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5. Revocable transfers (section

Section 2703 provides rules for the

Attachments. If a transfer, by trust or

2038). The gross estate includes the

valuation of property transferred to a

otherwise, was made by a written

value of transferred property in which

family member but subject to an option,

instrument, attach a copy of the

the enjoyment of the transferred

agreement, or other right to acquire or

instrument to Schedule G. If the copy of

property was subject at decedent’s

use the property at less than FMV. It

the instrument is of public record, it

death to any change through the

also applies to transfers subject to

should be certified; if not of public

exercise of a power to alter, amend,

restrictions on the right to sell or use

record, the copy should be verified.

revoke, or terminate. A decedent’s

the property.

Schedule H—Powers of

power to change the beneficiaries and

Finally, section 2704 provides that in

to hasten or increase any beneficiary’s

certain cases, the lapse of a voting or

Appointment

enjoyment of the property are examples

liquidation right in a family-owned

of this.

Complete Schedule H and file it with

corporation or partnership will result in

the return if you answered “Yes” to

It does not matter whether the power

a deemed transfer.

question 13 of Part 4 — General

was reserved at the time of the transfer,

These rules have potential

Information.

whether it arose by operation of law, or

consequences for the valuation of

was later created or conferred. The rule

On Schedule H, include in the gross

property in an estate. If the decedent

applies regardless of the source from

estate:

(or any member of his or her family)

•

which the power was acquired, and

The value of property for which the

was involved in any such transactions,

regardless of whether the power was

decedent possessed a general power

see sections 2701 through 2704 and

exercisable by the decedent alone or

of appointment (defined below) on the

the related regulations for additional

with any person (and regardless of

date of his or her death and

details.

•

whether that person had a substantial

The value of property for which the

How To Complete

adverse interest in the transferred

decedent possessed a general power

property).

of appointment that he or she exercised

Schedule G

or released before death by disposing

The capacity in which the decedent

All transfers (other than outright

of it in such a way that if it were a

could use a power has no bearing. If

transfers not in trust and bona fide

transfer of property owned by the

the decedent gave property in trust and

sales) made by the decedent at any

decedent, the property would be

was the trustee with the power to

time during life must be reported on the

includible in the decedent’s gross

revoke the trust, the property would be

Schedule, regardless of whether you

estate as a transfer with a retained life

included in his or her gross estate. For

believe the transfers are subject to tax.

estate, a transfer taking effect at death,

transfers or additions to an irrevocable

If the decedent made any transfers not

or a revocable transfer.

trust after October 28, 1979, the

described in the instructions beginning

transferred property is includible if the

With the above exceptions, property

on page 15, the transfers should not be

decedent reserved the power to remove

subject to a power of appointment is

shown on Schedule G. Instead, attach

the trustee at will and appoint another

not includible in the gross estate if the

a statement describing these transfers

trustee.

decedent released the power

by listing:

•

completely and the decedent held no

If the decedent relinquished within 3

The date of the transfer,

•

interest in or control over the property.

years of death any of the includible

The amount or value of the

powers described above, figure the

transferred property, and

If the failure to exercise a general

•

gross estate as if the decedent had

The type of transfer.

power of appointment results in a lapse

actually retained the powers until death.

of the power, the lapse is treated as a

Complete the schedule for each

Only the part of the transferred

release only to the extent that the value

transfer that is included in the gross

of the property that could have been

property that is subject to the

estate under sections 2035(a), 2036,

decedent’s power is included in the

appointed by the exercise of the lapsed

2037, and 2038 as described in the

gross estate.

power is more than the greater of

Instructions for Schedule G beginning

$5,000 or 5% of the total value, at the

on page 15.

For more detailed information on

time of the lapse, of the assets out of

which transfers are includible in the

In the “Item number” column,

which, or the proceeds of which, the

gross estate, see the Estate Tax

number each transfer consecutively

exercise of the lapsed power could

Regulations.

beginning with “1.” In the “Description”

have been satisfied.

column, list the name of the transferee,

the date of the transfer, and give a

Powers of Appointment

Special Valuation Rules for

complete description of the property.

Certain Lifetime Transfers

A power of appointment determines

Transfers included in the gross estate

who will own or enjoy the property

should be valued on the date of the

Sections 2701 through 2704 provide

subject to the power and when they will

rules for valuing certain transfers to

decedent’s death or, if alternate

own or enjoy it. The power must be

valuation is adopted, according to

family members.

created by someone other than the

section 2032.

Section 2701 deals with the transfer

decedent. It does not include a power

If only part of the property

of an interest in a corporation or

created or held on property transferred

transferred meets the terms of section

partnership while retaining certain

by the decedent.

2035(a), 2036, 2037, or 2038, then only

distribution rights, or a liquidation, put,

A power of appointment includes all

a corresponding part of the value of the

call, or conversion right.

powers which are in substance and

property should be included in the

effect, powers of appointment

Section 2702 deals with the transfer

value of the gross estate. If the

regardless of how they are identified

of an interest in a trust while retaining

transferee makes additions or

and regardless of local property laws.

any interest other than a qualified

improvements to the property, the

For example, if a settlor transfers

interest. In general, a qualified interest

increased value of the property at the

property in trust for the life of his wife,

is a right to receive certain distributions

valuation date should not be included

with a power in the wife to appropriate

from the trust at least annually, or a

on Schedule G. However, if only a part

or consume the principal of the trust,

noncontingent remainder interest if all

of the value of the property is included,

the wife has a power of appointment.

of the other interests in the trust are

enter the value of the whole under the

distribution rights specified in section

column headed “Description” and

Some powers do not in themselves

2702.

explain what part was included.

constitute a power of appointment. For

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Instructions for Schedules

Instructions For Form 706 - United States Estate (And Generation-Skipping Transfer) Tax Return - 2008 Page 16

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