IRS Still Silent on Decanting and Income Tax Issues

In recent years there has been an increase in States proposing and enacting statutes that allow decanting. The IRS asked for comments on decanting related tax issues, received numerous comments, but has not yet released any guidance on how trustees should handle decanting trusts for tax purposes. This creates a significant dilemma for the trustee, who has to decide whether the trust should be handled as a new trust or if it is a continuation of the first.

See Chad Makuch, Income Tax Reporting for Decanting, JD Supra, June 23, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.