IRC Section 2645 addresses adjustments to the GST inclusion ratio when certain events change the composition or structure of a trust, such as modifications to beneficial interests, decanting, trust divisions, or terminations that alter how much of the trust remains subject to GST tax. Its rules prevent manipulation of inclusion ratios and ensure that GST treatment reflects the actual economic interests of skip and non skip persons after changes occur. In the context of life insurance and dynasty trusts, Section 2645 can come into play when trustees split a trust into exempt and non exempt portions, roll assets into new trusts, or restructure arrangements that hold significant policy values or death benefit rights. Understanding that inclusion ratios may need to be recalculated under 2645 reminds planners that GST outcomes are not always static and must be monitored over the life of long duration trusts.

In day to day administration, advisors hear about IRC Section 2645 when estate planning attorneys propose decanting an existing trust, moving assets into a new vehicle, or making substantial changes to distribution standards and beneficiary classes. If a dynasty ILIT originally funded with life insurance is later divided so that one branch remains fully GST exempt and another remains partially taxable, Section 2645 provides the framework for adjusting inclusion ratios after the change. Trustees and tax professionals use these rules to recompute ratios, document the impact on future taxable distributions, and ensure accurate reporting. Advisors who understand 2645 can better explain to clients why significant trust modifications may have GST consequences, and why coordination between legal, tax, and insurance professionals is essential when altering long term life insurance structures that were initially designed to be GST efficient.