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Table of Contents
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List of Forms by Chapter - Chapter 1 — Overview of Revocable Grantor Trusts
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I. Introduction - II. Advantages of Revocable Grantor Trust
- [1.8] Probate Avoidance on Death of the Grantor
- [1.9] Privacy
- [1.10] Guardianship Avoidance and Continuity of Management in the Event of the Grantor’s Incapacity
- Flexibility During Grantor’s Life
- [1.11] Easy To Amend
- [1.12] Representation of Beneficiaries
- [1.13] Priority of Representation
- [1.14] Preservation of Nature of Assets
- Ease of Administration After Grantor’s Life
- [1.15] Expeditious Distribution of Assets
- [1.16] Asset Protection for Beneficiaries
- [1.17] Facility of Asset Management — Coordination and Unification of Asset Management
- Flexibility To Meet Changing or Unexpected Circumstances both During and After the Grantor’s Life
- [1.18] Trust Protector
- [1.19] Nonjudicial Settlement Agreement
- [1.20] Decanting
- III. Disadvantages of Revocable Grantor Trust
- Administrative Requirements
- [1.21] Accounting
- [1.22] Notices to Beneficiaries
- Claims Against the Trust
- [1.23] Creditor Claims During Grantor’s Life
- [1.24] Creditor Claims After Grantor’s Death
- [1.25] Trust Contests
- [1.26] Renunciation of the Will
- [1.27] Cost of Drafting
- “Avoidable” Consequences
- [1.28] Risk of Poor Drafting
- [1.29] Unfunded Trust
- IV. Ethical Considerations
- Chapter 2 — Determination of the Taxable Estate
- I. Introduction
- II. Federal Estate Tax
- Determining the Gross Estate
- [2.3] In General
- [2.4] Valuation and Alternate Valuation
- [2.5] Real Estate
- [2.6] Special Valuation of Farmland
- [2.7] Land Contract Receivables
- [2.8] Transfers with a Retained Life Estate
- [2.9] Jointly Owned Property Between Spouses
- [2.10] All Other Joint Interests
- [2.11] Tenancies in Common
- [2.12] Stocks and Bonds
- [2.13] Closely Held Corporate Stock
- [2.14] Mortgages, Notes, Cash, Checks, Contracts, and Partnerships
- [2.15] Interest and Dividends
- Life Insurance
- [2.16] Inclusion of Life Insurance
- [2.17] Group Life Insurance
- [2.18] Personal Property
- [2.19] Transfers During the Decedent’s Life
- [2.20] Powers of Appointment
- [2.21] UTMA or Custodial Accounts
- [2.22] Pensions, IRAs, and Annuities
- [2.23] Miscellaneous
- Determining the Taxable Estate
- [2.24] In General
- [2.25] Deductible Costs and Expenses
- [2.26] The Marital Deduction
- [2.27] Charitable Gifts
- [2.28] Rates and Estimating the Tax
- [2.29] Basis of Assets
- III. Illinois Estate Tax
- Chapter 3 — Planning for Spouses and Descendants
- I. In General
- II. Marital Deduction Portion of the Estate
- [3.3] In General
- [3.4] Outright Distribution to Spouse
- Life Estate with General Power of Appointment
- [3.5] In General
- [3.6] Qualifying for Marital Deduction
- [3.7] Income Provision
- [3.8] Invasion of Principal
- [3.9] General Power of Appointment Marital Trust
- [3.10] Frequency of Use
- QTIP Trust
- [3.11] In General
- [3.12] Qualifying for QTIP Marital Deduction
- [3.13] Tax Election
- [3.14] Income Provision
- [3.15] Invasion of Principal
- [3.16] Payment of Taxes
- [3.17] Reduction of Principal
- [3.18] Distribution upon Death of Spouse
- [3.19] Estate Trust
- [3.20] Questions for the Attorney
- III. Nonmarital Portion of the Estate
- [3.21] In General
- [3.22] Allocation of Property or Distribution with Disclaimer
- Trust for Spouse and Descendants
- [3.23] In General
