Federal Tax Law Compliance

Division 11, Part 5 of the Probate Code deals with compliance with the Internal Revenue Code 9IRC). Chapter 1 deals with general provisions. Section 21500 defines the term “Internal Revenue Code.”

Section 21502 provides that this part does not apply to an instrument the terms of which expressly or by necessary implication make this part inapplicable. By an appropriate statement made in an instrument, the transferor may incorporate by reference any or all of the provisions of this part.

Section 21503 explains that, if an instrument includes a formula intended to eliminate the federal estate tax, the formula is to be applied to eliminate or to reduce to the maximum extent possible the federal estate tax. If an instrument includes a formula that refers to a maximum fraction or amount that will not result in a federal estate tax, the formula is to be construed to refer to the maximum fraction or amount that will not result in or increase the federal estate tax.

Chapter 2 deals with marital deduction gifts. Section 21520 defines the terms “marital deduction” and “marital deduction gift.”

Section 21522 provides that, if an instrument contains a marital deduction gift, then three specified rules apply.

Section 21524 explains that, if a marital deduction gift is made in trust, in addition to the other provisions of this chapter, each of the three specified provisions also applies to the marital deduction trust.

Section 21525 states that, if an instrument that makes a marital deduction gift includes a condition that the transferor’s spouse survive the transferor by a period that exceeds or may exceed six months, the condition is limited to six months as applied to the marital deduction gift.

Section 21526 provides that a fiduciary is not liable for a good faith decision to make any election, or not to make any election.

Chapter 3 deals with charitable gifts. Section 21540 provides that, if an instrument indicates the transferor’s intention to comply with the Internal Revenue Code requirements for a charitable remainder unitrust or a charitable remainder annuity trust, the provisions of the instrument, including any power, duty, or discretionary authority given to a fiduciary, must be construed to comply with applicable federal tax laws.

Section 21541 states that, if an instrument indicates the transferor’s intention to comply with the requirements for a charitable lead trust, the provisions of the instrument, including any power, duty, or discretionary authority given to a fiduciary, is to be construed to comply with the provisions of that section in order to conform to that intent.