Trusts Serving as Grantors to Other Trusts: Drafting Multi-Trust Structures for Optimal Tax Results

Essential language in Grantor and Grantee Trusts

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


Conducted on Tuesday, October 3, 2017

Recorded event now available

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Program Materials

This CLE/CPE webinar will provide estate planners with a practical guide to the tax consequences of structuring trusts that own other trusts. The panel will discuss critical drafting language in both the grantor and grantee trust, and outline potential tax saving opportunities and risks in multi-trust structures.

Description

In Letter Ruling 201633021, the IRS recently took the (somewhat surprising) position that a trust may serve as a grantor over another trust, even if the two trusts have different tax attributes. While not binding, the Service’s position creates interesting opportunities for estate planners.

The PLR addressed a scenario in which a trust (Trust I) established by a decedent transferred property to a new, second trust (Trust II), after the death of the original grantor. Trust I retained certain powers over Trust II which would create grantor trust status if retained by an individual grantor.

The Service held that Trust I could be a grantor as to Trust II based on Trust I’s retained powers, applying the rules of §671 et seq.

Our panel will discuss this ruling and other code provisions and regulations that can apply when an existing trust forms and funds a new trust.  The panel will discuss critical drafting language in both the grantor and grantee trust and outline potential tax saving opportunities and risks in multi-trust structures.

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Outline

  1. Grantor Trust Rules of Sections 671-678
  2. Options for structuring secondary trusts
    1. Original grantor as grantor of Trust II
    2. Beneficiary as a grantor of Trust II
    3. Trust II as a complex trust
  3. Critical drafting language to accomplish intended status
  4. Letter Ruling 201633021: Trust I as grantor of Trust II
  5. Planning opportunities and risks

Benefits

The panel will review these and other key issues:

  • Various tax results that are possible when one trust establishes and funds a new trust
  • Recommended provisions to accomplish the desired tax results
  • Potential risks of using trusts as grantors to other trusts
  • Possible impact of PLR 201633021

Faculty

Katzenberg, Andrew
Andrew S. Katzenberg

Senior Counsel
Kleinberg Kaplan Wolff & Cohen

Mr. Katzenberg focuses primarily on wealth transfer planning and preservation, multi-generational planning, estate and...  |  Read More

Mattson, Ruth
Ruth Mattson

Principal
Bove & Langa

Ms. Mattson advises trustees and personal representatives with the administration of trusts and estates, including...  |  Read More

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