Grantor’s retained power to reacquire and substitute assets – no estate tax if equivalent value
When a grantor retains the power to reacquire and substitute trust assets that is exercisable in a nonfiduciary capacity without the approval or consent of any person in a fiduciary capacity, the trust corpus will not be includible in the grantor’s estate under Code sections 2036 or 2038 if the grantor is required to substitute property of equivalent value at the time of substitution. See Rev. Rul. 2008-22, 2008-16 I.R.B. 796.
26 U.S. Code § 675. Administrative powers
The grantor shall be treated as the owner of any portion of a trust in respect of which –
. . .
(4) General powers of administration. A power of administration is exercisable in a nonfiduciary capacity by any person without the approval or consent of any person in a fiduciary capacity. For purposes of this paragraph, the term “power of administration” means any one or more of the following powers: . . . (C) a power to reacquire the trust corpus by substituting other property of an equivalent value.