A recent private letter ruling involves a man who wants to reduce the size of his estate by transferring some assets to a trust for the benefit of his wife and children.

The husband wants to be able to retain a lifetime power to acquire the assets of the trust by substituting property of an equivalent value. The trustee, who must not be related or subordinate to the husband, must verify the value of the substitute property within 60 days of the transaction. The trustee may also make payments to satisfy federal or state income taxes incurred by the husband attributable to the trust's income.

The IRS ruled that these provisions will not cause the trust assets to be included in the husband's gross estate for estate tax purposes.

The full text can be viewed at ftp.fedworld.gov/pub/irs-wd/0120021.pdf.