21-Year Tax Issues And The Non-Specialist Advisor— Part 2

21-Year Tax Issues And The Non-Specialist Advisor— Part 2¹

Part 1 of this Series reviewed what the 21-year deemed disposition rules are and introduced three approaches to planning that appear to be most commonly used to manage the effects of the 21-year deemed disposition rules: Doing Nothing, the Simple Roll-Out, and Vesting Indefeasibly. The Doing Nothing approach was discussed in Part 1 of the Series and, in this second instalment, we will delve into the Simple Roll-Out approach to planning for the 21-year deemed disposition of a trust.

The Simple Roll-Out Approach

Assuming that there are no legal or technical tax issues that might restrict the ability to adopt the Simple Roll-Out approach, prior to the 21st anniversary of the trust, the trustees can simply resolve to distribute some or all of the capital of the trust to one or more of the capital beneficiaries.