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Reasonable period of settlement

Reasonable period of settlement is that pe­riod reasonably required (or if shorter, actually required) by the trustee of a split-interest trust to perform the ordinary duties of administration necessary for the settle­ment of the trust.  For example, these duties include the collection of assets, the payment of debts, taxes, distributions, and the determi­nation of the rights of the subsequent beneficia­ries.

Example.  On Jan. 15, 1983, Cyril Elm­wood created a charitable remainder annuity trust under which the trustees were required to distribute $10,000 a year to Betty, Cyril’s wife, for life and to hold the remainder in trust for the use of M, an organization described in section 501(c)(3).  Cyril was allowed a deduction for the amount of the charitable interest, and the trust was treated as a split-interest trust from the date of its creation.  Betty died on Feb. 10, 1988.  On April 15, 1988, the trustees completed the ordinary duties of administration necessary for the settlement of the trust brought about by Betty’s death.  These duties include, for exam­ple, an accounting for and payment to Betty’s estate of amounts accrued by Betty while alive during 1988.  However, the trustees did not dis­tribute the corpus to M by April 15, 1988.  The trust would continue to be treated as a split-interest trust until April 15, 1988.  After April 15, 1988, the trust would be treated as a charitable trust.


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Page Last Reviewed or Updated: 05-Mar-2014