- 42 -
under the trust or might be said to have been exercised “under”
the trust, the resulting generation-skipping transfer is treated
as being directly from her to her grandchildren. Consequently,
it was not a “generation-skipping transfer under a trust” within
the meaning of the transitional rule.
Sound policy considerations support this result. For
Federal estate tax purposes, a general power of appointment is
tantamount to outright ownership of the property to which the
power relates. See Morgan v. Commissioner, 309 U.S. 78, 81
(1940); Estate of Kurz v. Commissioner, 101 T.C. 44, 50-51
(1993).3 Because the holder of a general power of appointment has
“effective control over the disposition of the property”, the
power holder has the ability to avoid a generation-skipping
transfer. Peterson Marital Trust v. Commissioner, supra at 800.
Consequently, the power holder has no legitimate expectation of
immunity from the 1986 GST tax amendments that might otherwise
apply to generation-skipping transfers resulting from exercise of
the power. The purpose of the transitional rule would not be
served by providing transitional relief in these circumstances.
3 In this regard, the Federal estate tax rules depart from
the traditional common law view, under which the donee was often
likened to an agent or trustee for the donor. Under the common-
law “relation-back theory”, the appointive property was generally
thought of as passing directly from the donor to the appointee or
the takers in default. See Bittker & Lokken, Federal Taxation of
Income, Estates & Gifts, par. 128.1, at 128-3 (2d ed. 1993).
Page: Previous 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 NextLast modified: May 25, 2011