Estate 2 Flashcards
Not a Completed Gift
- revocable trust
- disclaimer
- disclaimer trust
-no gift tax
Gift of future interest
- no 15k exclusion
- 2503b
- remainder interest
- a trust with income accumulating
Gift of present interest
- 15k exclusion
- 2503c
- direct gift
- crummier trust
- 529 plans
- UGMA/UTMA
What can operate as a simple trust
- QTIP
- 2503b
- irrevocable
- spray
How to remember form 709
GAT
BTN
-GROSS Minus expenses, admin fees, debts, taxes, casualty losses -AGE Minus marital charitable -TAXABLE ESTATE PLUS adjusted taxable gifts -TAX BASE Minus exemption amount times tax rate -TENTATIVE TAX Minus gift taxes paid
Life insurance gift tax ability
During lifetime, if insured gifts the policy, taxable gift is the interpolated terminal reserve plus the unearned premium
ILIT TAXABILITY
As long as it’s been 3 years since transferring policy to an ILIT, it’s not included in your gross estate
- The funded ILIT (not crummy) is income taxable to grantor
- For the unfunded since there’s no “income” being produced and you’re just gifting the premium payment in every year there’s nothing to really pay income tax on
Simple trusts
2503b, QTIP, QDT, Dynasty
Complex trusts
2503b
Crummy trust
Irrevocable
Demand rights
Typical use is in an ILIT
5 or 5 estate tax
Kid dies with a 5% general power interest
- if they haven’t taken out 5%, included in their estate
- if they took out 5% and spent it, not included
Ascertainable standard taxability
Distributions for ascertainable standard have no gift or estate tax
Bypass Trust, nonmarital, B non marital, family
- can be simple or complex
- property transferred at death
- descendent has postmortem control
- can be set up to provide income to wife or other peeps (may have right to invade corpus)
- as long as only hems or 5/5 withdrawal rights, bypass will not be included in surviving spouses estate. At death of wife, assets pass tax free
Marital Trust A trust-power of appointment trust
Second spouse to die controls
Consists of property transferred at defendants death
Surviving Spouse has transfer control over property-can invade entire corpus
Qualified for Marital deduction
Subject to estate taxes after wife kicks it
QTIP/C trust—simple trust
First spouse to die controls “Current income trust” Qualified for marital deduction Included in gross estate of surviving spouse when she kicks it Serving spouse may have limited power of invasion over corpus and income of a QTIP Lifetime income interest for spouse Annual payments to spouse Mandatory payments to spouse Exclusively for spouse
QDT/QDOT-simple trust
To qualify for marital deduction assets must be in QDT. Similar to QTIP, but for noncitizen spouse
UTMA UGMA Custodian estate
Can be included in custodians estate
2503b
Bad boy trust
Simple trust
Gift of future interest into the trust(no exclusion)
Income must be distributed (15k exclusion allowed)
Income to bene is excluded from estate tax, but taxed as income tax
2503c
Complex trust
Taxed at trust rates
You get annual gift exclusion on contributions
Trust property and income must be spent by child before 21
If child dies, it’s included in child’s estate
Dynasty trust
Simple trust
Free of gift, estate, and gst taxes
Installment sale
Pigs need income
Don’t use if there is an estate issue (worried about estate taxes) or if there is depreciated assets (1245 prop)
At death, PV of remaining payments are included in decedents estate
SCIN
Pigs need income
Use if there is an estate issue or depreciated assets
No value is included in owners estate
Higher payment than installment— based on owners age
Gain is a cap gain
Private annuity
Usually wrong answer
Promise, not secured so you can’t sue your daughter
No value is included in estate-yay!
Taxed for errrything in year it has been established
GRAT/GRUT
Irrevocable trust
Grantor makes gifts of property while retaining income interest
At the end of term, remainder of corpus is paid to the remainderman
Longer the term, bigger discount you get (value of gift is discounted)
Best asset -ones that’s going to appreciate!
STRING
Partnership/Scorp
Property owner wants to gift assets/income to others Gift of shares-get 15k exclusion Fam gets conduit income from the shares No service related! Watch out for kiddie tax
Family limited partnership-FLP
Property owner wants to gift assets/income to others
Shift income from parents to children-income can’t come from personal services of general partner
Valuation discount 50%-lower gift tax
General partner maintains control
Gift leaseback
Property owner wants to gift assets/income to others
Gives fully depreciated assets to a trust or lower income bracket person
Owner only has business assets, can take biz deduction
Don’t use if kid is under 24!
QPRT
Property owner wants to gift assets/income to others
Irrevocable transfer of a personal residence
End of term-residence is eliminated from grantors estate and passes to the beneficiaries either in a trust or outright
Value of gift is discounted-longer the term, bigger discount
String
GSTT
Direct skip-15k exclusion-no trus. Transferor pays
Taxable termination-no 15k, gstt paid by trustee/trust
Taxable distribution-no 15k, distribution to skip person-grandchild pays taxes on whatever exceeds 11,400,000. D FOR DOUBLE- because it’s also subject to gift taxes
Disclaimer trust
Simple, similar to bypass trust
Spouse can disclaim property yet receive stream of income
Section 303 stock redemption
Estate liquidity-postmortem
MUST BE CORP, MUST BE CLOSELY HELD
Value of stock must be more than 35% of ADJUSTED Gross Estate
Only the amount of stock = to all estate taxes & admin expenses can be redeemed
Installment payment of estate taxes- y6166
Estate liquidity-postmortem
Allows you to pay estate taxes overtime
Must be sole proprietorship, partnership, or corporation
Value of business must be more than 35% of ADJUSTED Gross Estate
Special use valuation-2032A
Estate tax reduction
Method to discount the valuation of real estate used in connection with a closely held biz, or farming operation.
Max reduction=1,160,000
25% of GROSS Estate must consist of real property used in business
-must have been held for 5 out of last 8 years
-must be continued to use for qualified use for 10 years after descendent death
