Jump to Navigation

There are many different legal instruments available for planning an estate. These estate planning tools have various benefits and purposes during the estate administration process in Maryland or in any other state. One of the most common goals people have in estate planning strategies is minimizing tax liability by using a trust. Many are looking toward incomplete non-grantor trusts in order to avoid the gift tax.

This type of trust is designed in a manner that most distributions from the trust, as well as transfers to the trust, are considered incomplete gifts as far as gift tax purposes. The Internal Revenue Service (IRS) has recently put out several private letter rulings (PLRs), which were favorable toward incomplete non-grantor trusts. These rulings show that the IRS is taking an increasingly positive stance regarding incomplete non-grantor trusts that have been properly formed.

In other words, if the legal documents forming the incomplete non-grantor trust are correctly drafted, the IRS will be more likely to accept that distributions from and transfers to the trust will not be counted as being liable for gift taxation. Therefore, the legal language used in the documents forming the trust must be chosen carefully. Even a simple mistake could cause problems for intended beneficiaries.

Also, the PLRs issued by the IRS are not set in stone. The IRS interpretation of the law can be challenged in court, or lawmakers could pass statutes that change the rules pertaining to these types of trusts in Maryland or elsewhere. Therefore, even if one has a trust strategy in place, he or she may want to make adjustments based upon the latest changes in the law.

Source: wealthmanagement.com, "IRS Issues DING Guidance", Andrea Zakko, Aug. 5, 2014

No Comments

Leave a comment
Comment Information