Assignment of Future Lawsuit Proceeds to Trust Is Completed Gift. (PLR 200534015)


Taxpayer proposed to assign a portion of the potential proceeds from a wrongful death action to Trust. Trust is irrevocable and the provisions may be amended only under very limited circumstances. The trust instrument may not be modified in any manner that would alter the interest of any beneficiary. In addition, under the terms of Trust, Taxpayer is expressly prohibited from serving as a trustee.

Following the assignment of a portion of Taxpayer's interest in the proceeds to Trust, Taxpayer will remain the named party in the claim and will continue to have direct responsibility for directing legal representation and making settlement decisions. Notwithstanding Taxpayer's continued involvement in the administrative aspects of the claim, Taxpayer will have no means to reacquire the economic benefit of the assigned proceeds or to change any of the interests created under Trust. Accordingly, when Taxpayer assigns a portion of the potential proceeds of the cause of action to Trust, she will have parted with dominion and control over the proceeds.

Given the above, the Service concluded that Taxpayer's proposed assignment of a portion of the potential proceeds from the cause of action to Trust constituted a completed gift at the time of the assignment. The service made no comment regarding the value, for gift tax purposes, of the potential proceeds at the time of the assignment.

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