Mont. Admin. r. 42.30.101

Current through Register Vol. 23, December 6, 2024

Rule 42.30.101 - DEFINITIONS

The following definitions apply to terms used in this chapter:

(1) "Beneficiary" means a person who:

(a) is a beneficiary as defined in 72-38-103, MCA; or

(b) is a devisee or heir of a decedent's estate.

(2) "Business trust" means any entity that is a business trust as defined in 35-5-101, MCA, or that is formed with a trust instrument and taxed as a corporation, partnership, or sole proprietorship for federal income tax purposes.

(3) "Charitable trust" means a trust or portion of a trust created for a charitable purpose as provided in 72-38-405(1), MCA. Common forms of trusts that include both a private and a charitable element are charitable remainder annuity trusts (CRAT), charitable remainder unitrusts (CRUT), charitable lead annuity trusts (CLAT), charitable lead unitrusts (CLUT) and pooled income funds.

(4) "Common trust fund" has the meaning given the term "common trust fund" in section 584 of the Internal Revenue Code (IRC) and IRS regulation section 1.6032-1. This generally means a fund maintained by a bank exclusively for the collective investment or reinvestment of monies contributed by the bank in its capacity as a fiduciary or custodian and in conformity with the rules and regulations of the Board of Governors of the Federal Reserve System or the Comptroller of Currency pertaining to the collective investment of trust funds by national banks. To the extent that anything in this definition appears to conflict with the IRC or regulations, the IRC and regulations control.

(5) "Electing small business trust (ESBT)" has the meaning given the term "electing small business trust" in IRC section 1361. This generally includes any trust if:

(a) the trust does not have as a beneficiary any person other than an individual, estate, or organization described in IRC section 170(c), or an organization which holds a contingent interest in such trust and is not a potential current beneficiary;

(b) no interest in such trust was acquired by purchase; and

(c) the trust has an election under IRC section 1361(e). To the extent that anything in this definition appears to conflict with the IRC, the IRC controls.

(6) "Foreign estate" has the meaning given the term "foreign estate" in IRC section 7701. This generally means an estate the income of which, from sources without the United States which is not effectively connected with the conduct of a trade or business with the United States, is not includible in gross income under IRC subtitle A.

(a) To the extent that anything in this definition appears to conflict with the IRC, the IRC controls.

(7) "Foreign trust" has the meaning given the term "foreign trust" in IRC section 7701. This generally means any trust other than a trust:

(a) over which a court within the United States is able to exercise primary supervision over its administration; and

(b) one or more United States persons have the authority to control all substantial decisions of the trust. To the extent that anything in this definition appears to conflict with the IRC, the IRC controls.

(8) "Grantor trust" means that the income or gains of the trust are taxable to the grantor or others treated as substantial owners under IRC sections 671 to 679.

(9) "Gross income of the estate or trust" means all income of the estate or trust as provided in 15-30-2152, MCA, and in ARM 42.30.104.

(10) "Irrevocable trust" means a trust that cannot be modified or terminated except as provided in 72-38-411 or 72-38-412, MCA.

(11) "Nonresident estate" means an estate other than a resident estate.

(12) "Nonresident trust" means a trust other than a resident trust.

(13) "Pre-need funeral trust" means funds set aside in a trust account held by a trustee to fund a pre-need funeral contract or agreement as defined in ARM 24.147.302. In most cases a pre-need funeral trust is also a "qualified funeral trust (QFT)." A QFT is defined in IRC section 685, for which the trustee has elected to file federal Form 1041-QFT, U.S. Income Tax Return for Qualified Funeral Trusts.

(14) "Qualified subchapter S trust (QSST)" has the meaning given the term QSST in IRC section 1361(d)(3). This generally means a trust in which all of the income is distributed or required to be distributed currently to one individual who is a citizen or resident of the United States, and with terms requiring that:

(a) during the life of the current income beneficiary, there shall be only one income beneficiary of the trust;

(b) any corpus distributed during the life of the current income beneficiary may be distributed only to such beneficiary;

(c) the income interest of the current income beneficiary in the trust shall terminate on the earlier of such beneficiary's death or the termination of the trust; and

(d) upon the termination of the trust during the life of the current income beneficiary, the trust shall distribute all of its assets to such beneficiary. To the extent that anything in this definition appears to conflict with the IRC, the IRC controls.

(15) "Resident estate" means an estate of a decedent who was a Montana resident at the time of the decedent's death.

(16) "Resident trust" means any trust that establishes a sufficient connection to Montana. Factors that may be considered to determine whether a trust established sufficient connection to Montana include, but are not limited to, the testator's, grantor's, settlor's, or creator's domicile; the location where the trust was created; the location of trust property; the beneficiaries' domicile; the trustees' domicile; and the location of the trust's administration. Examples of resident trusts include, but are not limited to:

(a) any trust that designates Montana as its principal place of administration, as defined in 72-38-103 and 72-38-108, MCA;

(b) any trust that is primarily administered by a trustee or representative who is a Montana resident or whose principal place of business is located in Montana;

(c) any irrevocable trust created by, or consisting of property of, a Montana resident on the date the trust or portion of the trust became irrevocable and has at least one income beneficiary who, for all or some portion of the trust's current taxable year, was a Montana resident;

(d) any trust created by the will of a decedent who was a Montana resident at the time of the decedent's death; or

(e) any trust created by, or caused to be created by, a court as a result of the death of an individual when:

(i) property was transferred to an irrevocable inter vivos trust as a result of a decedent's death;

(ii) the decedent was a Montana resident at the time of the decedent's death; and

(iii) the trust has at least one income beneficiary who, for all or some of the trust's current taxable year, was a Montana resident.

(17) "Revocable trust" means any portion of a trust for which the power to revest title in the grantor is exercisable at any time by the trustor or a nonadverse party.

(18) "Simple trust" means a trust with terms that provide that all the net income must be distributed on an annual basis and do not provide that any amounts are to be paid, permanently set aside, or used for charitable purposes as specified in IRC section 642(c).

(19) "Split-interest trust" means a trust as provided in IRC section 4947, and includes a charitable remainder trust as provided in IRC section 664, a pooled income fund as provided in IRC section 642, charitable lead trust, grantor retained annuity trust (GRAT), grantor retained unitrust (GRUT), and grantor retained income trust (GRIT).

(20) "Supplemental needs trust" or "special needs trust" means a trust that was created for the benefit of a disabled beneficiary and under which the trust assets are not included in the beneficiary's asset or income base for purposes of government benefits such as Medicaid or supplemental security income as provided in 42 U.S.C. 1396 p(d)(4).

(21) "Testamentary trust" means a trust that is created by a will and begins its existence when property is transferred from the decedent's estate to the trust. A testamentary trust is irrevocable and can either be a simple or complex trust.

(22) "Trust" means any entity that is classified as a trust for federal income tax purposes and includes a designated settlement fund as provided in IRC section 468B.

Mont. Admin. r. 42.30.101

NEW, 2016 MAR p. 22, Eff. 1/9/2016.