Help with Form 709

[GraceNY]

First Form 709.

Taxpayer transferred a life insurance policy which was issued back in 2002 to irrevocable trust.  Still paying premiums.  Form 712 from insurance company shows a value of $80k at the time of the gift.

According to the trust document, lifetime beneficiaries of the trust are his son and his 2 children, NOT the grantor.

Am I correct in reporting in Part 2 of Schedule A (Direct Skip) due to the grandchildren being beneficiaries?

And, what about "Electing Out of Automatic Exemption Allocation" (IRC Section 2632(c))?   I'm not sure about this.

Thanks in advance for any input.

Grace

 

 

 

 

 

 

[DANRVAN]

It should be reported on part 3 since a trust that has both skip and non-skip beni's is considered an indirect skip as defined in sect 2632(c).

In regards to the 2632(c) election, that would cause a taxable termination on the death of the trust beni.

There are cases where the 2632(C) election is made out of the auto allocation of GST.  For example  if the life insurance policy expires while in trust there is a possible of waste of GST.

That might not be a concern depending on the size of the estate.  The estate attorney should be consulted if there is a concern.

 

[DANRVAN]

On 10/12/2019 at 9:55 AM, DANRVAN said:

allocation of GST.  For example  if the life insurance policy expires while in trust there is a possible of waste of GST.

That should read "GST exemption" in both sentences.