More on Estate of Turner v. Comm’r

I recently blogged about Estate of Turner v. Comm’r, T.C. Memo 2011-209 (2011) and the court’s holding that transferred FLP assets were included in the decedent’s gross estate. The court also addressed the issue of whether the decedent’s payment of life insurance policy premiums were subject to the annual exclusion under Section 2503(b).

The decedent was a grantor of an irrevocable life insurance trust that had purchased three separate life insurance policies. In 2000-2003, the decedent paid the insurance premiums directly from a joint checking account instead of transferring money to the trustees to pay the premiums. The IRS included the premiums paid on the life insurance policies in the estate’s total adjusted taxable gifts. On appeal, the court held that the premium payments were a gift of a present interest and were subject to the annual exclusion under Section 2503(b).

The Tax Court in Turner agreed, holding that the present interest exclusion applied to the premium payments because the beneficiaries had the “right to demand withdrawals from the trust.”

See William Alan Nelson II, Tax Court Ruling on Crummey Withdrawal Procedures, Wealth Strategies Journal 2.0, Sep. 20, 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this post to my attention.