A recent Private Letter Ruling details the IRS conclusions regarding distributions from an irrevocable trust. A grantor had created an irrevocable non-grantor trust for the benefit of him, his spouse, his mother, and his issue with a distribution committee. The trust terms specified that all gifts to the trust were not completed gifts and any trust assets would be included in the grantor’s gross estate. One of the grantor’s inquiries was if he is considered the owner of the trust, which portions of income, deductions, and credits should he include in his taxable income during the time of the distribution committee’s service. The IRS concluded that the grantor was not the owner of the trust so long as the distribution committee served. In another ruling, the IRS concluded that two gifts made to the trust were not complete because the grantor retained some power over the trust’s distributions. Similarly, the IRS ruled that any distribution by a committee member pursuant to their powers would not be considered gifts subject to the federal gift tax but rather gifts by the grantor.
See Dawn S. Markowitz, What Constitutes Completed Gifts?, Wealth Management, December 13, 2016.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
