CODE REQUIREMENTS FOR 468b TRUSTS by Thomas D. Begley, Jr.

 

 

The Internal Revenue Code and Treasury Regulations are very detailed with respect to 468b Trusts. A 468b Trust must meet all of the following requirements:[1]

 

 1.  Code Requirements

 

 •  Court Order. Established by a court order that extinguishes completely the taxpayer’s liability.[2]

 

 •  Qualified Payments. No amounts may be transferred other than in the form of qualified payments.[3]

 

 •  Independent Administrator. The QSF must be administered by persons, a majority of whom are independent of the taxpayer.[4]

 

 •  Personal Injury Death or Property Damage Claims. Is established for the principal purpose of resolving and satisfying present and future claims against the taxpayer (or any related person or formerly related person) arising out of personal injury, death, or property damage.[5]

 

 •  No Beneficial Interest. The taxpayer may not hold any beneficial interest in the income or corpus of the fund.[6]

 

 •  Election. An election must be made by the taxpayer.[7]

 

 2.  Treasury Regulations

 

 •  Governmental Authority. The trust must be established by an order of, or be approved by, the United States, any state (including the District of Columbia), territory, possession, or political subdivision thereof, or any agency or instrumentality (including a court of law), of any of the foregoing and is subject to continuing jurisdiction of that governmental authority.[8]

 

 •  Types of Claims. The trust is established to resolve or satisfy one or more contested or uncontested claims that have resulted or may result from an event (or related series of events) that has occurred and that has given rise to at least one claim asserting liability–

 

 ◦  under the Comprehensive Environmental Response Compensation and Liability Act of 1980 (CERCLA); or

 

 ◦  arising out of a tort, breach of contract, or violation of law; or

 

 ◦  designated by the commissioner in a revenue ruling or a revenue procedure; and the trust is valid under state law.[9]

 

 

 

Thomas D. Begley, Jr., CELA

 

Begley & Bookbinder, PC

 

ATTORNEYS AT LAW

COMMITTED TO EXCELLENCE

 

Specializing in Elder & Disability Law

 www.begleylawyer.com

(800) 533-7227

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[1] Id. §468B(d)(2).

[2] Id. §468B(d)(2)(A).

[3] Id. §468B(d)(2)(B).

[4] Id. §468B(d)(2)(C).

[5] Id. §468B(d)(2)(D).

[6] Id. §468B(d)(2)(E).

[7] Id. §468B(d)(2)(F).

[8] Id. 1.468B-1(c)(i).

[9] Id. 1.468B-1(c)(iii).