IRS Allows Generation Skipping Trust To Use Settlement Agreement Without Losing Status

May 15, 2015

In a series of private letter rulings, the IRS has establishes that using a family settlement agreement will not strip a generation skipping trust of it’s tax protection. In this case, an irrevocable trust set up to provided for a spouse, children, and grand-children was subject to litigation by younger beneficiaries looking for an immediate payout. A court sponsored agreement was entered into which required a LLC controlled by the trust to make payments per the arrangement. The IRS also ruled on whether the distributions to the beneficiaries would be included in income.

See Dawn S. Markowitz, Settlement Agreement Distributions Retain GST Tax-Exempt Status, Wealth Management, May 12, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.

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Current Events, Generation-Skipping Transfer Tax, Income Tax and Trusts