An irrevocable trust that is deemed owned by a beneficiary for income tax purposes (a “Code §678 trust”) can have several uses. First, if the beneficiary is in a lower overall federal and state income tax bracket than the trust, a Code §678 trust can save significant income taxes. Second, a client may be able to sell assets to a Code §678 trust and retain much more benefit and control than a traditional sale to an irrevocable grantor trust.

Code §678 trusts come in many flavors: BDITs, BDOTs, QSSTs, and relatively simply drafted trusts. Learn some of the nuances of various issues in using them during this webinar.

PLEASE TAKE THE PREREQUISITES SERIOUSLY – THEY ARE NECESSARY FOR YOU TO BENEFIT FROM THE WEBINAR.  

Learning Objectives: 

• Identify income tax and estate planning benefits to using a Code §678 trust


• Recall how Code §678(a) works in relation to Code §678(b)


• Determine how lapses of withdrawal rights affect the design of Code §678 trusts, including what portion is deemed owned after a lapse


• Identify potential access to a Code §678 trust by the beneficiary’s creditors


• List steps in planning for and structuring a sale of a Code §678 trust


• Recall gift tax reporting of a sale of a Code §678 trust


• Identify sample language when only wanting to shift income to the beneficiary


• List a trust as a deemed owner of another trust


• Identify fiduciary income tax advantages and disadvantages of Code §678 trusts


• Recall QSST as a Code §678 trust

Prerequisites: Knowledge of irrevocable grantor trusts can be gained by attending Formula Transfers for Estate Planning, and a basic understanding of the taxation of beneficiaries of irrevocable trusts can be achieved by attending the course: How to Shift Income to Beneficiaries