2.4.1 Federal Estate Tax
2.4.1.1 A decedent’s gross estate for federal purposes includes the value of the revocable trust. I.R.C. Sec. 2038 (retained power to revoke); I.R.C. Sec. 2036(a)(1) (decedent’s retention of the income rights); I.R.C. Sec. 2036(a)(2).
2.4.1.1.1 A revocable trust may be drafted to provide for a credit shelter disposition, so a revocable trust may be designed to secure the same federal estate tax advantages of a properly drafted will.
2.4.1.2 Basis Step-Up Treatment.
2.4.1.2.1 The income tax basis result is likewise parallel. I.R.C. Sec. 1014.
2.4.1.2.2 A current theory holds that joint spousal trusts can step-up the basis of the entire amount of the property held by both spouse. PLR 200101021 ruled in favor of the taxpayer on a joint trust but did not give a full “green light” to the technique. Also, of course, letter rulings cannot be relied upon. Nevertheless, it is a technique that may gain currency.
