Archives: Trust Administration

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Income Tax Reporting for Decanting

Decanting refers to the distribution of trust property of one trust (the “first trust”) to another trust (the “second trust”).  Over the past several years, the number of states specifically authorizing decanting by statute has grown rapidly.  As of March 2014, at least twenty-two states have passed or proposed a state decanting statute. Notwithstanding this … Continue Reading

SEC “Common Trust Fund” Exception Narrowly Construed for Private Trust Companies

Recent years have seen a dramatic increase in the number of Private Trust Companies (“PTCs”) established by wealthy families.  PTCs are used to consolidate the trustee function of multiple trusts within a family, and because these trusts are often invested in family-controlled investment vehicles they implicate various federal securities laws.  For instance, the Investment Company … Continue Reading


Because trusts are subject to the 3.8% Net Investment Income Tax at a very low income level, $12,150 for 2014, trustees of trusts owning interests in operating entities have been considering ways to meet the material participation requirements to avoid this tax.  As discussed in a prior post, differing points of view have arisen regarding … Continue Reading

Transfers to Non-Citizen Spouses: Planning Considerations

Estate planning professionals commonly encounter married couples with mixed nationalities.  That is, one spouse is an American citizen and the other is not.  The U.S. estate and gift tax rules are generally the same for U.S. citizens and resident aliens.  However, the estate tax marital deduction differs significantly as applied to non-U.S.-citizen surviving spouses. The … Continue Reading

Best Practices for Charitable Organizations: New York Overhauls Nonprofit Corporation Law

New York Governor Andrew Cuomo recently signed into law the Non-profit Revitalization Act of 2013.  The provisions of the Act are generally effective on July 1, 2014.  A copy of the Act can be found at The Act will require nonprofit corporations governed by the New York Not-for-Profit Corporation Law and wholly charitable trusts … Continue Reading

The Limits of Discretion: Trust Distributions for Health, Education, Maintenance and Support

Trustees are often granted the power to distribute trust property “in the Trustee’s discretion” for a beneficiary’s “general well-being,”  “best interests,” “comfort,” or, most commonly, “health, education, maintenance and support.”  This “health, education, maintenance and support” distribution standard is so common that most trustees and other trust advisors refer to it simply as the “HEMS” … Continue Reading

May I Pay Your Taxes?: Colorado Enacts a New Grantor Reimbursement Statute

Grantor trusts are a powerful tool in estate planning in part because they facilitate depletion of the grantor’s estate by the grantor’s payment of income taxes attributable to the trust.  There may be circumstances, however, when the grantor is no longer in a position to bear some part or all of the trust’s tax burden, … Continue Reading

Careful Estate Planning Required When Transferring S Corporation Shares to Trusts

S corporation shareholders must be careful not to inadvertently terminate their closely held company’s S election when engaging in estate planning. Closely-held entities, which choose not to be formed as a partnership or limited liability corporation, often elect to be taxed as an S corporation under the Internal Revenue Code to avoid the double taxation … Continue Reading

Beware: Active Participation of S-Corporation Trustee Shareholder is Required – Technical Advice Memorandum 201317010

Differing points of view have arisen regarding determining the active participation of S-Corporation shareholdings held in Trust.  The uncertainty centers on IRC § 469. Section 469 defines a passive activity as any activity that involves the conduct of any trade or business in which the taxpayer does not materially participate, and the section specifically includes … Continue Reading

The Proliferation of Trust Decanting Statutes Continues

Irrevocable trusts are now subject to varying degrees of amendment by court approved modifications, trust protector actions, private settlement agreements, and, of course, decanting.  Effective July 1, 2013, Wyoming will become the nineteenth state (and the ninth state since 2010) to permit trust decanting by statute.  Decanting refers to the distribution of trust property of … Continue Reading