In a recent letter ruling, the IRS addressed an inquiry regarding a grantor who wished to create an irrevocable trust to benefit himself, his issue, his children’s issue, and four individuals. The trustee was to be an in-state trust company, and during the grantor’s lifetime, the beneficiaries would be grantor and four adult individuals. In particular, the trust terms provide that the trustee must make distributions of income and principal as directed by a distribution committee and/or the grantor.
The IRS ruled that a grantor’s contributions to a trust with a distribution committee won’t be deemed completed gifts, that the trust’s distributions to the grantor won’t be deemed completed gifts of any committee member, and that distributions to beneficiaries will be deemed completed gifts of the grantor, not the committee members.
See “IRS Rules on Gift Tax Issues for Trust with Distribution Committee,” 2014 TNT 144-38 (Jul. 28, 2014).
Posted by Morgan Yuan, Esq., Associate Editor, Wealth Strategies Journal.