While the IRS acknowledges that in Cristofani not all of the power holders for whom a gift tax exclusion was allowed by the court had an income or
vested remainder interest in the trust (although those that did not were contingent beneficiaries), it does warn that it will continue to deny exclusions for Crummey power holders where the withdrawal rights have no substance, regardless of the beneficiaries' economic interest in the trust.
* The sale of the
Vested Remainder Interestin a Life Estate for the property located at 313 East 18th Street in Gramercy Park for $900,000 cash.
On one hand, a court might take the position that, because the homestead statute provides a
vested remainder in the adult children, the surviving spouse had only a life estate at the decedent's death and could not disclaim an interest greater than she had.
Gopman of Greenberg Traurig in Boca Raton co-authored "Ruling on Assignment of
Vested Remainder Interest May Have Reached Wrong Conclusion," which was published in the September/October issue of Tax Management Estates, Gifts, and Trusts Journal.
In a section titled "What a Skilled Estate Planner Would Do,"(122) Professor Dukeminier follows up on his point that "[t]he transmissible
vested remainder rule of the common law is a substitute for a power of appointment overlooked by the settlor"(123) by portraying good estate planning in a way that will bemuse my friends and colleagues who practice in this area, including the leading practitioners who serve on the Joint Editorial Board for the Uniform Probate Code.(124) The following example is what Dukeminier says is a skilled work product:
25.25111(h)(6) provides that if A holds "a
vested remainder interest in property, subject to being divested only in the event he should fail to survive one or more individuals or the happening of some other event, an irrevocable assignment of all or any part of his interest would result in a transfer includible for Federal gift tax purposes."
Accordingly, Trust A conferred a
vested remainder in the trust on one of the settlor's children and the remaining Crummey powerholders either had contingent interests or no interest at all.
A principal feature of sound estate planning in the twentieth century is creating flexibility in trusts, which experience has shown to be highly desirable.(8) The transmissible
vested remainder rule of the common law is a substitute for a power of appointment overlooked by the settlor.
According to the IRS, the intent of the annual exclusion provision is accomplished by a gift in trust only when the individuals holding withdrawal powers have "current or long term economic interests in the trust and in the value of the corpus" (e.g., current income or
vested remainder interests).
However, if a decedent is survived by a spouse and lineal descendants, the surviving spouse takes a life estate in the homestead with a
vested remainder to the lineal descendants in being at the time of decedent's death.
Addressing the degree of interest in property necessary to be eligible for the annual exclusion, the court stated that Crummey did not require or imply that beneficiaries of a trust have a vested present interest or
vested remainder interest in the trust corpus or income in order to qualify the gift for the annual exclusion.
The court rejected the notion that Crummey requires that the beneficiaries of a trust have a vested present interest or
vested remainder interest in the trust corpus or income to qualify under Sec.