Estate Planning Flashcards
Bypass Trust.
- makes full use of the applicable estate tax credit upon death
- wants to make sure that husband has access to her property
- AKA credit shelter trust
net gift
where the donee pays the gift tax on the property
non-citizen spouse special annual exclusion
$164,000 annually
tax form for split gifts
form 709
gift of community property
- do not require gift splitting
- not subject to gift splitting
lifetime gift tax applicable exclusion amount
4,769,800
first $1M of tax due is
345,800
Taxed at gift tax rate ($345,800)
Taxed at 40% ($4,769,800)
1st $1M
Next $11, 060,000
TOTAL: $12,060,000
Gifts of Future Interest
- are 100% taxable
5/5 Lapse Rule
- a taxable gift is made when either the greater of 5% or $5k has been withdrawn
unlimited Charitable deduction (UCD)
- fed, state, local gov for public use
- 501c3 corps exclusively for religons, chartibale, science, literary, educa purposes
gift tax filing date
april 15th or extension date
Gross Estate Inclusion
= value of annuity at decedents death * (decedents cost basis / total annuity cost basis)
Valuation included in decedents GE
= (trading Price AFTER decedents DOD * # of days betwn DOD and 1st preceding trade) + (trading Price BEFORE decedents DOD * # of days btwn decedents DOD and next trade)
_______________________________________________________________________________
sum of days before and after the DOD
AVD
= value 6 months after the DOD
= include wasting assets (annuities, notes, royalties, lease income)
Estate Tax Calculation
Gross estate - last medical exp - admin exp - funeral exp - debts of the decedent - losses during estate admin = Adjusted Gross Estate - state death tax deduction - UMD -UCD = taxable estate \+ post 76 taxable gifts = tentative tax base - credit for previous tax paid - applicable estate tax credit - credit for tax paid on prior transfers - foreign death tax credit = FEDERAL ESTATE TAX LIABILITY
FTP
FTP
- (FTF - FTP)
________
penalty
always calculate FTP first
Nursing Home Look back Period
= amount of $ gifted in 5 years / cost of the nursing home
Transfer to a revocable trust
- transfer is not considered a completed gift
Transfer to an irrevocable trust
- transfer is considered a taxable gift
GSTT
an issue for irrevocable trusts NOT revocable trusts
2503c trust
choir boy trust
complex trust
A trust which allows the trustee discretion to distribute or accumulate current income
A trust which allows a beneficiary a limited noncumulative right to demand.
2503b trust
bad boy trust
simple trust
Trusts with HEMS provisions
ILIT
Bypass trust
A charitable pooled income fund
This estate planning tool is created and managed by a qualified charity to provide a variable income stream (based on portfolio performance) to non-charitable beneficiaries
operates similarly to a mutual fund
a sale technique that is secured
SCIN
a sale technique that is NOT secured
private annuity
“S”CIN
“S”ale
“S”ecured
Section 6166 election
the ownership asset must make up at a minimum of 35% of the estate
irrevocable trust with life interest income to a beneficiary
100% included in the GE regardless of irrevocability
Trust payment amount included as GI:
= (amount paid to bene / total amount distributed) * distributable net income
Distributable net income of a trust
= dividends + interest income
The CRAT
is subject to the probability test.
testamentary trust
Is created under a last will and testament
The assets are included in the gross estate
It is included in probate
indicates that a sale and leaseback arrangement might be advantageous
cash flow needs
Installment Notes in a Gross Estate
- do not receive a new tax basis because they are IRD property and do not get a step up basis
estate freeze
Any property transferred would be appreciating in value and the future gain would occur in the transferee’s estate
AB Trust max contribution
$16,300,000
charitable contribtuion deductions
ONLY MATERIALS
Does not include time, rental of space
U.S. resident alien estate tax return
not required unless the decedent’s gross estate, plus adjusted taxable gifts, exceeds the applicable exclusion amount ($12,060,000 for 2022)
Installment note receivable with payments being made post mortem
Installment note receivable is an IRD asset
does not avoid probate
GRAT
saves the largest amount of transfer taxes if the grantor survives the trust term.
ascertainable interest for a gift
= gift of PV
gift tax paid
only included in GE on the gifts made < 3 years before death
Guardianship
Always #1 priority for estate planning no matter the debt or CF situation
