Client Alerts

Analysis of DING Trust Rulings PLR 201426014 and PLR 201642019

PLR 20146014 addressed all of the rulings relevant to the tax structure of a so-called DING trust, except that there is one major factual difference upon which the IRS ruled. In that ruling, if Child 1 and Child 2 are no longer serving as the Distribution Committee, or if there are fewer than two members of the Distribution Committee serving, then all of the trust property would be distributed back to the settlor and the trust would terminate. In PLR 20146014 the IRS ruled that this trust was a nongrantor trust.

In PLR 201642019, the IRS revoked that ruling, stating that the provision in the trust addressing the termination of the trust if Child 1 and Child 2 are no longer serving as the Distribution Committee, or if there are fewer than two members of the Distribution Committee serving, constitutes a reversion within the meaning of Section 673 of the Code. Under Section 673, the grantor shall be treated as the owner of any portion of a trust in which the grantor has a reversionary interest in either the corpus or the income therefrom, if, as of the inception of that portion of the trust, the value of such interest exceeds 5% of the value of such portion.

In this Client Alert, we discuss why PLR 201642019 does not spell the end of DING trusts, although it is just another wrinkle in the long, tumultuous history of the DING trust structure.

Click here to download the full Morris Nichols alert.

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