[WSBAPT] 3rd party special needs trust--intentionally defective grantor language

[Ronda Larson Kramer]

I need to revise my previous message. It would not be a IDGT. Rather, what I'm wondering is if anyone has put language in the SNT to allow a step up in basis at death. For example, in Rev. Rul. 2004-64, the IRS said that if the trust instrument requires the trustee to distribute to the grantor income or trust principal in an amount sufficient to satisfy the grantor’s income tax liability, the trust assets would be includible in the grantor’s estate at death under Internal Revenue Code § 2036(a). Putting such language in the trust seems like an easy way to obtain the basis step-up at death for a 3rd party special needs trust that has a house in it where the grantor is a Medicaid applicant and the beneficiary is his disabled child.


Would any of you agree?

________________________________
From: Ronda Larson Kramer
Sent: Tuesday, November 6, 2018 2:39:54 PM
To: wsbapt List serve; WANAELA List serve; Elder Law Section
Subject: 3rd party special needs trust--intentionally defective grantor language


Has anyone done Medicaid planning to transfer a Medicaid applicant's real estate (e.g., a rental house)  into a 3rd party special needs trust for a disabled child to live in the house (or rent it out), where you put language in the trust to get a step up in basis on the grantor's death (i.e., intentionally defective grantor trust language)? Do you see any traps for the unwary?


Ronda Larson Kramer
J.D., LL.M in Tax Laws, Owner
LARSON LAW, PLLC
Elder Law, Estate Planning
1700 Cooper Point Rd SW, Bldg A3
Olympia WA 98502
Ph: 360-259-3076
ronda at larsonlawpllc.com<mailto:ronda at larsonlawpllc.com>
www.larsonlawpllc.com<http://www.larsonlawpllc.com/>

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