Estate Flashcards
Community Property: Basis
Wife has $1mm IRA
Husband has $500k in estate
If wife dies, full step up in basis to $1mm
Estate Tax Form
706
“six feet under”
Is premium paying an incident of ownership?
NO
EX: crummy trust
Policies in ILITs in gross estate?
Policy issued to ILIT: not included
Policy transferred to ILIT: if transferred within 3 years of death it is included
Gift Tax Form
709 must be filed if:
- more than $16k to non-spouse
- future interest
- split gifting (unless it comes from joint account)
Completed Gift: Future Interest examples
- 2503(b)
- remainder interest
- a trust in which income will be accumulated for a period of years
Completed Gift: Present Interest examples
- 2053(c)
- Direct gift
- Crummey trust
- 529
- UGMA/UTMA
Powers that CANNOT be given to another
- to Execute or Revoke a will
- to Execute a living will
Tainted Trusts
- reversionary interest that exceeds 5%
- right to income or right to use or enjoy property
When does a trustee become a fiduciary?
when the trustee controls the assets
Crummey Trust: right to withdrawal how much and for how long?
LESSOR of $16k or value of gift
30 days to withdrawal
Are Ascertainable standards distributions taxed?
NO, not subject to estate tax or gift tax
Wealth Replacement Trust
For donors who have serious concerns that their remaining assets may be insufficient to satisfy the financial needs of their heirs or for LIQUIDITY.
Installment Sale
Client NOT WORRIED about estate taxes (do not choose if over estate exemption)
- PV of remaining payments is included in owner’s estate.
- Gain is capital gain.
- DO NOT USE if property is subject to RECAPTURE (1245 prop)
SCIN
use if client IS WORRIED about estate taxes
- No value in owner’s estate
- This ADDS COST to buyer
- Higher payout than installment
- Capital gain
- Assets CAN be depreciated
Private Annuity
sale of property in exchange for payments
-ALL the GAIN it taxed to seller in year PA is created
- Not included in estate
- transfer is a promise
GRAT/GRUT
STRING: if you die during the term, included in your estate
APPRECIATED ASSET: best asset
- end of term corpus distributed to remainder person
Partnership / S Corp
(Gifting Shares)
DO NOT choose if bene subject to Kiddie Tax
- family member receives conduit income
- business must be capital sensitive (not service related)
FLP
Gift interest to limited partners to reduce estate
General partner MAINTAINS CONTROL
Valuation discounts
QPRT
STRING: if you die during the term, included in your estate
after term residence is excluded from your estate
gift is discounted
Section 303 stock redemption
ESTATE LIQUIDITY
Business must be incorporated
Stock must exceed 35% of decedent’s AGI
amount of stock redeemed cannot exceed the sum of estate taxes
Installment Payment of Estate Taxes (6166)
ESTATE LIQUIDITY / SAFE ANSWER
property must be in a sole proprietorship, partnership, corp
Stock must exceed 35% of decedent’s AGI
Pay taxes over 14 years
Special Use Valuation (2032A)
ESTATE REDUCTION
Family Farm / Real Estate
50% of estate real/personal prop. 25% is real prop
$750,000 ($1,230,000) reduction gross estate, then must be used for 5/8 years before death and 10 years after
