Homework
Donald established an irrevocable trust on May 10, 2017. The trust named his wife, Melinda, as trustee and named his daughter, Daisy, as backup trustee.
The trust instrument contained the following key provisions:
This trust is irrevocable. To the extent allowed by law, the assets in this trust shall not be subject to the beneficiaries' liabilities or creditors and shall not be subject to homework or anticipation by any beneficiary.
During the lifetime of the grantor, the trustee may, in her sole discretion, distribute assets to or for the benefit of the spouse and/or children of the grantor to the extent that she deems appropriate for their health, education, maintenance and support. However, no distribution shall be made for the benefit of Melinda under this Paragraph without the express consent of at least one child or grandchild of the grantor.
During the first five years of the trust's existence, the trustee may, in her discretion, also use trust income (but not principal) for the benefit of Donald, the grantor. After five years shall have elapsed from the execution of this trust, this power shall cease to exist and shall be null and void.
After the death of the last to die of the grantor and his wife, the remaining trust assets, if any, shall be distributed to and among the children of the grantor, in equal shares, per stirpes.
You may assume that the remaining provisions of the trust are fairly standard boilerplate provisions and are not relevant to this question.
On June 1, 2018, Donald transferred $2,000,000 to this trust.
Answer the following questions regarding this trust:
a. How much of the transfer is eligible for the gift tax marital deduction? Explain.
b. Are the trust assets part of Donald's taxable estate? What does this depend on? Explain.
c. Why are gifts to this trust not eligible for the gift tax annual exclusion? What could be done to change that? Please describe.
d. Are the trust assets part of Melinda's taxable estate? Explain.
e. For income tax purposes, is this trust considered a "grantor trust"? Explain.
Format your homework according to the give formatting requirements:
a. The answer must be double spaced, typed, using Times New Roman font (size 12), with one-inch margins on all sides.
b. The response also includes a cover page containing the title of the homework, the course title, the student's name, and the date. The cover page is not included in the required page length.
c. Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.