Estate Flashcards
Probate Calculation Shortcut
- add all assets subtract out non-community property, then divide by 2. Once solved, add back non-community property items
Best way to leave assets to each other outside of marriage
- revocable trust or tenants in common
- a will or joint tenants with right of survivorship are INEFFECTIVE
Appropriate Gift Property: Highly to Appreciate
- donate to charity
Appropriate Gift Property: Likely to Appreciate
- gift to remove future value
Appropriate Gift Property: Income Producing
- gift to someone in a lower tax bracket
Appropriate Gift Property: Loss Property
- sale to take loss and gift proceeds
Appropriate Gift Property: Property Subject to Depreciation
- keep until fully depreciated
Appropriate Gift Property: Out-of-State Property
- gift to avoid ancillary probate
Net Gift Calculation
- net gift = [gift tax / 1.4]
- cannot use without using $12,920,000 lifetime exemption first
Generation Skipping Transfer Tax Calculation
- generation skipping transfer tax due = total estate - [$12,920,000 + estate tax due] x 40%
Who pays Generation Skipping Transfer Tax
- direct = transferor
- termination = trustee
- distribution = transferee
Estate Tax Due with Income in Respect to the Deceased
- estate tax due = [federal estate tax WITH income in respect to the deceased] - [federal estate tax WITHOUT income in respect to the deceased]
A Trust
- marital trust
- power of appointment trust
- spousal trust
B Trust
- non-marital trust
- credit shelter trust
- unified credit trust
- family trust
- bypass trust
C Trust
- qualified terminal interest property (QTIP) trust
- current interest trust
Generation Skipping Tax Calculation
- [estate - (exemption - estate tax due) = GSTT]
Assets Subject to Probate
- singly owned assets (individual ownership)
- property held tenants in common
- assets where beneficiary is the “estate of the insured”
- 50% of community property
Defective or Tainted Trust for Estate Tax Purposes
- reversionary interest that exceeds 5% measured at time of death
- right to income or enjoyment of the trust property
- it is not good to taint a trust for estate tax purposes
Defective or Tainted Trust for Income Tax Purposes
- a reversionary interest that exceeds 5% of the trust value at the time of creation is retained by grantor or grantor spouse
- power to control the beneficial enjoyment is held by grantor or grantors spouse
- good to lower tax bracket
Simple Trust
- 2503(b), QTIP, QDT, dynasty trusts
- income is distributed
- income is taxed to the beneficiaries
- corpus is distributed at termination
- no charitable gifts
- only dividends are distributed
Complex Trusts
- 2503(c)
- income must or may accumulate
- accumulated income is taxed to trust
- income distributed is taxed to beneficiaries.
- corpus distributed per trust terms
- charitable gifts are permitted
Can have HEMS and 5 or 5 provisions
- life insurance trust
- b trust
- c trust
Subject to Estate Tax at Second Spouse’s Death
- a trust
- c trust
Assets pass using $12,920,000 Exemption
- b trust
Assets pass by Marital Deductions
- a trust
- c trust
Gifting using Crummy Provisions
- life insurance trust
- death benefits passes tax free
Reverse QTIP
- going to grandkids
- keeps GSTT exemption from being lost
Minimum 5% Distribution Rule
- CRAT
- CRUT
- private foundations
No 5% Distribution Rule
- pooled income fund
- charitable gift annuities
- CLAT/CLUT
Additions Allowed (Charitable Transfers)
- CRUTs
- pooled income
Any Charity Allowed (Charitable Transfers)
- CRAT
- CRUT
Specific Charity Allowed (Charitable Transfers)
- pooled income
- charitable gift annuities
Fixed Payments (Charitable Transfers)
- CRAT
- charitable gift annuity
Variable Payments (Charitable Transfers)
- CRUT
- pooled income
QPRT Keys
- large residence
- 10+ years of life expectancy
- donor continues to live in house
- larger than exemption estates
Gift Leaseback Keys
- conduit income
- depreciation
- 23+ years
Liability of GST tax (Who Pays)
- direct skip = transferor/donor
- taxable termination = trustee
- taxable distribution = transferee
Installment Payment of Estate (6166) Safe Answer
- closely held business
Increasing Basis on Appreciated Gift
- must be appreciated properly
- gift tax must have been paid by donor
