Administrative Powers describes and analyzes the development of the law with regard to the estate and gift tax consequences of various administrative powers granted to trustees; reserved by a settlor or a decedent; or held by an executor, custodian or others. For many years, individuals have attempted to reduce their income tax burden and their ultimate estate tax liability by means of inter vivos transfers of property in trust. In many instances, the transferor has attempted to give away the property to achieve the tax benefit while, at the same time, retaining some degree of control over the transferred property by means of reserving, or granting to a trustee, certain discretionary and administrative powers. 

The Portfolio, written by Alan S. Acker, Esq., discusses the estate and gift tax questions that arise from the inclusion of specific administrative powers, normally used to provide flexibility to a trustee, to effectuate the intention of the settlor/decedent without the need of seeking court approval. Local law controls the interpretation of the governing instruments, and is of importance with regard to the federal estate or gift tax effect of the creation, existence or exercise of an administrative power. Federal courts have tried to give effect to the settlor's intention and to determine whether or not the holder of the power is limited in its use of the power by a local court. In most instances, if the power is found to be subject to such control, the federal courts have held the powers to have little or no estate or gift tax consequences.

Administrative powers, an essential element in all trusts, are, for purposes of this Portfolio, defined as powers that are not obviously substantive or dispositive, but rather are more ministerial or incidental to the basic terms of the transfer of the property to the trustee or to its use or disposition after the transfer. The context of the definition is that of estate and gift taxes rather than income taxes.

Administrative Powers allows you to benefit from:

• Hundreds of hours of original research on specific tax planning topics from leading practitioners in this area
• Invaluable practice documents including tables, charts and lists
• Plain-English guidance from world-class experts
• Real-world and in-depth analysis that lets you explore various options
• Time-saving access to relevant sections of tax laws, regulations, court cases, IRS documents and more
• Alternative approaches to both common and unique tax scenarios

This Portfolio is part of the Estates, Gifts and Trusts Portfolios Library, a comprehensive series containing more than 80 Portfolios, which covers critical transactions in estate, gifts and trusts planning. This highly-regarded resource library offers commentary on a wide range of estate planning topics including: Generation Skipping Tax, Family Limited Partnerships, Charitable Remainder Trusts, Estate Planning for Closely-Held Businesses, Exempt Organizations and Private Foundations, Life Insurance, Valuation, and more.

Detailed Analysis

I. Introduction

II. General Estate and Gift Tax Implications

III. Definition of Administrative Powers

IV. Creation of Administrative Powers

V. Power of Settlor to Act as Trustee or to Appoint Trustees

A. Power of Settlor to Name Himself as Trustee

B. Power of Settlor to Name Others as Trustees

C. De Facto Control of Trustees

VI. Estate Tax Statutory Concepts

Introductory Material

A. Section 2033 - Property in Which Decedent Had an Interest

B. Section 2035 - Transfers Within Three Years of Death

C. Section 2036 - Transfers With Retained Life Estate

1. Power of Settlor to Accumulate or Distribute Trust Income

2. Power to Use Income for Legal Obligations

3. Power to Affect Production of Trust Income

D. Section 2037 - Transfers Taking Effect at Death

E. Section 2038 - Revocable Transfers

F. Section 2041 - Powers of Appointment

G. Section 2042 - Insurance

H. Section 2046 - Disclaimers

I. Section 2055 - Transfers for Public, Charitable and Religious Uses

1. Split-Interest Trusts

2. Termination of Impermissible Powers

3. Selection of Charity

J. Section 2056 - Marital Deduction

1. Powers Pertaining to Allocation or Apportionment of Receipts and Expenditures

2. Power to Determine Manner of Allocation of Receipts and Expenditures

3. Other Administrative Powers

4. Payment of Death Taxes, Administrative Expenses, Debts and Other Charges from Marital Deduction Property

VII. Gift Tax Statutory Concepts

A. Section 2503(b) - Exclusions from Gifts

B. Section 2503(c) - Exclusions from Gifts - Minors

C. Section 2511 - Incomplete Transfers

D. Section 2514 - Powers of Appointment

E. Section 2518 - Disclaimers

F. Section 2522 - Charitable Gifts

G. Section 2523 - Gift Tax Marital Deduction

VIII. Effect of State Law

IX. Specific Administrative Powers

Introductory Material

A. Power to Limit Liability of Trustee

B. Power to Amend Administrative Provisions

C. Power to Terminate Trust

D. Power to Sell

E. Power Over Investment Policy

1. Settlor's Power to Assist Trustee in Investment Decisions

2. Power to Control Investment Decisions

3. Power to Require Retention of Specific Investments

4. Power to Invest in "Nonlegal" Investments

5. Power to Invest in Nonincome-Producing Property

6. Power to Invest in Life Insurance

7. Power to Invest in Mutual Funds

F. Power over Trust Accounting

G. Power to Allocate Receipts and Disbursements

H. Power to Pay Death Taxes and Administrative Expenses

I. Power to Create Additional Trusts

J. Termination of Power

K. Power to Elect to Take Against a Will

L. Power to Substitute Assets

M. Power of Custodian

N. Power of Executor

Working Papers

Table of Worksheets

Worksheet 1 Administrative Powers Provisions for Trusts and Wills

Bibliography

OFFICIAL

Statutes:

Treasury Rulings:

Cases:

UNOFFICIAL

Periodicals:

1986

1987

1989

1990

1995

1996

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2003