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Interesting Cases and Ruling

An interesting case is found at Groody Trust, Vol.1, Third Series, Fiduciary Reporter, p.108 Monroe County, Pa. This case discusses whether a Last Will changes the dispositive terms of a Revocable trust. After a review of all the facts the Court concluded that whichever document represented “the final expression of the decedent of his intention regarding payment…” is controlling. This case also contains an interesting factual discussion of whether a beneficiary transfers an interest in a trust or disclaims such interest.

In Cepko Estate ,Vol.1, Third Series, Fiduciary Reporter, p.115, Westmoreland County, Pa., at issue was a joint account which remaining funds was specifically bequeathed to decedent’s daughter and the Court found that the account was controlled under section 6303 of the Pennsylvania Multiple-Party Account Act and the funds were contributed by the decedent and used both at his direction and also properly by his agent (his spouse) under his power of attorney.

In Private Letter Ruling 20944002 the IRS refused to rule whether the assets of the trust are included in the estate of Settlor under section 2036 where taxpayer created an irrevocable trust which benefited himself along with his spouse and descendents. The trust was created under a state law which provided that creditors could not reach Settlor if it the trust is a self settled asset protection trust. All the proper provisions where in place as the trustee was not a related party, it was a grantor trust with a substitution clause, the trustee was prohibited from reimbursing the taxpayer for income taxes paid by the taxpayer with respect to the trust income, and the IRS determined that the gift was a completed gift. However, the IRS refused to rule regarding the issue of whether or not the property is included in Settlor’s gross estate under section 2036 because the trustee had discretion to distribute income and principal to the grantor. Thus, self settled trusts remain questionable with respect to section 2036 inclusion.

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