- 9 - to B for life with remainder to B's issue. Assume further that B was given a non-cumulative right to withdraw $10,000 a year from the principal of the trust fund * * * . In such case, the failure of B to exercise his right of withdrawal will not result in estate tax with respect to the power to withdraw $10,000 which lapses each year before the year of B's death. At B's death there will be included in his gross estate the $10,000 which he was entitled to withdraw for the year in which his death occurs less any amount which he may have taken during that year. * * * Sec. 20.2041-3(d)(3), Estate Tax Regs. The above example is taken directly from the Senate Report on the Powers of Appointment Act of 1951, ch. 165, sec. 2, 65 Stat. 91. See S. Rept. 382, 82d Cong., 1st Sess. (1951), reprinted in 1951 U.S.Code Cong. & Admin. News (U.S.C.C.A.N.) 1530. With respect to then proposed new section 811(f)(5), which in substance is identical to current section 2041(b)(2), the Senate report stated: The House bill provided that the failure to exercise a future power which lapses during the life of the holder of the power shall not be deemed an exercise or release of the power. An amendment by your committee modifies this latter provision so as to exempt from estate and gift tax only limited amounts of property subject to lapsed powers. The committee amendment provides an annual exemption with respect to the lapsed powers equal to $5,000 or 5 percent of the trust or fund in which the lapsed power existed, whichever is the greater. Thus, for example, if a person has a noncumulative right to withdraw $10,000 a year from the principal of a $200,000 trust fund, failure to exercise this right will not result in either estate or gift tax with respect to the power over $10,000 which lapses each year prior to the year of death. At his death there will be included in his gross estate the $10,000 which he was entitled to draw for the year in which his death occurs, less any sums which he may have taken onPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
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