Instructions For Form 706 - 2016 Page 29
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54Section 2701 deals with the transfer
valued on the date of the decedent's
If the failure to exercise a general
of an interest in a corporation or
death or, if alternate valuation is
power of appointment results in a lapse
partnership while retaining certain
elected, according to section 2032.
of the power, the lapse is treated as a
distribution rights, or a liquidation, put,
release only to the extent that the value
If only part of the property transferred
call, or conversion right.
of the property that could have been
meets the terms of section 2035(a),
appointed by the exercise of the lapsed
Section 2702 deals with the transfer
2036, 2037, or 2038, then only a
power is more than the greater of
of an interest in a trust while retaining
corresponding part of the value of the
$5,000 or 5% of the total value, at the
any interest other than a qualified
property should be included in the value
time of the lapse, of the assets out of
interest. In general, a qualified interest is
of the gross estate. If the transferee
which, or the proceeds of which, the
a right to receive certain distributions
makes additions or improvements to the
exercise of the lapsed power could have
from the trust at least annually, or a
property, the increased value of the
been satisfied.
noncontingent remainder interest if all of
property at the valuation date should not
Powers of Appointment
the other interests in the trust are
be included on Schedule G. However, if
distribution rights specified in section
only a part of the value of the property is
A power of appointment determines
2702.
included, enter the value of the whole
who will own or enjoy the property
under the column headed “Description”
subject to the power and when they will
Section 2703 provides rules for the
and explain what part was included.
own or enjoy it. The power must be
valuation of property transferred to a
created by someone other than the
family member but subject to an option,
Attachments. If a transfer, by trust or
decedent. It does not include a power
agreement, or other right to acquire or
otherwise, was made by a written
created or held on property transferred
use the property at less than FMV. It
instrument, attach a copy of the
by the decedent.
also applies to transfers subject to
instrument to Schedule G. If the copy of
restrictions on the right to sell or use the
the instrument is of public record, it
A power of appointment includes all
property.
should be certified; if not of public
powers which are, in substance and
record, the copy should be verified.
effect, powers of appointment
Finally, section 2704 provides that in
regardless of how they are identified
certain cases, the lapse of a voting or
Schedule H—Powers of
and regardless of local property laws.
liquidation right in a family-owned
Appointment
For example, if a settlor transfers
corporation or partnership will result in a
property in trust for the life of his wife,
deemed transfer.
If any assets to which the
with a power in the wife to appropriate
These rules have potential
special rule of Regulations
!
or consume the principal of the trust, the
consequences for the valuation of
section 20.2010-2(a)(7)(ii)
wife has a power of appointment.
CAUTION
property in an estate. If the decedent (or
applies are reported on this schedule,
any member of his or her family) was
Some powers do not in themselves
do not enter any value in the last three
involved in any such transactions, see
constitute a power of appointment. For
columns. See instructions for line 10 of
sections 2701 through 2704 and the
example, a power to amend only
Part 5–Recapitulation for information on
related regulations for additional details.
administrative provisions of a trust that
how to estimate and report the value of
cannot substantially affect the beneficial
these assets.
How To Complete Schedule G
enjoyment of the trust property or
Complete Schedule H and file it with
All transfers (other than outright
income is not a power of appointment. A
the return if you answered “Yes,” to
transfers not in trust and bona fide
power to manage, invest, or control
question 14 of Part 4—General
sales) made by the decedent at any
assets, or to allocate receipts and
Information.
time during life must be reported on
disbursements, when exercised only in
Schedule G, regardless of whether you
a fiduciary capacity, is not a power of
On Schedule H, include in the gross
believe the transfers are subject to tax.
appointment.
estate:
If the decedent made any transfers not
The value of property for which the
General power of appointment. A
described in these instructions, the
decedent possessed a general power of
general power of appointment is a
transfers should not be shown on
appointment (defined later) on the date
power that is exercisable in favor of the
Schedule G. Instead, attach a statement
of his or her death and
decedent, the decedent's estate, the
describing these transfers by listing:
The value of property for which the
decedent's creditors, or the creditors of
The date of the transfer,
decedent possessed a general power of
the decedent's estate, except:
The amount or value of the
appointment that he or she exercised or
1. A power to consume, invade, or
transferred property, and
released before death by disposing of it
appropriate property for the benefit of
The type of transfer.
in such a way that if it were a transfer of
the decedent that is limited by an
property owned by the decedent, the
Complete the schedule for each
ascertainable standard relating to
property would be includible in the
transfer that is included in the gross
health, education, support, or
decedent's gross estate as a transfer
estate under sections 2035(a), 2036,
maintenance of the decedent.
with a retained life estate, a transfer
2037, and 2038 as described in the
2. A power exercisable by the
taking effect at death, or a revocable
Instructions for Schedule G.
decedent only in conjunction with:
transfer.
In the “Item number” column, number
a. the creator of the power or
each transfer consecutively beginning
With the above exceptions, property
b. a person who has a substantial
with “1.” In the “Description” column, list
subject to a power of appointment is not
interest in the property subject to the
the name of the transferee and the date
includible in the gross estate if the
power, which is adverse to the exercise
of the transfer, and give a complete
decedent released the power
of the power in favor of the decedent.
description of the property. Transfers
completely and the decedent held no
included in the gross estate should be
interest in or control over the property.
Part Instructions
-29-
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