Thursday, November 5, 2026
10:15 AM
to
11:15 AM
Back to Event
Tax/Corporate Track
Presented by the Estates and Probate, and Tax Law Sections
About the Program
With the federal estate tax exemption now at a historic high and permanent under current law, fewer families face an estate tax problem, and the planning conversation is shifting from avoiding estate tax to capturing income tax basis. Assets held in many long-standing irrevocable trusts will pass to the next generation or continue to be administered for their benefit without the step-up in cost basis that outright-owned assets receive at death, leaving beneficiaries or the trusts administered for the next generation exposed to significant capital gains tax on appreciated property.
This session walks through practical strategies to deliberately cause trust assets to be included in a beneficiary's taxable estate where doing so is advantageous so those assets receive a fresh basis at the beneficiary’s death. We will cover modifying, decanting or using existing discretionary powers in trusts to add powers of appointment, drafting new trusts that give an independent fiduciary the power to grant a beneficiary a general power of appointment (a "GPOA"), and planning for non-exempt trusts approaching the end of their perpetuities period. A centerpiece of the discussion is the "Delaware Tax Trap"** Internal Revenue Code Section 2041(a)(3) which, rather than being something to fear, can be intentionally "sprung" to pull low-basis trust assets into the estate of an older or less wealthy family member who has unused exemption, resetting basis to fair market value with little or no estate tax cost. We will show how the trap is triggered when a beneficiary exercises a power of appointment to create a new power that restarts the perpetuities clock, why the choice between a new general and a new special power of appointment matters for creditor protection and estate inclusion, and how state perpetuities rules determine what is possible.
You Will Learn
- To recognize when a beneficiary is better served by including trust assets in their estate for a basis step-up rather than shielding those assets from estate tax
- How to evaluate techniques for creating estate inclusion including trust modifications and decanting that add a power of appointment, and new-trust drafting that empowers an independent fiduciary to grant a beneficiary a GPOA
- How the Delaware Tax Trap (Section 2041(a)(3)) is intentionally sprung to obtain a basis step-up, and how the perpetuities rules and the general-versus-special power distinction affect the outcome
- About strategies for non-exempt trusts nearing the end of their perpetuities period, including distributions and positioning assets for a future basis step-up
- How to spot relevant Connecticut trust, estate and income tax considerations
Who Should Attend
Estate planning and trust attorneys, fiduciary and tax advisors, trust officers, and CPAs who advise families with existing trusts wishing to maximize tax benefits and those administering irrevocable trusts particularly those revisiting older trust structures in light of the higher now permanent federal exemption.
Credit
CT: 1.0 CLE Credit (General)
NY: 1.0 CLE Credit (AOP)
1.0 Paralegal CE Credit (General)
The Connecticut Bar Association/CT Bar Institute is an accredited provider of New York State CLE. This program qualifies for newly admitted and experienced attorneys CLE credits.
Attorneys seeking NY CLE credit who have been admitted to the New York State Bar for two years or less must attend the live seminar for skills or ethics credit, a fully interactive videoconference, or simultaneous transmission with synchronous interactivity. Diversity, Inclusion and Elimination of Bias CLE credits are only available as non-transitional credits. For further information please see the NYCourts.gov page on CLE: http://ww2.nycourts.gov/attorneys/cle/index.shtml.