Question

Q: D creates a trust with income payable for D's lie either to A or to B, as D directs, remainder to C or C's estate. D retains a power to revoke. Assume A, B and C are unrelated to D.

a.    Does D make a completed gift at the time of creation of the trust?

b.    At D's direction, the first year's income is paid equally to A and B. Are there any gifts?

c.    In addition, D relinquishes D's power to revoke at the end of year 1, but not D's right to direct income payments. Is there a further gift?

d.    In addition to the facts of part c. above, at the end of the year 2 D directs that the year's income be paid to A and effectively further directs that all remaining income during D's life be paid to A or A's estate. Are there any gifts?

e.    Would D have made a completed gift of the entire trust property if D had simply created a trust with income to A for ten years, remainder to A or A's estate, and D retained a power to accumulate income?

Answer 1

a. No, because we don't know who it's going to go to.

b. Yes, because it was actually given and we lost dominion and control over it.

c. There is a further gift for the remainderment. There isn't a gift for the income payments.

d. Yes, because if D is directing income to go to A there are going to be actual gifts.

e. There will be a gift because the power to accumulate income doesn't matter. Time or manner of enjoyment is disregarded in gift tax.

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