Advanced Trust Drafting for Income Tax Minimization: Including Capital Gains in DNI, Push-Outs, and More

Managing the Disparity in Income Tax Treatment Between Beneficiary and Trust

Note: CPE credit is not offered on this program

Recording of a 90-minute CLE video webinar with Q&A


Conducted on Tuesday, May 18, 2021

Recorded event now available

or call 1-800-926-7926
Course Materials

This CLE course will provide estate planning counsel with a comprehensive understanding and application of best practices in tax planning and trust document drafting to minimize income tax consequences of trust income. The panel will provide a thorough review of the rules and practices covering inclusion of capital gains in distributable net income (DNI) for trusts and estates and other critical considerations for minimizing income taxes on trust receipts through careful structuring of the trust's governing instrument.

Description

Among the most critical tasks for estate counsel and planners is ensuring that trust documents are drafted so that the trust vehicle achieves the settlor's intent in the most tax-efficient means possible. With the estate tax exemptions now permanent, many drafters' more significant challenge is to avoid or defer income tax on trust assets and accumulation. Estate planners must have a thorough knowledge of the drafting techniques and considerations available to reduce income tax consequences on trust income by carefully structuring trust documents.

Estate and trust counsel should always draft trust documents with a view toward clearly delineating between income and principal in a trust document. This is particularly critical in structuring those provisions that define and allocate DNI. Because trusts are essentially a conduit, with distributions generally taxed at the beneficiary level, drafters should always be mindful to include in DNI all income that can be passed through to beneficiaries with a lower tax impact than if retained within the trust.

This is especially true for trusts that anticipate significant capital gains. The current tax treatment of trusts provides a significant incentive for getting capital gains out of a trust. Lower overall taxes will often be achieved if capital gains are included in DNI rather than added to the corpus amount.

Listen as our experienced panel provides comprehensive and practical details on drafting trust documents to minimize income tax consequences by including capital gains into DNI and other drafting practices for income tax minimization.

READ MORE

Outline

  1. Default capital gains treatment inclusion in the corpus
  2. Treas. Reg. Section 643(a)-3(b) provisions for including cap gains in DNI
    1. The instrument provides for inclusion in income
    2. Allocated to corpus but treated as a distribution
    3. Actually distributed
  3. Push-out provisions and prioritizing distributions
  4. Use of Section 678 withdrawal powers
  5. Non-tax considerations
  6. Drafting provisions for income tax minimization

Benefits

The panel will review these and other key issues:

  • What are the general requirements of IRC 643 on treatment of capital gains and FAI?
  • How can the trust document be structured--and interpreted--to allow the inclusion of capital gains in DNI?
  • What are local and state provisions that may allow capital gains inclusion in DNI?
  • Income push-out provisions
  • What are best practices for income tax minimization on trust accumulation?

Faculty

Barnett, Robert
Robert S. Barnett, CPA

Partner
Capell Barnett Matalon & Schoenfeld

Mr. Barnett’s practice is highly concentrated in the areas of taxation, trusts, estates, corporate and...  |  Read More

Doyle, Jere
Jeremiah W. (Jere) Doyle, IV

Senior Vice President
Bank of New York Mellon

Mr. Doyle provides clients with integrated wealth management advice on how to hold, manage and transfer their...  |  Read More

Access Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. All formats include course handouts.

To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video

Download