Many clients desire to terminate irrevocable trusts. These could be bypass trusts, QTIP trusts, life insurance trusts or any other irrevocable trust. There may be many reasons, some quite reasonable, to do so.  However, early trust terminations can have both income and transfer tax consequences. Do you know what they are?  What about mere reformations through decanting or private settlement agreements – when may those also be problematic? 

Ed Morrow will review the potential tax consequences, some of which may really shock you. He’ll point out where the law is unsettled in this area and what we should warn clients about even if all the parties agree to terminate or amend a trust. If you aren’t positive of the tax consequences of trust termination, you need to attend this webinar! 

Here's a list of just some of the topics Ed will cover in this content-packed webinar:

The potential tax consequences of an early trust termination (a.k.a. commutation) as outlined in PLRs 201932001-201932010.  If those PLRs are correct, how can we avoid their devastating conclusions when terminating trusts, including the draconian zero basis rule of IRC 1001(e)? Why and how we should avoid a tax battle even if the PLRs are not correct.

What are the potential income and transfer tax consequences of decanting and judicial and non-judicial settlement agreements that do not terminate, but substantially change trust terms?  Why do IRS rulings differentiate between those reformations that cause a material change in beneficial interests and those that do not?  In addition to negative income tax effects, what may be the estate, gift and generation-skipping transfer tax consequences of reformations, terminations and decantings that effect material changes in the beneficial interests of the trust beneficiaries?