Current Developments Estate Inclusion Risk if Exempt and Non-Exempt Trusts Have Differing Terms

Stephen R. Akers

Oct 02, 2025

The IRS included paragraphs at the end of IRS Private Letters Rulings 202507005 (Feb. 14, 2025) and 202531005 (Aug. 1, 2025) hinting that it might take the position that the grantor’s decision of whether to allocate GST exemption to a trust that has different terms for exempt and non-exempt trusts may cause inclusion in the gross estate under Sections 2036 or 2038 and might create an “estate tax inclusion period” (ETIP). The same reasoning might suggest that a transfer to the trust is an incomplete gift. This is a surprising (and potentially devastating) development.

Steve Akers
Senior Fiduciary Counsel