{"id":5599,"date":"2024-06-25T13:16:15","date_gmt":"2024-06-25T17:16:15","guid":{"rendered":"https:\/\/www.lindabury.com\/firm\/?p=5599"},"modified":"2025-01-02T14:14:02","modified_gmt":"2025-01-02T19:14:02","slug":"cca-202352018-a-cautionary-tale","status":"publish","type":"post","link":"https:\/\/www.lindabury.com\/firm\/insights\/cca-202352018-a-cautionary-tale.html","title":{"rendered":"CCA 202352018 &#8211; A Cautionary Tale"},"content":{"rendered":"<p>Since passage of the Uniform Trust Code in New Jersey in 2016, planners now have an established procedure to modify or terminate an irrevocable trust, and it is undoubtedly a valuable tool. Clients frequently have trusts that could be made better if one or two changes were made.\u00a0 However, while attractive, the modification or termination of an irrevocable trust so that the trust will accommodate circumstances unforeseen when the trust was created, can have unintended gift tax consequences.<\/p>\n<p>It was just such a situation that a recent Memorandum issued by the Chief Counsel for the IRS, CCA 202352018 (hereafter the CCA or Memorandum), addresses.\u00a0 In that Memorandum the grantor of the trust established an irrevocable trust for her child for the child\u2019s life.\u00a0 The trustee had the power to distribute income and principal to the child, in the trustee\u2019s discretion, and on the child&#8217;s death the trustee was directed to distribute the proceeds to the child\u2019s descendants.\u00a0 The grantor had no right to income or principal from the trust and essentially had relinquished all control over the assets in the trust.\u00a0 As such, the grantor appeared to have successfully removed the assets in the trust from her taxable estate.<\/p>\n<p>The trust included a provision that made the trust income taxable to the grantor under section 671 of the Internal Revenue Code. \u00a0Using such a provision in a trust is actually very popular.\u00a0 Because the trust will not pay any income taxes, the trust can grow more quickly. \u00a0In effect, it is as if the grantor is making a tax-free gift to the trust each year in the amount of the tax the trust would otherwise have paid. \u00a0Sometime after the trust in the CCA was operational, however, the grantor no longer wished to pay those income taxes and instead sought to have the trust reimburse her for those tax payments.<\/p>\n<div class=\"read_more_link\"><a href=\"https:\/\/www.lindabury.com\/firm\/insights\/cca-202352018-a-cautionary-tale.html\"  title=\"Continue Reading CCA 202352018 &#8211; A Cautionary Tale\" class=\"more-link\">Continue Reading \u203a<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Since passage of the Uniform Trust Code in New Jersey in 2016, planners now have an established procedure to modify or terminate an irrevocable trust, and it is undoubtedly a valuable tool. Clients frequently have trusts that could be made better if one or two changes were made.\u00a0 However, while attractive, the modification or termination [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[65,343],"tags":[],"coauthors":[139],"class_list":["post-5599","post","type-post","status-publish","format-standard","hentry","category-insights","category-wills-trusts-estates-insights"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>CCA 202352018 - A Cautionary Tale &#8212; June 25, 2024 &#8212; Lindabury, McCormick, Estabrook &amp; Cooper, P.C. 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