6 Estate General

Question 1

4 Estate Planning Tools for Everyone

Answer 1

1. Durable POA (agent for all matters until death)
2. Living Will (end of life medical care, often paired with healthcare POA)
3. Will (specify guardians for kids)
4. Funded Rev. Living Trust (avoids probate)

Question 2

What valuation date to use for an estate?
Who decides, and when, and where?

Answer 2

1. DOD (Date of Death) - this is the simple default
2. AVD (Alternate Valuation Date) - use date 6 mos after DOD for EVERYTHING with two exceptions: (a) deprec. prop like cars, patents, life estate, & remainder interests still uses DOD, and (b) prop sold/distrib/etc in those 6 mos uses FMV on the “disposition date”

Executor makes this election irrevocably on Form 706 which is due 9 mos after death and can be extended another 6 mos

Question 3

Section 303ª
- What is it?
- Why?
- Reqs?

Answer 3

• What? Allows the purchase of a portion of a decedent shareholder’s stock by the shareholder’s corporation to be treated as a sale or exchange rather than as a dividend.
• Why? When a corporation is facing forced liquidation due to a death
• Reqs: the stock in decedent’s gross estate is ≥ 35% of [gross estate – (estate expense, indebtedness, and taxes + losses)]

E.g., if Gross estate = $1,250,000
Admin. and funeral costs = $250,000
No other deductible expenses
To qualify for a Section 303 redemption, the value of the stock must exceed $350,000 {35% of ($1,250,000 - $250,000)}

Question 4

Section 2032A
- what?
- max?
- reqs

Answer 4

what: executor may elect to value qualifying real property based on its actual special use rather than its highest and best use (eg, family farm near encroaching housing dev)

max reduction in estate $1,390,000 (remember roughly 10% of $13.61 exemption)

reqs:
- must be involved in a qualified use (ie a biz) on DOD
- prop = 50% of the decedent’s gross estate – debt/mtgs
- ≥ 25% of the gross estate, less debts and unpaid mortgages on all property in the gross estate, must be qualified farm or closely held business real property.
- must pass to a qualified heir: Immed. family, Ancestors, Lineal descendants, Spouse or the spouse of a descendant, or A grandparent’s lineal descendant.
- owned by fam for 5 of 8 yrs before DOD, and a fam membre involved in the biz

Question 5

Section 6166
- benefit?
- qualifications?

Answer 5

Benefit
- may defer payment of estate tax for a closely held biz using installment payments
- pay in up to 10 equal annual installments (1st due by 5th anniversary of the due date of the estate tax liability on Form 706)
- useful if unable to pay tax without selling assets at a loss and when biz/estate can earn more than the interest

Qualifications
- biz interest > 35% of adjusted gross estate
- decedent is a US citizen
- full and complete notice of election with a timely filed federal estate tax return

Question 6

does Community Property go through probate?

Answer 6

Depends - Need titling “S1 & S2, CWROS”

(eg, in Texas & California)