In PLR 201933007, the IRS ruled regarding the annuity and estate tax deduction of a revocable trust, making the following rulings:
- the annuity amount equal to five percent of the fair market value of the initial trust estate, as determined by the trust’s grantor and the grantor’s spouse, would be an ascertainable amount. In addition, the use of a formula clause in the Revocable Trust satisfied the requirement that a guaranteed annuity should be paid for a specified term of years under Code Sec. 2055(e)(2)(B).
- if the grantor’s spouse survived and the grantor expired without modifying or revoking the trust, the spouse’s estate would be entitled to a deduction under Code Sec. 2055(a) for the present value of the annuity from the charitable lead annuity trust (CLAT) if:
- The recipient of the annuity from the CLAT was a charitable organization described in Code Secs. 170(c), 2055(a) and 501(c)(3);
- The terms of the marital trust satisfied the requirements of Code Sec. 2056(b)(7);
- The election under Code Sec. 2056(b)(7) was properly made for the assets of the marital trust; and
- The grantor’s spouse did not exercise her testamentary power of appointment such that the assets of the marital trust actually passed to the CLAT.
Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.