Chapter 10: Unlimited Marital Deduction Flashcards
Ascertainable Standard
An objective standard for allowing distributions defined in the Internal a Revenue Code as distributions for health, education, maintenance, or support (HEMS).
ABC Trust Arrangement
A common trust arrangement that utilizes a bypass trust (B trust), a GPOA trust (A trust), and a QTIP trust (C trust) to provide the necessary support to a surviving spouse while maximizing the use of the decedents applicable estate tax credit and providing the decedent the ability to determine the ultimate beneficiary of most of his assets at the death of the surviving spouse
Bypass Trust
A trust created to ensure that an individual makes use of his applicable estate tax credit.
Estate trust
A trust which grants the surviving spouse a testamentary general power of appointment over the trust assets. Because of the spouses general power of appointment over the trusts assets, the FMV of the trust will be eligible for the unlimited marital deduction at the death of the first-to-die spouse.
General Power of Appointment Trust (A trust)
An irrevocable trust that can created either during an individual’s lifetime or at an individual’s death that gives the agent the right to appoint the settlors assets.
Overqualified
A decedents taxable base is less than the applicable estate tax credit equivalency because too many assets have passed to a surviving spouse.
Portability
The ability of the executor of an estate to timely file Form 706 to transfer the decedents unused credit exclusion to the surviving spouse.
Privity
The prohibition of a surviving spouse transferring his or her inherited or donated unused exemption amount to his or her next spouse at the surviving spouses death. The privity requirement prohibits the accumulation of exemptions through remarriage.
Qualified Domestic Trust (QDOT)
A trust created for the benefit of a noncitizen spouse which has enough transfer stipulations to allow the U.S. government to subject assets remaining at the death of the noncitizen surviving spouse, as well as distributions of principal, to estate taxation. Assets transferred to a QDOT qualify for the unlimited marital deduction.
Qualified Terminable Interest Property Trust (QTIP Trust or C trust)
A trust which allows a decedent to qualify s transfer for the marital deduction at his death yet still control the ultimate disposition of the property.
Survivorship Clause
A clause included in a will requiring that the legatee survive for a specific period in order to inherit under the will. The bequest will qualify for the marital deduction if the property transfers to the surviving spouse and the time period of the survivorship clause is six months or less.
Terminable Interest
An interest that terminates at some point
Underqualified
When too much of a decedents property is subject to estate tax at the death of the first spouse due to improper use of the unlimited marital deduction.
Unlimited Marital Deduction
Because a married couple is viewed as one single economic unit for estate and gift tax purposes, an individual receives a deduction from his gross gifts or from the adjusted gross estate for transfers to a spouse. Hence, transfers to a spouse are not subject to estate or gift tax.
