A new Private Letter Ruling has been recently released by the IRS in regards to Qualifired Domestic Trusts in a case involving a the decedent and his surviving spouse who was a foreign national. However, the spouse had only just become an American citizen.
Before she become a citizen of the US, she drafted up the trust so that funds could pass into the trust upon his death. Unfortunately, she did not notify the IRS of her citizenship change and incurred an estate tax. She challenged this determination because her lawyer to not mention that she needed to provide the IRS with notification.
The IRS stated that according to the code as long as the taxpayer acts with reasonable and good faith that they could grant her an extension to provide this notification. They reasoned that the fact that she relied upon a tax professional, it constituted a reasonable and good faith action.
This highlights the importance of knowing when and exactly who to notify when there are substantial life changing events that will effect your estate plans. When something like a new marriage or in this case a change in citizenship happens please contact your estate litigation Attorney immediately to avoid any problems and unnecessary taxes and costs that may result.
*This blog entry was not written by an Attorney and should not be constituted as professional legal advice.