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life estate or a term of years or an annuity is not severable as
the term is used for purposes of determining whether a disclaimer
is a qualified disclaimer under section 2518. Sec. 25.2518-3(d),
Example (2), Gift Tax Regs.
In the dissenting portion of her opinion, Judge Kroupa
argues that the foundation’s annuity interest in the trust and
Hamilton’s remainder interest in the trust are independent
because the foundation can do nothing to affect the contingent
remainder and Hamilton can do nothing to affect the annuity.
Control by the “holder” of the beneficial interest is not
relevant; the holder of the income interest in a trust and the
holder of the remainder interest in that trust generally cannot
affect each other’s interest; yet those interests are not
severable.
Although it is possible for the trustee of a trust to affect
either the income interest or the remainder through investment
decisions, the trustee has a fiduciary duty to balance the
interest of the income beneficiary with that of the remainderman
in making investment decisions. During the life of the income
beneficiary or the term of years, the distribution of the income
(usually cash dividends and/or interest) to the income
beneficiary does not diminish the value of the remainder
interest. Similarly, the gain or loss that might accrue in the
corpus is not affected by the income earned and distributed to
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