Rick established an irrevocable trust and funded it with $1 million. A corporate trustee is authorized to make distributions from the trust for the health, education, maintenance, or support of Rick's descendants. At the creation of the trust, Rick had three children and eight grandchildren.

SWFT Corp Partner Estates Trusts
42nd Edition
ISBN:9780357161548
Author:Raabe
Publisher:Raabe
Chapter20: Income Taxation Of Trusts And Estates
Section: Chapter Questions
Problem 28P
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Rick established an irrevocable trust and funded it with $1 million. A corporate trustee is authorized to make distributions from the trust for the health, education, maintenance, or support of Rick's descendants. At the creation of the trust, Rick had three children and eight grandchildren.

Which one of the following statements is correct regarding the consequences of this transfer?

 
 
A)
It would be unwise for Rick to allocate any of his GSTT exemption to the trust at the time of creation.
 
 
B)
If a taxable distribution is made from this trust, the trustee of the trust will be responsible for paying any GSTT that is due.
 
 
C)
This transfer will not be subject to the GSTT unless a taxable termination or distribution occurs.
 
 
D)
This trust is an example of a direct skip trust.
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