Trusts offer your clients asset protection and tax benefits, giving them the power to say how and when their cash and property are distributed. They also offer a mechanism for putting the decision-making process in the hands of someone other than the grantor—the power of appointment (POA).
But for all their flexibility, powers of appointment also have the tendency to throw estate plans off track, resulting in unplanned-for tax liability and unforeseen results.
Although a person who has a general power of appointment over property isn’t said to own the property, if they die holding the POA, their gross estate can include the value of that property. And that’s where the dispute in Estate of Chancellor v. Comm’r, T.C. Memo 2011-172 (2011) begins.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of the estate tax in Advisor’s Journal, see More States Moving to Estate Tax Repeal (CC 11-121) & Does the New Estate Tax Make the Bypass Trust Obsolete? (CC-10-122).
For in-depth analysis of the estate tax, see Advisor’s Main Library: A—Federal Estate Tax General.