Four years ago, Gertrude and Stanley created Irrevocable Life Insurance Trusts. Each trust gives the trustees the power to distribute income to the surviving spouse for any reason, and even corpus, if there is a real need. Eventually, the corpus of both trusts will be distributed to the couple’s children. The trustees purchased cash value life insurance on their respective grantors. Stanley died two years ago and Gertrude died three months ago. Which of the following is the true statement concerning these two ILITs?
a. The trust Gertrude created will avoid Stanley’s estate but will be taxed in her estate.
b. The trust Stanley created will be taxed in his estate but not in Gertrude’s estate.
c. The trust Stanley created will be included in his estate but will qualify for the marital deduction because of the trustee’s unlimited power, unfortunately that power will cause it to be included in Gertrude’s estate
d. The three year rule captures Stanley’s insurance trust but not Gertrude’s.
e. Neither trust is included in either estate.