Monday, August 10, 2009

IRS Addresses Tax Consequences of Reformation Of Trust

In Private Letter Ruling (PLR) 200927013, the IRS ruled that the judicial reformation of two trusts constitutes a qualified reformation under section 2055(e)(3) and that an estate tax charitable deduction is permissible under section 2055(a) for the present value of the charitable remainder interests in the trusts passing to an institution. A copy of the PRL can be found at:

For those that are unaware of the concept of reformation, a simple explanation is as follows. Sometimes there is a mistake or ambiguity in the will or the trust that is not discovered until after the testator or grantor has passed away. There is a process to correct mistakes or ambiguities under state law and through the Internal Revenue Service (IRS) through a process known as reformation. Sometimes reformation is needed even where there is not a "mistake," but good and experienced estate planning can help avoid the need for a reformation.

Any questions or comments should be directed to: hm@moravecslaw.com or (626) 793-3210. The firm website is http://www.moravecslaw.com/