- [3.24] Trust for Spouse — Payment of All Income
- [3.25] Sprinkling-of-Income Provision
- [3.26] Accumulation of Income
- [3.27] Distribution of Principal
- Surviving Spouse’s Remarriage
- [3.28] In General
- [3.29] Conversion of Mandatory Payment of Income to Discretionary Sprinkling Provision
- [3.30] Removal of Surviving Spouse from Sprinkling Trust
- [3.31] Limited Distribution of Principal
- [3.32] Trust for Children of Prior Marriage
- [3.33] Distribution of Nonmarital Trust
- [3.34] Questions for the Attorney
- IV. Distribution upon Death
- [3.35] In General
- [3.36] Separate Trusts for Each Child
- [3.37] Common Trust Fund Until the Youngest Child Is a Certain Age or Graduates from College
- [3.38] Distribution and Distribution Ages for Children
- [3.39] Lifetime Trust for Children with Mandatory Income
- [3.40] Trusts for Support of a Minor or Person with a Disability
- [3.41] Disaster Provisions
- [3.42] Questions for the Attorney
- V. Tangible Personal Property and the Residence
- VI. Choice and Powers of Trustee
- [3.51] Grantor as Trustee
- [3.52] Individual vs. Corporate Trustees
- Family Members vs. Independent Persons
- [3.53] In General
- Power To Distribute Principal
- [3.54] In General
- [3.55] Power To Use Principal or Income To Discharge Legal Obligation To Support
- [3.56] Power To Distribute Principal When Trustee Is Income Beneficiary
- [3.57] Power To Sprinkle Income Among Beneficiaries, Including Trustee
- [3.58] Power of Beneficiary To Remove and Appoint Trustee
- [3.59] Family Members as Trustee — Additional Concerns
- [3.60] Questions for the Attorney
- Chapter 4 — Drafting Marital Deduction and Credit Shelter Provisions
- Chapter 5 — Tax Aspects of Trust Administration
- I. [5.1] Overview
- II. Pre-Death Aspects
- [5.2] Gift Tax
- [5.3] Generation-Skipping Transfer Tax
- Federal Income Tax
- [5.4] Grantor Considered as Owner
- [5.5] Tax Return and Tax Year
- [5.6] Trust Taxpayer Identification Number
- [5.7] Estimated Tax Payments
- [5.8] Basis and Holding Period
- [5.9] Passive Activity
- [5.10] At-Risk Rules
- [5.11] S Corporations
- [5.12] Section 1244 Stock
- [5.13] Installment Sales
- [5.14] Sale of Principal Residence
- Illinois Taxes
- [5.15] Illinois Income Tax
- [5.16] Illinois Residential Property Tax Credit
- III. Post-Death Aspects
- [5.17] Generation-Skipping Transfer Tax
- Federal Estate Tax
- [5.18] Inclusion of Trust Assets
- [5.19] Deductibility of Administrative Expenses
- [5.20] Trustee’s and Executor’s Liability for Payment of Estate Tax
- [5.21] Gifts from Grantor Trust Within Three Years of Death
- [5.22] Disclaimers
- Federal Income Tax
- Taxation of Net Income of Grantor Trusts After the Trust Becomes Irrevocable
- [5.23] In General
- [5.24] Distributable Net Income
- [5.25] Simple or Complex Trust
- [5.26] Sprinkling Provision
- [5.27] Throwback Rules
- [5.28] Fiscal Year-End
- [5.29] Taxpayer Identification Number
- [5.30] Estimated Tax Payments
- [5.31] Basis and Holding Period
- [5.32] Gain and Loss to Trust upon Distribution of Property
- [5.33] The Taxpayer’s Final IRS Form 1040
- [5.34] Passive Activity Losses
- [5.35] S Corporation Stock
- [5.36] Illinois Income Tax
- Tax Apportionment and Tax Clauses
- [5.37] In General
- [5.38] Estate Tax Apportionment Clauses
- [5.39] Generation-Skipping Transfer Tax
- [5.40] Tax on Excess Accumulation from Qualified Retirement Plans
- [5.41] Income Taxation of Retirement Plan Benefits Paid to a Revocable Grantor Trust
- Chapter 6 — Planning for Incapacity
- Chapter 7 — Funding the Revocable Grantor Trust
