FAMILY TRUSTS & TRUSTORS (T/G 403) covers the elements of a valid trust, the meaning of "power of appointment," the federal tax returns required (gift, death, generation-skipping), the designation of family members as successor trustees, and the "economic leveling" opportunity when distributing income and corpus. Also covered:

• What makes a family trust "abusive"
• Pre-trust directives in your will
• Estate "deduction-inclusion" of QTIPs
• IRS scrutiny of family business transfers
• Sources of trust income and Form 1041
• Trust distinction: "simple" vs. "complex"

Family Trusts & Trustors
Book:  403

Table of Content:

1.  INTRODUCTORY ASPECTS                                1-1

    Meaning of “Trustor”                                1-2
    State Law Provisions                                1-3
    The Working Components                              1-5
    Trust Instrument: General Contents                  1-7
    The Trustor & His Property                          1-9
    Meaning of “Power of Appointment”                   1-10
    Beware of Abusive Trusts                            1-12
    Definitions re “Family”                             1-13
    A Trust is Not a Business                           1-15
    The “One Trust” Rule                                1-17

2.  IMPOSITION OF TRANSFER TAX                          2-1

    Tax Code Provisions                                 2-2
    Transfers in General                                2-3
    When Insufficient Consideration                     2-5
    The Imposition Mandates                             2-7
    The “Unified” Concept                               2-8
    The Unified Rates & Exclusions                      2-9
    Annual Gift Tax Exclusion                           2-11
    Taxable Gifts Cumulative                            2-13

3.  GIFT & DEATH TAX RETURNS                            3-1

    Form 709 Overview                                   3-2
    Schedules A & B: Form 709                           3-4
    Synopsis of 709 Computations                        3-5
    Form 706 Overview                                   3-7
    No Escaping Form 706                                3-8
    Distinction: Executor vs. Trustee                   3-10
    The 9 Asset Schedules                               3-11
    The Deduction Schedules                             3-14
    Other Items of Note                                 3-16
    Death Tax Computation                               3-18

4.  SPECIAL VALUATION RULES                             4-1

    Conservation Easement Land                          4-2
    Farm & Business Real Property                       4-3
    Must Attach Schedule A-1                            4-5
    Family-Owned Business Interests                     4-7
    Claims on Schedule T                                4-9
    Minority Interest Discounts                         4-10
    Estate Freeze Limitation                            4-12
    Sections 2701 & 2702: Synopsis                      4-15

5.  GRANTOR TRUST RULES                                 5-1

    Rule 1:  Substantial Owner: 5+%                     5-2
    Rule 2:  Reversionary Interests                     5-4
    Rule 3:  Grantor’s Spouse, Etc.                     5-5
    Rule 4:  Death of Beneficiaries                     5-7
    Rule 5:  Beneficial Enjoyment                       5-8
    Rule 6; Administrative Control                      5-10
    Rule 7:  Income for Grantor                         5-11
    Rule 8:  Nongrantor Owners                          5-12
    Rule 9:  Foreign Transfers                          5-13
    Rule 10: Power to Revoke                            5-15

6.  CHARITABLE REMAINER TRUSTS                          6-1

    Overview of IRC Sec. 664                            6-2
    Charitable Annuity Trusts                           6-3
    Charitable Remainder Unitrusts                      6-5
    Mandatory Aspects                                   6-7
    Sample Trust Declarations                           6-9
    “Unrelated Business Income” Explained               6-10
    How Remainders Determined                           6-11
    Tables Include Formulas                             6-13
    Loophole for Abuse                                  6-15

7.  SURVIVING SPOUSE TRUSTS                             7-1

    The Marital Deduction                               7-2
    Includible in Survivor’s Estate                     7-3
    Deductible Interests Defined                        7-6
    Terminable Interest Property                        7-7
    The QTIP Election                                   7-9
    The Alien Spouse Rule                               7-10
    Qualified Domestic Trust Defined                    7-11
    Making the QDOT Election                            7-13
    Schedule M Summarized                               7-14
    When Surviving Spouse Dies                          7-16

8.  DESIRABLE TRUST FEATURES                            8-1

    Don’t Bypass a Will                                 8-2
    IRS “Acceptance Letter”                             8-3
    Confusion over Forms 1041                           8-5
    Clarifying Creation Dates                           8-6
    Declare Trustor’s Intent Early                      8-9
    Article 2: Termination Events                       8-10
    Designation of Successor Trustees                   8-12
    Diagram of Intended Subtrusts                       8-13
    Beneficiary Prioritizing                            8-16
    Trust Property:  Appendix A                         8-17
    Standard Clauses: Appendix B                        8-18
    Powers of Administration: Appendix C                8-19

9.  GENERATION-SKIPPING TRUSTS                          9-1

    Overview of GST Law                                 9-2
    Fundamental Definitions                             9-3
    Generation Assignments?                             9-5
    Other Key Definitions                               9-7
    GST Exemption Amount                                9-8
    Self-Allocation or Deemed?                          9-10
    How Allocations Made                                9-12
    Inclusion Ratio for GST Trusts                      9-13
    How/When GST Tax Paid                               9-15
    Rule Against Perpetuities                           9-17

10. SOURCES OF TRUST INCOME                             10-1

    Sources Listed on Form 1041                         10-2
    Interest & Dividend Income                          10-3
    Tax-Exempt Interest                                 10-5
    Restructure Proprietorship Income                   10-7
    Family Corporation Stock                            10-8
    Rents & Royalties Income                            10-10
    Pooled Investment Activities                        10-12
    Transactional Gains & Losses                        10-13

11. COMPREHENDING FORM 1041                             11-1
    
    Head Portion Distinctions                           11-2
    Type of Entity Checkboxes                           11-4
    Trust Administration Deductions                     11-7    
    Fiduciary Fees                                      11-8
    Charitable Deduction                                11-10
    Legal & Accounting Fees                             11-12
    Other Items of Note                                 11-13
    Capital Gains & Losses                              11-16
    Schedule D (1041) Allocations                       11-17
    Suspect Transactions                                11-19

12. HOW DISTRIBUTIONS MADE                              12-1

    Candidate Distribution Sources                      12-2
    Scrutinizing the Contract                           12-4
    Seek Legal Opinions Early                           12-6
    The Role of Schedule B (1041)                       12-7
    Simple vs. Complex Revisited                        12-7
    Limitation on Deduction                             12-10
    The Computational Sequence                          12-12
    The Beneficiary K-1s                                12-15
    A Simple Trust Example                              12-16
    Other Simple K-1 Uses                               12-19
    Complex Trust & Charities                           12-20
    Property Distributed in Kind                        12-21
    Skip Persons & GST Tax                              12-22