[EstGift] Formula General Power to Capture Income Tax Basis Adjustment

Fri Jan 7 08:58:05 PST 2022

I wrote an article on the technique in Trusts and Estates in 2020 that
contains useful links, some of which provides drafting materials.

https://d9ee9a6d-0f12-4749-8836-2e73487cafa5.filesusr.com/ugd/09ecee_d3456038ff474d1fb377030a9be40278.pdf

Robert J. Kolasa
Robert J. Kolasa, Ltd.
Attorney, C.P.A., LL.M. (Tax)
1401 N. Western Avenue, 2nd Floor
Lake Forest, IL 60045

Telephone: 1-847-234-6262
Facsimile: 1-847-234-7629
E-Mail:   robert at kolasalaw.com
Web site: http://www.kolasalaw.com

Confidentiality: This email message is intended for the use of the
individual or entity to which it is addressed, and may contain information
that is privileged, confidential or exempt from disclosure under applicable
law.  If the reader of this message is not the intended recipient, or the
employee or agent responsible for delivering the message to the intended
recipient, you are hereby notified that any dissemination, distribution or
copying of this communication is strictly prohibited. If you have received
this message in error, please notify the sender immediately by telephone
and delete the original message from your email. Thank you.

*From:* estgift-bounces at actec.org <estgift-bounces at actec.org> *On Behalf Of
*Day, Eileen
*Sent:* Friday, January 7, 2022 10:27 AM
*To:* 'EstGift at actec.org' <EstGift at actec.org>
*Subject:* [EstGift] Formula General Power to Capture Income Tax Basis
Adjustment

Wondering if anyone is using a formula General Power of Appointment in
Irrevocable Trusts so that the second-to-die spouse includes the
irrevocable trust assets in their estate to the extent they have available
estate exemption, in order to take advantage of step-up in basis.

For example, a credit-shelter trust is created at first death.
Second-to-die spouse has unused/unusable estate exemption. Instead of
trying to terminate the credit shelter trust to include the asset in
spouse’s estate, it would be nice to have drafted in a formula GPA to force
assets in second-to-die spouse’s estate, but only to the extent of that
person’s available estate exemption, and then get basis adjustment on those
assets.  Thought being to direct that the first assets of the trust over
which power is exercisable are those assets with largest percentage
difference between FMV and income tax basis.

If anyone has drafted such a provision or has thoughts about traps of using
such a formula in drafting, your thoughts are appreciated.

-Eileen

*Eileen M.* *Day*
Partner

STINSON LLP
50 South Sixth Street, Suite 2600
Minneapolis, MN 55402
Direct: 612.335.7026*  \  *Mobile: 612.669.0299*  \  *Bio
<https://www.stinson.com/people-EileenDay>

Assistant: MPL.LAATeam4 at stinson.com*  \  *612.335.1702

*STINSON.COM <http://www.stinson.com>*

This communication (including any attachments) is from a law firm and may
contain confidential and/or privileged information.  If it has been sent to
you in error, please contact the sender for instructions concerning return
or destruction, and do not use or disclose the contents to others.
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists2.fsr.net/pipermail/estgift/attachments/20220107/9fddeb67/attachment.html>