- Chapter 8 — Standard Revocable Grantor Trust Agreement
- I. [8.1] In General
- II. Standard Revocable Grantor Trust Agreement with Comments
- [8.2] Heading and Identification Data
- [8.3] Declaration of Trust
- [8.4] Article 1: Name of Trustee
- [8.5] Article 2: Name of Trust and Date of Creation
- [8.6] Article 3: Funding of Trust
- [8.7] Article 4: Distribution During Lifetime
- [8.8] Article 5: Terms After Death
- [8.9] Paragraph 5.1: Debts and Taxes
- [8.10] Paragraph 5.2: Tangible Personal Property
- [8.11] Paragraph 5.3: Names of Children and Spouse; Adopted Children as Descendants
- [8.12] Paragraph 5.4: Division of Trust upon Grantor’s Death
- [8.13] Article 6: Special Terms of Both Marital Trust and Credit Shelter Trust
- [8.14] Paragraph 6.1: All Income to Spouse
- [8.15] Paragraph 6.2: Invasion of Principal
- [8.16] Paragraph 6.3: Special Power
- [8.17] Article 7: Special Terms of Marital Trust
- [8.18] Article 8: Disposition of Credit Shelter Trust
- [8.19] Article 9: Perpetuities Clause
- [8.20] Article 10: Trust Administration
- [8.21] Paragraph 10.1: Resignation of Trustee
- [8.22] Paragraph 10.2: Successor Trustees
- [8.23] Paragraph 10.3: Removal and Replacement of Trustee
- [8.24] Paragraph 10.4: No Bond Required of Trustee; Good Faith
- [8.25] Paragraph 10.5: Acts of Prior Trustees
- [8.26] Paragraph 10.6: Diversity of Holdings
- [8.27] Paragraph 10.7: Income Tax
- [8.28] Paragraph 10.8: Small Trust Termination
- [8.29] Paragraph 10.9: Spendthrift Provision
- [8.30] Paragraph 10.10: Exercise of Power
- [8.31] Paragraph 10.11: Spouse’s Power To Require That Marital Trust Property Be Made Productive
- [8.32] Paragraph 10.12: Federal or Illinois QTIP Election
- [8.33] Paragraph 10.13: Notice and Information to Beneficiaries
- [8.34] Paragraph 10.14: Sale of Land to Family Member
- [8.35] Paragraph 10.15: In Terrorem Clause
- [8.36] Paragraph 10.16: S Corporation Stock
- [8.37] Paragraph 10.17: Section 2032A Property
- [8.38] Paragraph 10.18: Designation of Designated Representative
- [8.39] Article 11: Trustee Powers
- [8.40] Paragraph 11.1: Allocation of Principal and Income
- [8.41] Paragraph 11.2: Retention of Property
- [8.42] Paragraph 11.3: Investments
- [8.43] Paragraph 11.4: Distributions — Facility of Payment
- [8.44] Paragraph 11.5: Stocks and Securities
- [8.45] Paragraph 11.6: Creation of Corporation, Limited Liability Company, Land Trust, or Partnership
- [8.46] Paragraph 11.7: Retention of Grantor’s Business Interest
- [8.47] Paragraph 11.8: Voting Trusts and Buy-Sell Agreements
- [8.48] Paragraph 11.9: Real Estate
- [8.49] Paragraph 11.10: Bidding at Sale of Property
- [8.50] Paragraph 11.11: Mineral Leasing
- [8.51] Paragraph 11.12: Oil and Gas Business
- [8.52] Paragraph 11.13: Farm Management
- [8.53] Paragraph 11.14: Farm Manager
- [8.54] Paragraph 11.15: Preservation of Farmland
- [8.55] Paragraph 11.16: Buildings
- [8.56] Paragraph 11.17: Insurance
- [8.57] Paragraph 11.18: Depreciation and Depletion
- [8.58] Paragraph 11.19: Residence for Beneficiaries
- [8.59] Paragraph 11.20: Borrowing Money and Mortgaging Property
- [8.60] Paragraph 11.21: Litigation
- [8.61] Paragraph 11.22: Additions to Trust
- [8.62] Paragraph 11.23: Employment of Agents and Counsel; Fees and Expenses
- [8.63] Paragraph 11.24: Division of Trust Property
- [8.64] Paragraph 11.25: Distribution of Undivided Interests
- [8.65] Paragraph 11.26: Continuation of Powers; Disclaimer
- [8.66] Paragraph 11.27: Dealing with Fiduciaries
- [8.67] Paragraph 11.28: Payment of Taxes, Etc.
