Re: Is the Credit Shelter Trust a Grantor Trust?

It's pretty easy to set it up. Just allow the trustee/beneficiary to distribute the property to himself at any time. It will be considered a completed gift to that person, even if it remains in trust. But if you do that, why even bother using a trust? But I still don't understand why. As far as income tax is concerned, the B trust generally distributes all its income to the surviving spouse anyway. The trust gets a deduction for the distributions, and the surviving spouse is taxed on all the income. So it works out the same both ways.

If you don't use an ascertainable standard, then it doesn't qualify under section 2056, but instead becomes a grantor trust.

The best way (unless there's some reason you don't want to do it that way) is to make it a completed gift to the survivor. If you want it retained in trust, that's ok as long as it's clear from that time on it all belongs to and is under the control of the survivor. If that won't work, you could take a tip from the Crummey Trust. Set up the trust exactly as you would like, but give the surviving spouse 30 days to withdraw it all from the trust for any reason. If not done in 30 days the power to withdraw lapses. That will be considered a completed gift to the surviving spouse, and the lapse leaving it in the trust will cause the survivor to the the grantor. Then it will be a grantor trust if it qualifies under any of the statutes defining the trust. For example if the surviving spouse is also the beneficiary, she will have the power to control beneficial enjoyment of the trust. It will thus be a grantor trust under section

...

My suggestion would be to consult an experienced estate planning specialist that can evaluate the whole situation thoroughly rather than trying to "roll your own" via usenet...