“String” Regulations

Jim Roberts (Attorney, Glast, Phillips & Murray, P.C., Dallas, TX) has written an article entitled String Inclusion: Final Regulations on 2036 and 2039.

Here is an excerpt from the article:

A little over a year ago, on June 6, 2007, the Treasury and IRS published proposed regulations on what part of a trust is includable in a deceased settlor’s estate under Sections 2036 or 2039 if the settlor retained an interest in the trust property – a so- called “string.” This past month, Treasury finalized those regulations (TD 9419, issued July 11, 2008, effective July 14, 2008).

Major Points. Four major points can be made:

(a) inclusion will be computed under section 2036 and its newly amended Reg.Sec. 20.2036-1;

(b) inclusion will not be addressed or computed under section 2039, so says newly amended Reg.Sec. 20.2039-1;

(c) other sections of the Code, such as sections 2035 through 2039, can still be applied where the IRS thinks appropriate (at least one example illustrates that point); and

(d) the amount to be included is not the present value of the stream of payments.