A power of substitution—commonly called a “swap power”—must be held by the grantor (or a nonadverse party) and must be exercisable in a nonfiduciary capacity to qualify as a grantor-trust trigger under IRC § 675(4)(C).
Below is a sample clause that satisfies the statutory requirements and the IRS guidance in Rev. Rul. 2008-22 and Rev. Rul. 2011-28.
Example: Power of Substitution Clause
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