Unless the trust follows the IRS
requirements, the life tenant )grantor) will have failed to transfer the property to the trust for tax
purposes, and the property will remain in the grantor's gross estate for estate tax
The trust may be perfectly valid for the purpose of transferring property to the trustee for the beneficiary
's/ies' use and benefit
. But, for estate tax purposes the property remains in the grantor's gross estate.
At this time, because the estate tax exemption is $5,000,000, the error you describe is, for most people, irrelevant. But, if Congress does nothing then on Jan 1, 2013, the exemption returns
to $1,000,000, and that could create a difficult estate tax situation for many decedent estates, who have substantial assets
Hope this helps.
NOTICE: My goal here is to entertain while educating the public about the law
. Your positive feedback to the website is appreciated. If you need to contact me again, please put my user id
at the beginning of your question ("To Socrateaser"), and the system will send me an alert. Please Click the following link for IMPORTANT LEGAL INFORMATION
. Thanks and best wishes!