Al was one of several beneficiaries of an irrevocable trust created by his grand
ID: 2723419 • Letter: A
Question
Al was one of several beneficiaries of an irrevocable trust created by his grandmother. Al was given the right to withdraw the greater of $5,000 or 5% of the trust corpus each year. Al withdrew $100,000 from the trust the day before he died. The value of the trust was $2 million. What amount subject to the withdrawal was included in Al’s gross estate
5,000 is included in Al’s gross estate
The $100,000 that Al had withdrawn from the trust but had not yet spent is included in his gross estate.
The $2 million value of the trust is included in his gross estate.
A special power of appointment is not included in a holder’s gross estate.
5,000 is included in Al’s gross estate
The $100,000 that Al had withdrawn from the trust but had not yet spent is included in his gross estate.
The $2 million value of the trust is included in his gross estate.
A special power of appointment is not included in a holder’s gross estate.
Explanation / Answer
Total Value of find = $2 million
He can withdraw greater of $5,000 or 5% of total amount
5% of total amount = $2,000,000 × 5%
= $100,000
Since he has withdrawn before death of her grandmother. Then the $100,000 that Al had withdrawn from the trust but had not yet spent is included in his gross estate.
Hence, Option (B) is correct answer.