Estate and Trusts
Don’t use your Trust as a possible tax avoidance vehicle
The IRS is targeting a practice called “toggling” grantor trusts.”Toggling” grantor trust transactions are utilized by grantors of these trusts in an attempt to avoid recognizing gain or to claim a tax loss greater than any actual economic loss by purportedly terminating and then reestablishing the grantor status of the trust.The transactions usually occur within 30 days of each other.
What this means is follows:A “grantor trust” exists, for example, in a situation where a surviving spouse retains her assets in a trust after the death of the first spouse (or grantor).These trusts are usually created for estate planning and probate purposes.What the IRS is targeting are persons who are using these trusts in an abusive way to save income taxes.Persons with these trusts should take caution when asked to terminate the trust, and re-establish it because of a certain transaction.For more information see IRS Notice 2007-73.
We can work with your estate attorney and account for transactions in a correct manner.