What kinds of restrictions affect a persons power to remove and replace a trustee?
A. In a Private Letter Ruling, PLR 9735023, the IRS ruled that a child did not hold a general power of appointment over trust assets by virtue of the child’s power to remove and replace the trustee of the trust with a trustee who is not related or subordinate to the child. In Rev Rul 95-58, the IRS had ruled that a grantor’s reservation of an unqualified power to remove a trustee and appoint an individual or corporate successor who is not related or subordinate is not considered a reservation of the trustee’s discretionary powers of distribution over the property. Similarly, the 8th Circuit in Estate of Vak v. Commissioner, 973 F.2d 1409 (1992) concluded that a decedent had not retained dominion and control over assets transferred to a trust by reason of his power to remove and replace the trustee with a party that was not related or subordinate to the decedent. An unrestricted right to remove and replace a trustee could result in the IRS taking the position that the holder of the righ
