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Modify Trust for Basis Step-up & BDOT by Trust Distribution & PFD Partnerships


Cost Free
Presentation Length 1.5 hours

Recorded DateMay 26, 2022
CPE:Not available
(archived webinars do not offer CPE credits)
Subject AreaTaxes
Course LevelAdvanced
Course Description

Drawn from Steve Gorin’s 1st quarter 2022 newsletter, this course discusses trust modifications to receive a basis step-up in light of a recent letter ruling, avoiding high fiduciary income tax rates by treating the beneficiary as the deemed owner, and income tax advantages of preferred partnership interests. Letter Ruling 202206008 held that adding a formula general power of appointment caused estate inclusion only to the extent the beneficiary exercised the power. We will examine less or more risky formulas and tax and legal risks and benefits of modifying trusts in this manner. The segment on BDOT by Trust Distribution responds to high fiduciary income rates (actual and threatened) on business interests held in trust, as well as on accelerated distributions from IRAs under the SECURE Act.  

We will start with how a trustee can cause income to be taxed to the beneficiary without actually distributing it, review the rules on lapsing withdrawal rights without the lapse constituting a gift, and discuss how a GST-exempt trust can acquire assets from a GST-nonexempt trust using similar principles. Finally, we will examine using preferred partnership interests.  

After reviewing the basics of preferred partnerships, we will see how they may be better than a sale to an irrevocable grantor trust, how giving a service partner a preferred profits interest may benefit both the partnership and the service partner, how family offices might use this idea to avoid unfair tax rules, and how an old-and-cold preferred partnership can generate better tax results than an inter vivos charitable lead trust. 

Learning Objectives:

  • List the tax and legal effects of modifying a trust to add a formula general power of appointment 

  • Define "crediting” a beneficiary to carry out taxable income to the beneficiary

  • Determine how a GST-exempt non-grantor trust can create a GST-exempt beneficiary deemed-owned trust to acquire the assets of a GST-nonexempt non-grantor trust

  • Identify when a preferred partnership is better than a sale to an irrevocable grantor trust or a payment of fees to a partner

  • Recognize how a family office can structure investment management services to avoid unfair tax treatment of investment expenses 

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Thompson coburn llp

Steve has drafted trusts and a full range of estate planning documents for clients to help grow, preserve, and transmit their family wealth. He has also prepared organizational documents for limited liability companies, corporations, and partnerships to implement their owners' wishes regarding current and future control and transmission, including bringing in new owners and facilitating exit strategies. 
Steve enjoys helping clients structure their affairs to achieve their personal, business, and financial goals while reducing the drag that taxes imposed on them. His firm provides full service to businesses; however, he also acts as counsel on specialized matters while cooperating and facilitating the continued involvement of an existing legal, accounting, and financial services team. Steve maintains his CPA license but prefers to refer income tax returns to practicing CPAs.

Steve Gorin is the former president and an ongoing contributor to Covenant Place’s strategic initiatives. It is a senior affordable housing community with a groundbreaking model for integrated residents with the surrounding community and facilitating holistic services to enrich their lives. 
To know more about Steve Gorin, kindly click on the link below:
For various free resources Steve offers, see

About Our Presenter

Thompson coburn llp

For approximately 90 years, Thompson Coburn LLP has provided the quality legal services and counsel our clients demand to achieve their most critical business goals. Whether helping with a tax, estate planning, real estate or employment issue, navigating a complex acquisition or defending a product or service in litigation, we have the knowledge and resources to meet any legal need.

With over 380 attorneys, we have experience in more than 50 areas of the law. Supported by our firm's state-of-the-art technology, lawyers in our Chicago, Dallas, New York, Los Angeles, Southern Illinois, St. Louis and Washington, D.C. offices enjoy a nationwide practice.