Preface to the 1998 (Centennial) Edition

New features and enhancements. The last edition contained only a few paragraphs on the federal income taxation of trusts. The Centennial Edition has an entire chapter, Chapter 10, devoted to the subject. It includes an introduction to the federal fiduciary income tax; sections on income, deductions, and tax and payments; the 1998 tax rate schedule for trusts; and material devoted to practical information on when and how to file. A copy of the Form 1041 and its accompanying schedules is reprinted in Appendix III.

The Handbook’s coverage of the federal estate and generation-skipping tax has been substantially enhanced as well. There are now sections on tax-sensitive powers, tax apportionment within trusts, the Charitable Remainder Unitrust (CRUT), the Charitable Remainder Annuity Trust (CRAT), the IRS-approved Charitable Lead Trust, the Qualified Domestic Trust (QDOT), and the Qualified Personal Residence Trust (QPRT) . There are also materials on the interaction of the estate and generation-skipping tax and on those situations when a trustee must prepare and file the estate tax returns of a deceased settler, beneficiary, or power-holder. The implications of recent domestic asset protection legislation for the federal estate tax (and the implications of recent initiatives to abolish the Rule Against Perpetuities for the generation-skipping tax) are also discussed.

Important developments in the law of trusts since April 1998. Regulation 9 was revised, effective January 29. 199i. There is now a separate section on the revision. which is reprinted in Appendix II. All references to the regulation throughout the text and footnotes have been inventoried and revised to accommodate the many changes brought about by the revision.

Fortunately, the Taxpayer Relief Act of 1997 was enacted into law before press time. Accordingly. the Handbook charts the incremental increase in the unified credit culminating in $1 million for the year 2006 and thereafter. The legislation also substantially does away with the throwback rules for domestic trusts. This long overdue simplification of the federal tax code is flagged in Chapter 10.

The Centennial Edition contains a section on the initiatives of Alaska and Delaware to become domestic asset protection havens. Elsewhere, text and footnotes - including, as mentioned. the tax sections - have been revised to accommodate this development. There is a section on the initiatives of at least 5 states to abolish in whole or in part the Rule Against Perpetuities and what the implications of all of this may be for the institution of the trust. This edition flags the recent approval by the National Commissioners on Uniform State Laws of the 1997 Update of the Uniform Principal and Income Act. Text has been revised to accommodate those recent changes to CERCLA that are designed to ameliorate the lot of the fiduciary title-holder and to accommodate those changes in the U.S. tax laws that relate to the filing of reports on the establishment of, and receipt of income from, foreign trusts. Our region by region mathematical analysis of standard charge schedules of corporate trustees has been updated to June 1997. There is now a section on the non-charitable unitrust movement, a response to the widespread acceptance of the “total return” approach to investing. A preexisting section on spousal rights has been enhanced with a discussion of divorce settlements that involve equitable interests. Finally, material on the progress of the evolution of the trust relationship into an “entity” has been woven into the text and footnotes.

Miscellaneous topics. Other topics that have found their way into the Handbook with the Centennial Edition are: statutory trusts; insurance for bank trust departments; the condominium trustee; loans of trust assets to current beneficiaries and remainderman; the Common Fund Doctrine; trust reformation to remedy faulty tax planning; the charitable trust and the doctrine of separation of powers; and a bank account (or debt) is not a trust. There are expanded discussions of virtual representation, the Doctrine of Capture, the Massachusetts Rule of Allocation, and when a trustee may invoke the attorney-client privilege.

Statistics. The enhanced text is tight, sparse, and efficient in the Loring tradition. At the same time it is rich in new and useful information. In fact, a substantial portion of the Centennial Edition is new. There are more than 100 pages of new text. Besides the new chapter on the income taxation of trust, the Handbook contains 31 new sections or subsections and 189 new footnotes. The Table of Cases contains 51 new entries. 370 items have been added to the already extensive index, which is perhaps the Handbook’s most valuable feature. The number of scholarly articles cited in the text and footnotes has increased by 55. Hundreds of footnotes have been revised to conform and integrate cross-references to accommodate the new chapter and the new sections and subsections. And, of course, myriad dated references have been made current.

-April 8, 1998
Charles E. Rounds, Jr