In PLRs 201938004-6, the Service ruled that judicial modifications to three trusts to correct scrivener’s errors and resolve ambiguities related to the administration of resulting separate trusts did not cause the trusts to lose their generation-skipping transfer (GST) exempt status or cause the GST tax to apply to any of the separate trusts. The Service rebased that for Treas. Reg. §26.2601-1(b)(4)(i)(C) purposes, the judicial reformation involved bona fide issues and the modifications were consistent with applicable state law that would be applied by the highest court of the state.
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Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.