In PLR 201322025 a decedent’s GST trust called for a distribution of $250,000 to a son’s trust, a number tied to the GST in effect before 1986. The trust contained a provision to update the $250,000 amount if the Code changed. When the decedent died in 1987 the executor exempted all of the assets from GST and now the trustee has obtained a court order to distribute all of the assets to the son’s trust. The IRS determined there were no adverse GST, gift, or estate tax consequences.
In PLR 201320009 the place of administration of a trust had been moved from one state to another. However, the court order granting the move provided that the law of the original state would govern the validity and construction of the trust. When the trustee wanted to convert the distribution provisions to a unitrust, it applied the law of the original state, which had adopted a unitrust statute.
Moving the place of administration without changing the governing law, as here, is often helpful to ensure no inadvertent change that might affect a grandfathered trust.
In PLR 201334001 the IRS determined disclaimers were timely on the following facts:
Grantor created Trusts several years before his death on Date 1, a date before January 1, 1977, for the benefit of the lawful lineal descendants of his daughter (Daughter), per stirpes. Daughter’s son, Grandson is the current beneficiary of Trusts. Upon the death of Grandson, Grandson’s son (Taxpayer) will be entitled to income distributions from Taxpayer’s per stirpital share of Trusts. The income distributions will continue until the earlier of Taxpayer’s death or the perpetuities date. Upon termination of each of the Trusts, any remaining trust property will be distributed to Taxpayer and Taxpayer’s brother, per stirpes.
Taxpayer, who is over 18 years of age, represents that Taxpayer learned of the transfers creating his interests in Trusts on Date 2. Taxpayer further represents that he had no knowledge that he possessed any interest in Trusts, prior to Date 2. Taxpayer proposes to execute and timely file and deliver a written disclaimer to the trustees for each of Trust 1, Trust 2, Trust 3, and Trust 4, on or before Date 3, stating that he irrevocably, unconditionally and without qualification, disclaims and refuses to accept any interest that would otherwise pass to Taxpayer under the relevant provisions of Trusts. The disclaimers will be valid under Statute 1 and Statute 2. Date 3 is a date occurring not more than nine months after Date 2.
The ruling states:
Section 25.2511-1(c)(2) of the Gift Tax Regulations provides, in relevant part, that, in the case of taxable transfers creating an interest in the person disclaiming made before January 1, 1977, where the law governing the administration of the decedent’s estate gives a beneficiary, heir, or next-of-kin a right completely and unqualifiedly to refuse to accept ownership of property transferred from a decedent (whether the transfer is effected by the decedent’s will or by the law of descent and distribution), a refusal to accept ownership does not constitute the making of a gift if the refusal is made within a reasonable time after knowledge of the existence of the transfer. The refusal must be unequivocal and effective under the local law. There can be no refusal of ownership of property after its acceptance. In the absence of the facts to the contrary, if a person fails to refuse to accept a transfer to him of ownership of a decedent’s property within a reasonable time after learning of the existence of the transfer, he will be presumed to have accepted the property.
The U.S. Supreme Court has recognized that, under the predecessor to this regulation, an interest must be disclaimed within a reasonable time after obtaining knowledge of the transfer creating the interest to be disclaimed, rather than within a reasonable time after the distribution or vesting of the interest. Jewett v. Comm’r, 455 U.S. 305 (1982). The requirement in the regulations that the disclaimer must be made within a “reasonable time” is a matter of federal, rather than local law. Id. at 316. Whether a period of time is reasonable under the regulations is dependent on the facts and circumstances presented.
In this case, Taxpayer will execute each disclaimer within nine months of learning of the transfers creating his interests in each of Trust 1, Trust 2, Trust 3, and Trust 4. Accordingly, based upon the information submitted and the representations made, we conclude that Taxpayer’s proposed disclaimers of his interests in Trusts, if made on or before Date 3, will be made within a reasonable time after Taxpayer learned of the existence of the transfers under § 25.2511-1(c)(2). Furthermore, provided that Taxpayer’s disclaimers are valid under State law and assuming the other requirements of § 25.2511-1(c)(2) are met, Taxpayer’s disclaimer of his interests in Trusts will not be taxable gifts under § 2501.
