Qualified Severance and the Generation-Skipping Transfer Tax

Jerold I. Horn (attorney, Peoria, Illinois) has recently published his article entitled Availability of a Qualified Severance (i) If the Severance Changes Beneficial Interests or Otherwise Coincides with Changes in Beneficial Interests and (ii) If Remainder Dispositions Are Outright, 33 ACTEC J. 94 (2007).

Here is the introduction to his article:

The primary focus of this article is whether a qualified severance is available for a trust in which beneficial interests, present or future, are subject to change because of the death of a beneficiary, the termination of a term of time, the mandate of the governing instrument, the making of a severance, the availability or nonavailability of a qualified severance, the exercise of a nongeneral power of appointment, the exercise of a power of a trustee to “decant,” or the exercise of a power of an independent trustee to grant or revoke a general power of appointment. The situations that are described in the preceding sentence are common. Whether a qualified severance is available in each of these situations will have a large impact upon the extent, if any, to which reliance upon a qualified severance of a single trust that has an inclusion ratio of more than zero and less than one is a viable alternative to the mandated creation, from the outset, of two trusts, one with an inclusion ratio of zero and the other with an inclusion ratio of one.