
Tax Aspects of Decanting - A 2019 Update
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Decanting is the act of distributing the assets of an old trust to a new one with more favorable terms. It provides an easy, inexpensive method of correcting errors or ambiguities, adapting a trust to changes in a settlor’s objectives or changes in a beneficiary’s circumstances, taking advantage of new planning opportunities or adding flexibility to a trust.
The TCJA greatly expanded decanting opportunities by doubling the gift and estate tax exemption(s). For the next eight years we have a tremendous opportunity to help clients with a number of selective decanting opportunities including adding a GPA to obtain a step-up, decanting from a grantor to non-grantor trust, accelerating grandchildren and future generations (under the law for four states), enhancing asset protection and more.
However, because trust decanting is a relatively new estate planning strategy, its tax consequences have not yet been clearly established. This fast-paced course will cover some of the critical income tax, gift and estate tax, and GST tax issues including:
- How the TCJA impacts decanting
- Gain recognition by the transferor trust where the decant is from non-grantor trust to non-grantor trust, grantor trust to non-grantor trust and grantor trust to grantor trust
- GST issues with grandfathered trusts, exempt trusts and nonexempt trusts
- Whether a decanting distribution results in gain recognition by trust beneficiaries under IRC § 1001
- Changing grantor trust status
- Whether a distribution of property from one trust to another is treated as a distribution for purposes of IRC §§ 661 and 662
- What impact does decanting have on the original trust's tax attributes?
- Does a decanting power prevent a trust from qualifying as a QSST?
- What are the "negative basis" implications?
- Whether a beneficiary whose interests in a trust are reduced by decanting makes a taxable gift
- Adding limited and general powers of appointment
- Whether decanting results in gift tax for a trustee or a trust beneficiary
- Whether a beneficiary whose interests in a trust are reduced by decanting makes an IRC § 2036 or § 2038 transfer
- Changing distribution standards
- Whether a GST grandfathered trust that receives decanted property loses its grandfathered trust status
- Whether decanted property has the same GST inclusion ratio in the transferee trust that it had in the transferor trust
Decanting is the act of distributing the assets of an old trust to a new one with more favorable terms. It provides an easy, inexpensive method of correcting errors or ambiguities, adapting a trust to changes in a settlor’s objectives or changes in a beneficiary’s circumstances, taking advantage of new planning opportunities or adding flexibility to a trust.
The TCJA greatly expanded decanting opportunities by doubling the gift and estate tax exemption(s). For the next eight years we have a tremendous opportunity to help clients with a number of selective decanting opportunities including adding a GPA to obtain a step-up, decanting from a grantor to non-grantor trust, accelerating grandchildren and future generations (under the law for four states), enhancing asset protection and more.
However, because trust decanting is a relatively new estate planning strategy, its tax consequences have not yet been clearly established. This fast-paced course will cover some of the critical income tax, gift and estate tax, and GST tax issues including:
- How the TCJA impacts decanting
- Gain recognition by the transferor trust where the decant is from non-grantor trust to non-grantor trust, grantor trust to non-grantor trust and grantor trust to grantor trust
- GST issues with grandfathered trusts, exempt trusts and nonexempt trusts
- Whether a decanting distribution results in gain recognition by trust beneficiaries under IRC § 1001
- Changing grantor trust status
- Whether a distribution of property from one trust to another is treated as a distribution for purposes of IRC §§ 661 and 662
- What impact does decanting have on the original trust's tax attributes?
- Does a decanting power prevent a trust from qualifying as a QSST?
- What are the "negative basis" implications?
- Whether a beneficiary whose interests in a trust are reduced by decanting makes a taxable gift
- Adding limited and general powers of appointment
- Whether decanting results in gift tax for a trustee or a trust beneficiary
- Whether a beneficiary whose interests in a trust are reduced by decanting makes an IRC § 2036 or § 2038 transfer
- Changing distribution standards
- Whether a GST grandfathered trust that receives decanted property loses its grandfathered trust status
- Whether decanted property has the same GST inclusion ratio in the transferee trust that it had in the transferor trust
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