48:3 The New Super-Charged PAT (Power of Appointment Trust)



This article proposes to repeal the QTIP provisions in order to collect revenue now for transfers that are essentially transfers to third parties and not to the decedent’s spouse. Because there are advantages of increased flexibility attendant to a QTIP as opposed to a PAT, this article proposes to take those repealed QTIP benefits and attach them to the PAT, which would greatly enhance that marital deduction trust form. A super-charged PAT would thereby be able to preserve the decedent’s GST tax exemption (like a reverse QTIP), create a decedent’s by-pass trust by allowing a PAT (or a partial PAT) “election-out,” and create a decedent’s state-only PAT marital deduction. The super-charged PAT would provide for much desired post-mortem tax planning without the complex and strict requirements of a disclaimer. Moreover, the new PAT would eliminate conflicts of interest and fiduciary problems inherent in the QTIP form of the marital deduction. Lastly, by repealing the QTIP provisions and by super-charging the PAT, the marital deduction would truly be a marital deduction and not a third party beneficiary tax deferral device.