Backdating allocation of marital assets into survivor trust
The trustee must also pay to the surviving spouse principal of the surviving trust for the surviving spouse’s comfort, welfare and happiness.
The trustee must also pay to the surviving spouse any principal that the surviving spouse directs.
The family trust became irrevocable on the decedent’s spouse’s death; the survivor’s trust remained revocable.
Under the joint revocable trust, the survivor’s trust should have been funded with the decedent’s 50 percent beneficial interest as a tenant in common, and the family trust should have been funded with his spouse’s 50 percent beneficial interest as a tenant in common.
After the decedent’s spouse had died, however, a law firm incorrectly advised the decedent that the survivor’s trust wouldn’t be funded from the family trust and that 100 percent of the trust assets remained as the family trust.
As a result, the decedent failed to segregate the assets of the survivor’s trust and the family trust and instead, administered them both as a combined trust.
On the daughter’s death, the trustee must distribute the balance to the daughter’s then-living descendants per stirpes.The trustee of the son’s share was to distribute to him all the net income and principal free of trust.The trustee of the daughter’s share was to distribute income and principal for the daughter’s health, education, maintenance and support.It also provide that while they were alive, they each would hold a power to revoke their share.
After one of them died, the surviving spouse could amend any trust share over which he had a general non-lapsing power of appointment (POA) over principal, except for retirement benefits.
In Private Letter Ruling 201429009 (released July 18, 2014), the Internal Revenue Service concluded that the value of assets held in a family trust aren’t includible in a decedent’s gross estate, except for the value of a “5 or 5” power held by a decedent at his death.