September 25, 2012
Authored by: Stephanie Moll and Larry Brody
With guest co-blogger, Washington University School of Law student, Anne Jump.
The IRS recently released Private Letter Ruling 201233008 (the “PLR”), in which the IRS ruled that a proposed partial termination and modification of a trust pursuant to state law will not (1) cause the trust to be includible in the grantor’s estate under Internal Revenue Code sections 2036 or 2038, (2) result in a transfer by settlor of trust assets pursuant to Code section 2501, and (3) will not cause the trust to lose its exempt status for purposes of chapter 13 of the Code.
The Uniform Trust Code (UTC) provides that an irrevocable noncharitable inter vivos trust may be modified or terminated upon consent of the settlor and all of the beneficiaries. U.T.C. § 411(a). From the facts set forth in the PLR, the proposed partial termination and modification of the trust at issue was likely being