Question

Assume that G, age 60, transfers $400,000 to a trust. The income is payable to C, age 60, for life and then the remainder is distributable to C’s children. At nearly the same time, C transfers $300,000 of her own assets to a trust. The income from that trust is payable to G for life and the remainder is distributable to G’s children.

A.  Is either trust included in G’s gross estate upon his death?

B.  Assume further that at G’s death, the trust created by C is valued at $500,000, and at C’s death the trust created by G is valued at $700,000. How much should be included in each estate?

Answer 1

A. The trust created by transferring C's assets to trust should be included in G's gross estate upon his death. This is because trust deed explicitly states that upon G's death remainder should be transferred to his children. So, estate that is distributed to his children should form part of G's estate to be distributed to his children.

B. In that case, in G's estate $500,000 should be included. In C's estate $700,000 should be included. Here it is assumed that this value is after making payment of income to G & C. These values should be included in there respective estates because this has been written in there respective trust deeds that balance amount after payment of income should be transferred to there estates upon there deaths i.e., paid to there children on there deaths.