The Final Grat Regulations: Schott Shot Down

6 Pages Posted: 24 Mar 2006

See all articles by Wendy C. Gerzog

Wendy C. Gerzog

University of Baltimore - School of Law


The problem, here, with accepting successive spousal interests is not that a dual life interest is any more contingent or unreliable a term measurement than a single life interest, which is acceptable under the regulations. Rather, the difficulty is produced by the fact that the spousal interest is contingent on the grantor's power to revoke, which, controllable by the grantor, may make that interest an illusionary one. The regulations treat a revocable spousal interest as the grantor's interest as if it were identical to the grantor's life interest. While one can reason that because a grantor's revocable power becomes irrevocable at his death, the term is actually for the grantor's life; inevitably, however, it is that departure from the general rule against contingencies that undermines the rationale for the prohibition against contingencies and causes the distinctions later drawn to be somewhat capricious.

Keywords: GRATs, 2702, Gift Tax Regs., valuation, Schott

Suggested Citation

Gerzog, Wendy C., The Final Grat Regulations: Schott Shot Down. Tax Notes, Vol. 107, p. 1175, 2005. Available at SSRN:

Wendy C. Gerzog (Contact Author)

University of Baltimore - School of Law ( email )

1420 N. Charles Street
Baltimore, MD 21218
United States
410-837-4522 (Phone)

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