Recent Tax Court decisions — particularly Estate of Powell v. Commissioner — have materially changed how estate planning structures are evaluated under Internal Revenue Code §2036. While many sophisticated estate plans were carefully designed and properly implemented years ago, evolving case law now requires a fresh look at whether those structures continue to accomplish their intended estate tax objectives.
At Sollertis, we increasingly see situations where estate plans that once appeared sound now warrant a targeted legal review. We refer to this process as a Powell Compliance Review.
Estate Planning Is Not Static
For many families, an estate plan is something that gets designed, implemented, and then set aside. Trusts are formed, entities are created, interests are transferred, and the assumption is that the structure will quietly do its job for decades.
But estate planning does not exist in a vacuum. The law evolves — sometimes incrementally, sometimes decisively. Over the past several years, a series of Tax Court cases has reshaped how the IRS and courts analyze retained control, fiduciary independence, and non-tax business purpose in lifetime planning structures.
The result is not that sophisticated planning has been invalidated. Rather, the standards used to evaluate that planning have changed.
The Powell Case (IRC §2036) — In Plain English
At the center of this shift is IRC §2036(a)(2). In broad terms, this provision allows the IRS to include assets in a decedent’s taxable estate if the decedent retained — directly or indirectly — the ability to control who would benefit from those assets or when they would benefit.
Historically, planners relied heavily on formal distinctions: legal ownership versus control, fiduciary roles versus personal powers, and entity structures designed to separate the transferor from decision-making authority.
In Estate of Powell v. Commissioner (2017), the Tax Court made clear that formalities alone are no longer enough.
The court held that even indirect control, exercised “in conjunction with another person,” can trigger estate inclusion if, in substance, the transferor retained the ability to influence distributions, liquidation, or other decisions that determine who ultimately enjoys the property.
Equally important, the court emphasized timing. The analysis focuses on the powers that existed at the moment assets were first transferred into the structure, not merely on the rights that existed at death. This timing point is critical and frequently misunderstood.
What the Powell Decision Did Not Say
Powell is sometimes interpreted as having undermined common estate planning techniques. That interpretation goes too far.
Powell did not prohibit family limited partnerships or LLCs, invalidate trusts holding entity interests, eliminate valuation discounts, or suggest that lifetime planning is ineffective.
What Powell did do was shift the analysis away from form and toward substance. The central question is no longer “What does the document say?” but rather:
Who can actually cause assets to be distributed, liquidated, or enjoyed?
That question now drives modern §2036 analysis.
Larson and Fields: Important Counterweights
Powell is only part of the story.
In Estate of Levine (often referred to as the Larson case), the Tax Court confirmed that fiduciary independence still matters. Where a fiduciary has genuine, enforceable duties to beneficiaries whose interests meaningfully differ from the settlor’s, retained control may not be attributed back to the settlor.
More recently, in Estate of Fields (2024), the court focused on non-tax business purpose. The court rejected planning structures where legitimate business purposes were articulated only after the fact, rather than supported by contemporaneous documentation.
Taken together, Powell, Larson, and Fields establish a consistent framework: retained control matters, independence must be real rather than theoretical, and documentation is increasingly important.
Where Powell Risk Commonly Appears
In reviewing existing estate planning structures, potential Powell exposure most often arises from combinations of otherwise familiar features, such as removal or replacement powers that create subtle control chains; trustees or protectors whose independence may be more formal than practical; entity-level management powers that coexist uneasily with trust ownership; dual-role service providers whose economic incentives are not clearly segregated; and non-tax business purposes that exist in concept but not in documentation.
None of these features is inherently improper. The risk lies in how they interact when viewed as a whole.
What Is a Powell Compliance Review?
A Powell Compliance Review is a focused legal analysis of an existing estate planning structure, designed to assess whether it remains defensible under current IRC §2036 jurisprudence.
It is not an IRS filing, not an audit, and not an assertion that anything has failed. Rather, it is a forward-looking review intended to identify risk and, where appropriate, recommend practical steps to strengthen the structure.
What a Powell Compliance Review Typically Includes
While each review is tailored to the client’s facts, it typically includes analysis of trust and entity governance provisions; review of removal and control powers; evaluation of fiduciary independence under Powell and Larson; review of entity-level management authority; assessment of non-tax business purpose documentation in light of Fields; and a written memorandum explaining whether the structure appears Powell-compliant and, if not, what changes are recommended.
Where appropriate, Sollertis coordinates closely with the client’s existing attorneys, CPAs, and financial advisors.
Who Should Consider a Powell Compliance Review of Their Estate Plan
A review is particularly appropriate for families with trusts holding interests in LLCs or partnerships; centralized “asset hub” or holding-company structures; layered fiduciary or trust-protector arrangements; estate plans implemented before 2017; or a belief that their estate plan is “complete” and requires no further attention.
In many cases, the review confirms that the structure remains sound. In others, modest adjustments can materially reduce estate tax risk.
How Powell Compliance Fits With Other Advisors
Sollertis does not replace a client’s existing estate planning attorney, CPA, or financial advisor. A Powell Compliance Review is designed to complement existing advice, identify issues that may fall between traditional disciplines, and provide a clear legal framework that other advisors can work within.
When a review identifies recommended changes, collaboration with the client’s broader advisory team is expected and encouraged.
Decide and Commit to Taking Action
Powell compliance is not about abandoning sophisticated estate planning. It is about ensuring that existing structures continue to function as intended under today’s legal standards. As Tax Court decisions evolve, so too must the way complex estate plans are evaluated and maintained.
A Powell Compliance Review provides an opportunity to step back, examine how control, fiduciary authority, and documentation work together in your current structure, and confirm that your planning remains defensible. In many cases, a review simply validates that the structure is sound. In others, modest adjustments can significantly reduce risk and strengthen long-term outcomes.
Before investing additional time or resources into maintaining an existing estate plan, it is prudent to consult with a tax and asset protection attorney who regularly works at the intersection of trust law, entity governance, and federal tax rules. Sollertis is a national tax and asset protection law firm focused on complex planning for business owners, real estate investors, and high-net-worth families, with matters that frequently span multiple jurisdictions within the United States and abroad. We design, implement, and maintain sophisticated structures with an emphasis on long-term integrity and defensibility. Our role is not to replace your existing advisors, but to complement them by identifying structural risk, clarifying how recent Tax Court decisions apply to your plan, and recommending practical steps to preserve the integrity of your planning over time.
Now You Know
Tax planning, like asset protection, is most effective when it is proactive. Structures that were well designed years ago can quietly drift out of alignment as the law develops. A periodic review helps ensure that your planning continues to do what it was intended to do — protect your family, your assets, and your legacy.
You have worked hard to build what you own. Taking the time to confirm that your estate plan remains sound under current law is an important part of responsible stewardship. If you would like to learn more about Sollertis’s Powell Compliance Review services, we invite you to reach out and start the conversation.
