Placing faith-based arbitration clauses into trusts has recently been growing in popularity. When a Florida couple claimed the gift tax exclusion for money that they placed into a faith-based irrevocable “Crummey” trust, the IRS challenged them. The IRS argued that because the trust required beneficiaries to arbitrate disputes before a “beth din” (a rabbinical court in Judaism), the beneficiaries did not possess the “present interest” necessary for the gift-tax exclusion. The Tax Court overruled the IRS, ruling that including a faith based arbitration clause does not disqualify a settlor from claiming the gift tax exclusion. Resolving disputes through faith based arbitration is becoming increasingly popular in Christian, Muslim, Jewish and other religious communities.
See Juan C. Antunez, Will a Faith-Based Arbitration Clause Disqualify Your Trust For Tax Purposes?, Probate & Trust Litigation Blog, April 20, 2015.
Special thanks to Jim Hillhouse for bringing this article to my attention.
