PLR 200942020PLR 200942020

IRS rules that the beneficiaries' “hanging” withdrawal rights don't interfere with grantor trust status

In PLR 200942020 (Oct. 16, 2009), the IRS addressed whether trust beneficiaries' current and hanging withdrawal rights, as well as those that previously lapsed, would cause a trust to be considered a grantor trust to the beneficiaries rather than the grantor. That ruling involved a trust agreement that created four subtrusts — each subtrust was for one of the taxpayer's four children, that child's spouse and that child's descendants. In addition, the taxpayer's spouse was a beneficiary of each of the subtrusts. The taxpayer's spouse served as co-trustee of the trusts with another individual who was non-adverse and neither related nor su...