Aug 1, 2006 12:00 PM, By Trent S. Kiziah, senior vice president, U.S. Trust N.A., Boca Raton, Fla.

By: By Trent S. Kiziah, senior vice president, U.S. Trust N.A., Boca Raton, Fla.

In theory, a trust is administered to effectuate a grantor's intentions for establishing it. In practice, most trusts don't accomplish this goal. That's usually because the operative documents fail to provide sufficient guidance. Trustees are left to rely on their concept of what's appropriate. At the root of the problem is the federal estate tax.

A trust may be included in a beneficiary's federal gross estate if the beneficiary has an unlimited power to appoint trust property to herself, her creditors or the creditors of her estate.¹ But if the beneficiary's invasion power is limited (that is to say, it's ascertainable), estate tax inclusion does not occur.² Specifically, a beneficiary can possess the power to appoint trust property to herself without estate tax inclusion if the invasion power is limited to the beneficiary's “health, education, maintenance and support” — the four chosen words.

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