Harold funds a trust through a devise in his will that contains the following dispositive provisions: If my wife survives me, the trustee shall distribute the net income of the trust to her on a regular, but not more infrequent than annual, basis. Upon my wife's death, the trust property shall continue to be held in trust for the benefit of my issue. The trustee, in its sole discretion, may distribute trust income or principal for the benefit of my then-living children and grandchildren; any income not so distributed shall be accumulated and added to principal. Upon the death of any child, or upon my wife's death if a child predeceases my wife, a fraction of the trust property (with the denominator equaling the number of my children who survived me) shall be distributed to that child's then-living issue, per stirpes. If a child dies without then-living issue, the portion of the trust that otherwise would have been distributed to that child's then-living issue shall be distributed to my then-living issue, per stirpes. Harold dies survived by his wife (W), two children (C1 , C2 ), and four grandchildren (GC1 , GC2 , GC3 , who are children of C1 ; GC4 , child of C2 ). Following Harold's death, his family members die in the following order: W, C1 , and C2 . a. Assuming that Harold's executor makes a QTIP election, identify all the possible transferors to the trust for GST tax purposes. Can Harold's executor do anything to change these results? b. Describe the GST tax consequences, if any, when W dies. c. Following W's death, the trustee makes a discretionary distribution of $20,000 to each of GC1 , GC2 , GC3 , and GC4 . What are the GST tax consequences, if any, of these distributions? 561 d. Following W's death, the trustee pays GC1 's college tuition bill of $40,000. Discuss the GST tax consequences of this payment. e. Discuss the GST tax consequences to the trust when C1 dies

a. If Harold's executor makes a Qualified Terminable Interest Property (QTIP) election, Harold will be considered the transferor for GST tax purposes for the portion of the trust that qualifies for the QTIP election. After Harold's wife (W) dies, she will be considered the transferor for GST tax purposes for the remaining portion of the trust. The executor cannot change these results once the QTIP election is made. b. When W dies, there are no immediate GST tax consequences. However, the remaining portion of the trust will be included in W's estate for estate tax purposes. c. The discretionary distribution of $20,000 to each grandchild (GC1, GC2, GC3, and GC4) after W's death could potentially be subject to GST tax. However, the exact tax consequences depend on whether the trust is a GST trust and whether any GST exemption was allocated to the trust. d. The payment of GC1's college tuition bill of $40,000 by the trustee is not subject to GST tax if it is paid directly to the educational institution for tuition. This is an exception to the GST tax rules. e. When C1 dies, the portion of the trust property that is to be distributed to C1's then-living issue (GC1, GC2, GC3) could potentially be subject to GST tax. However, the exact tax consequences depend on whether the trust is a GST trust and whether any GST exemption was allocated to

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