Grantor Trusts After Divorce: Tax Reform, Fiduciary Challenges, and Minimizing Tax for Trust Transfers to Former Spouse

Gift Tax Exemption on Divorce Transfers, Grantor Trust Rules, Gift-Splitting and Income Tax Rules

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


Conducted on Wednesday, February 14, 2018

Recorded event now available

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Program Materials

This CLE/CPE webinar will provide estate planners and fiduciary advisers with a practical, post-tax reform, guide to administering a grantor trust after the grantor’s divorce. The panel will describe adverse income tax consequences due to inadequate drafting of the trust, detail corrections and critical terms to include in grantor trusts to avoid triggering recognition, and address post-divorce steps for fiduciaries to minimize the tax impact of divorce on a grantor trust.

Description

Post-divorce administration of grantor trusts can present fiduciaries with significant challenges. While the IRC generally treats distribution of assets in a marital dissolution as a non-taxable event, the presence of a grantor trust can bring unanticipated income and gift tax consequences when assets are transferred to the non-grantor former spouse. The new tax reform law also has implications for grantor trusts.

Section 2516 exempts certain payments and transfers between former spouses that would otherwise be taxable, but only when those payments are made pursuant to a written agreement to resolve divorcing spouses’ joint property rights or provide for child support. Transfers outside the scope of joint property rights or support of minor children are deemed taxable.

Estate and fiduciary advisers must also navigate the impact of “kick-out” provisions in estate and trust documents. While these provisions serve to protect the grantor’s interest, they can create situations in which distributions from the trust outside the scope of Section 2516 to the former spouse are treated as taxable transfers. Estate planners and fiduciary advisers must ensure these rules work to avoid adverse tax consequences.

Listen as our panel of estate planning counsel details the specific challenges of administering grantor trust transfers to former spouses arising from divorce, since tax reform.

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Outline

  1. Section 2516 provisions exempting transfers between former spouses
  2. Grantor trust rules of Section 682
  3. Kick-out provisions and impact on taxability of transfers between former spouses
  4. Section 671
  5. Drafting and administrative strategies to minimize income and gift tax impact of trust transfers after tax reform

Benefits

The panel will review these and other key issues:

  • Transfers between former spouses incident to divorce that fall outside the tax exempt provisions of Section 2516
  • Grantor trust rules as they apply in divorce scenarios
  • How “kick-out” provisions in estate and trust documents impact grantor trust status
  • Strategies to minimize income and gift tax consequences from trust distributions to former spouse after tax reform
  • Tax reporting requirements

Faculty

Young, Audrey
Audrey Young
Senior Manager, Private Client Services
RSM US

Ms. Young focuses her practice in the area of trusts and estates law and taxation. She counsels individuals, families...  |  Read More

Goldstein, Kenneth
Kenneth A. Goldstein

Horwood Marcus & Berk

Mr. Goldstein focuses his practice on trust and estate planning for individuals and sophisticated tax planning for...  |  Read More

Other Formats
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Strafford will process CLE credit for one person on each recording. All formats include program handouts. To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video

48 hours after event

$297

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48 hours after event

$297