Reversion

What is a reversion, anyway? This is easily one of the most asked technical support questions we receive.

When the grantor retains a "reversion," it means that the trust property is returned to the grantor's estate(and distributed according to the grantor's will) if the grantor dies during the term of the trust. The retention of a reversion reduces the gift to the remaindermen of the trust because of the possibility that the grantor will die during the term of the trust and the remaindermen will receive nothing. However, adding a second measuring life may increase the value of the gift to the remaindermen because the probability that both lives will end during the term of the trust is less than the probability that one life will end, so the reversion has a smaller value and the taxable remainder has a greater value.