- [8.68] Paragraph 11.29: Special Valuation
- [8.69] Paragraph 11.30: Generation-Skipping Transfer Tax
- [8.70] Paragraph 11.31: Division into Separate Trusts
- [8.71] Paragraph 11.32: Commingling Trusts
- [8.72] Paragraph 11.33: Combined Record-Keeping
- [8.73] Paragraph 11.34: Trust as Beneficiary of Insurance
- [8.74] Paragraph 11.35: Change of Situs of Trust
- [8.75] Paragraph 11.36: Certification of Trust
- [8.76] Paragraph 11.37: Continuance of Trusts with §2032A Property
- [8.77] Paragraph 11.38: Broad Power
- [8.78] Article 12: Order of Death
- [8.79] Article 13: Amendment, Revocation, or Termination
- [8.80] Article 14: Language on Deeds
- [8.81] Article 15: Dealing with Third Persons
- [8.82] Article 16: Construction
- [8.83] Signature and Acknowledgment
- [8.84] Acceptance by Trustee
- III. [8.85] Concluding Comments
- Chapter 9 — S Corporations and Illinois Revocable Grantor Trusts
- Chapter 10 — Trusts by Citizens or Residents for Noncitizen Spouses (Qualified Domestic Trusts)
- I. [10.1] Introduction
- II. QDOT Requirements
- III. [10.10] Reformation and Amendment of Trust
- IV. [10.11] Multiple QDOTs
- V. [10.12] Transfer/Assignment of Property to QDOT
- VI. [10.13] QDOT Termination
- VII. Federal Taxation of the QDOT
- [10.14] In General
- [10.15] QDOT Tax
- [10.16] Exemptions
- [10.17] Basic Exclusion Amount Planning
- [10.18] Tax Return and Due Date
- [10.19] Liability and Lien for Tax Due
- [10.20] Basis in Property Distributed
- [10.21] Special Rule When Spouse Becomes Citizen
- [10.22] Double Taxation Treaties
- [10.23] Provision for Payment of QDOT Taxes
- [10.24] Capital Gains Recognition Under Code §684
Authors
- Sarah M. Barnes
Sarah M. Barnes
Sarah M. Barnes is an associate at Harrison & Held, LLP, in Chicago, where she concentrates her practice in trust and estate administration, probate, and estate planning. She is a member of the Illinois State and Chicago Bar Associations and a volunteer attorney for the CVLS Probate Court Assistance Program. Ms. Barnes received her B.A. in political science from Michigan State University and her J.D. from the Chicago-Kent College of Law.
- Elizabeth A. Garlovsky
Elizabeth A. Garlovsky
Elizabeth A. Garlovsky is a Partner at Harrison & Held, LLP, in Chicago, where she focuses her practice on estate planning, probate, and trust administration. She is a Fellow of the American College of Trust and Estate Counsel. She is also a member of the Illinois State Bar Association Trusts and Estates Section, the Chicago Bar Association (where she serves on the Probate Forms Committee), and the Chicago Estate Planning Council. Ms. Garlovsky received her B.A. from the University of Illinois Urbana-Champaign and her J.D. from the Loyola University Chicago School of Law.
- Shawn M. McCullough
Shawn M. McCullough
Shawn M. McCullough is an associate at Harrison & Held, LLP, in Chicago, where he focuses his practice on estate planning, estate and trust administration, and business succession. He is a member of the Chicago Estate Planning Council and the Illinois State and Chicago Bar Associations. He is also a Certified Public Accountant. Mr. McCullough received his B.S. from Indiana University and his J.D. from the Chicago-Kent College of Law.
Revocable Grantor Trusts 2023 Edition
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