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<p style="margin-top:0;margin-bottom:0">The statute expressly provides that normal grantor trust rules
<span title="" class="">trump</span> 678. When the original grantor trust status ends, whether 678 can then be triggered, please see the article entitled "Decoding Section 678" by Mitchell Gans, Alvina Lo and me in <span style="font-size: 12pt;">ACTEC Journal,
Vol. 35, No. 2, Fall 2009. Jonathan</span></p>
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<div id="divRplyFwdMsg" dir="ltr"><font face="Calibri, sans-serif" style="font-size:11pt" color="#000000"><b>From:</b> estgift-bounces@actec.org <estgift-bounces@actec.org> on behalf of David L. Case <dlc@tblaw.com><br>
<b>Sent:</b> Wednesday, May 30, 2018 3:20 PM<br>
<b>To:</b> EstGift@actec.org<br>
<b>Subject:</b> [EstGift] [filtered] IRC 678 vs. IRC 675/677</font>
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<p class="x_MsoNormal">Dear Fellows.</p>
<p class="x_MsoNormal">Question on income taxation of ILIT with additional funding:
</p>
<p class="x_MsoNormal">As typical, ILIT allows Trustee to pay premiums with income (IRC 677(a)(3) applies), and has substitution of assets power for Trustor (IRC 675(4)(C) applies), and thus would have grantor trust status. ILIT also has typical Crummey powers
(IRC 678 issue). Though recent PLRs indicate that grantor trust status controls over IRC 678, and consensus seems to be that is a correct result, is there any more definitive current authority that beneficiaries who have lapsed withdrawal powers are not taxed
on income? Issue is more critical here due to substantial additional funding of ILITs through receipt of residuary GRAT distributions, possible substantial dividends and capital gain in ILIT.</p>
<p class="x_MsoNormal">Thanks.</p>
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