Service Approves “Administrative” Modifications to GST-Exempt Trusts

The Service recently released two related rulings,PLRs 201209001 and 201209002, in which it approved “administrative” modifications to two separate multi-generational trusts. The trust documents provided for a “maintenance allowed” distribution to beneficiaries based on ascertainable standards. The documents also provide for discretionary distributions exceeding the maintenance allowance.

The proposed modifications would (1) allow only the independent co-trustees to participate in exercising discretion regarding the discretionary distributions, (2) change the mechanisms for appointing and removing successor trustees so that the settlor’s wife (a co-trustee) could only appoint independent trustees and could not remove a trustee if the removal would cause independent trustees to make up less than half the total number of trustees, and (3) change the situs of the trust to another state.

In its rulings, the Service found that neither the situs change nor the proposed “administrative” modification would affect the GST-exempt status of the trusts. The Service also found that the modifications would not be treated as a taxable gift by any beneficiary of the trusts.

See Two PLRs Approve “Administrative” Modifications to GST-Exempt Trusts, Charitable Planning, Mar. 5, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.