. The first, a Gallo trust, allowed direct skip transfers of up to $2,000,000 per grandchild before January 1, 1990. The first allowed direct skips of unlimited amounts, to which there was a 0% rate assigned, during 2010, although the legislation permitting this was enacted on December 17, 2010 giving a limited window to intentionally plan for this transfer.
The Intersection of Charitable Remainder Trusts and Estate Tax, Part II
This much-requested article is part of my subscription offering.
Previously, I discussed an issue glossed over by the Code and Regulations – the application of a step-up in basis to assets of a charitable remainder trust that are subject to gross estate inclusion at the death of the grantor. This issue is often irrelevant if the charitable remainder is paid at the grantor’s death, but it becomes important if the trust continues for the benefit of one or more noncharitable beneficiaries before the remainder is paid.
In this article, I address some other guidance and gaps in the Code and Regulations dealing with the scope and extent of gross estate inclusion under IRC Sections 2036 and 2038 as pertains to a charitable remainder trust with an ongoing income interest after a grantor’s death.
Long story short, it is dangerous to assume that the gross estate inclusion is entirely offset by the estate tax charitable deduction. This article tees up the next discussion on exactly that point – determining the scope of any marital and charitable deduction that might be available to the grantor’s gross estate. In addition to these points, the next article addresses the lack of guidance on gross estate inclusion for the grantor’s spouse to the extent a prior gift or estate tax marital deduction was permitted.
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