Trust Portion Includable in Decedent’s Estate and Proposed IRS Regulations

James V. Roberts (Attorney at Law, Glast, Phillips & Murray P.C.) has recently published his article entitled New Proposed Regulations on IRC § 2036 and § 2039 Inclusion, RPPT eREPORT (2007).

Here is the abstract of his article:

On June 6, 2007, the IRS published new proposed regulations that provide guidance on what part of a trust is includable in a deceased settlor’s estate under Sections 2036 and 2039 if the settlor retained the use of the trust property or the right to an annuity or other income from the trust for life (or some term that doesn’t actually end before death). Many practitioners would immediately surmise that 100% would be included, but there are revenue rulings to the contrary.

Rev. Rul. 76- 273, 1976-2 C.B. 268 and Rev. Rul. 82-105, 1982-1 C.B 133 are spotlighted in the preamble of the proposed regulations. Basically, the IRS explained that these rulings can provide a means for claiming only a part of the value of a trust in the decedent’s estate. The IRS explained that the new proposed regulations are designed to incorporate those rulings into the regulations, and also modify the existing regulations to update them with changes in the law.

In addition, the preamble explained that the proposed changes to the 2039 regulations were intended to point the practitioner back to 2036 for computational rules.