Robert J. Kolasa
Formula General Powers of Appointment to the Rescue
Updated: Mar 28
See my article in the May 2019 edition of Trusts and Estates magazine. Many credit shelter trusts (CSTs) and irrevocable trusts are inefficient because they don't save estate taxes, yet will deprive the family of stepped-up basis treatment at the beneficiary's death. The article explains that an outstanding cutting-estate tax strategy to mitigate this dilemmainvolves granting the surviving spouse a Formula General Power of Appointment. The formula is usually crafted in such a way to use the spouse's otherwise unused estate tax exclusion to award stepped-up basis for CST assets that have significant appreciation or are subject to high income tax rates while preserving carryover basis for loss assets.