In PLR 201245004 a surviving spouse received IRA distributions in excess of the required minimum distribution for the year of the deceased spouse’s death but was allowed to disclaim the balance of the IRA. The ruling states:
In Rev. Rul. 2005-36, 2005-1 C.B. 1368, a beneficiary received RMDs from an IRA. The Service ruled that receipt of the RMD constitutes acceptance of that portion of the corpus of such account, plus the income attributable to that amount. However, the Service also ruled that if the beneficiary disclaims the remaining balance of the IRA, assuming the other requirements of § 2518 are satisfied, the beneficiary’s acceptance of the RMD amounts does not preclude the beneficiary from making a qualified disclaimer with respect to the balance of the IRA.
In this case, the automatic deposits into the bank account held by Trust to benefit Spouse continued for two months after the Decedent’s death and then were cancelled. During the two months the withdrawals equaled $C. The facts in this case are similar to the facts in Rev. Rul. 2005-36. Similar to the revenue ruling, Spouse has accepted the benefit of $C and the income attributable to $C. However, assuming the other requirements of § 2518 are satisfied, Spouse’s acceptance of the RMDs amounts does not preclude Spouse from making a qualified disclaimer with respect to the balance of the IRA.
In this case, as a result of Spouse’s disclaimer, the balance of the IRA passed to Family Trust. The terms of Family Trust were established by Decedent when he created Trust. Accordingly, the disclaimed property did not pass pursuant to the direction of Spouse. With respect to IRA benefits payable to Family Trust, during Spouse’s lifetime, Trustee is required to withdraw each year from the IRA the greater of the RMD for that year and that portion of the IRS benefits that constitutes the accounting income of the IRA benefits. Additionally, Trustee shall withdraw so much of the net income and principal of the IRA benefits payable to the Family Trust as Trustee determines is necessary for Spouse’s health, education, maintenance, and support. Family Trust terminates upon the death of Spouse and the balance of the trust will be administered under Article Sixth of Trust. Accordingly, pursuant to the terms of Trust and Family Trust, Spouse does not have any right to direct the beneficial enjoyment of the disclaimed property.
Gifts Must Be Delivered (Usually)
In Estate of Roger T. Hansen, 810 N.W.2d 358 (Wis.App., 2012), the decedent was busy changing his Will, including writing his attorney to ensure that certain notes were forgiven in the Will, but died before signing it. The obligor argued that the forgiveness was a gift causa mortis – but the court held otherwise because nothing was delivered to the donees.
In Greene v. Greene, 938 N.Y.S.2d 629 (N.Y.A.D. 2 Dept., 2012), the issue was whether a letter directing that certain bonds were to be reregistered in the recipient’s hands was an inter vivos gift when the envelope stated it was only to be opened after the sender died, and it was. The court held no inter vivos gift because there was no present transfer of ownership.
In Mendenhall v. Mountain West Farm Bureau Mutual Insurance Company, 274 P.3d 407 (Wy. 2012), the issue, for accident insurance purposes, was whether a truck had been given to the driver. The facts were:
In January 2008, Lucas told David Nelson (Nelson), the owner of Wyoming Electric, that he was looking to acquire a pickup truck. Nelson decided to give Lucas one of the old company trucks. Lucas took the keys to the 1997 Ford truck from the Wyoming Electric office, took possession of the truck, and retained possession of the truck. Lucas was responsible for all the expenses associated with the truck, and on January 29, 2008, he added the truck to his Allstate automobile insurance policy. Nelson and Wyoming Electric did not exercise any control over the truck after Lucas drove it off the company lot. However, Nelson and Lucas did not apply for a new certificate of title reflecting Lucas as the owner of the truck until April 16, 2008. Additionally, the truck’s registration and plates remained in Wyoming Electric’s name and the truck was not removed from Wyoming Electric’s Mountain West insurance policy.
The court declined to require formal transfer of title:
The parties agree that Nelson gave Lucas the truck; that Lucas removed the keys from the Wyoming Electric office and took possession of the truck; that Lucas was responsible for all expenses associated with the truck and purchased insurance; and that Nelson and Wyoming Electric did not exercise any further control over the truck. The fact that Nelson gave Lucas the truck, and allowed him to leave with possession of the truck, demonstrates that Nelson had the present intention to make an immediate gift. Additionally, the stipulated facts show that Nelson actually delivered the truck to Lucas, divesting himself of dominion and control. Finally, the facts show that Lucas accepted the truck when he drove it off Wyoming Electric’s property and took responsibility for all expenses related to the truck. The undisputed facts, as applied to the elements of a gift, clearly demonstrate that Nelson transferred ownership of the truck to Lucas through an inter vivos gift.