Estates

Question 1

2032(A) - SPECIAL USE VALUATION - Real Estate
-Farming OR Business

> or = 50% of AGE (adjusted gross estate)

• Qualified use prior to death in last five out of eight years
• Election made on form 706
• Subject to recapture if disposed of or used for non-qualifying purpose within 10 years unless due to bankruptcy
• heir is liable for any recapture

Question 2

TRUSTS FOR MINORS - 2503(b) and 2503 (c)

2503 (b) simple trust | “mandatory income trust”

• income must be distributed annually
• gifts partially qualify for annual exclusion (PV of income interest)
• assets removed from grantors estate

Question 3

TRUSTS FOR MINORS - 2503 (c)

2503(c) complex trust | “accumulation trust”

• must be distributed at age of majority, usually 21
• by law, qualifies for annual exclusion

Question 4

DISCLAIMED PROPERTY

How much time do you have to disclaim?

Answer 4

-within 9 months

Question 5

GSTT

• 40% flat tax rate
• direct skips
• unrelated individual younger by 37 1/2 years or more

Question 6

CRAT

Can you add more assets after establishment?

Answer 6

-Cannot add more contributions once created

Question 7

CRUT

• Can add contributions
• inflation protection

Question 8

PRIVATE FOUNDATION
-Tax-exempt charitable organization created by a family or corporation to effectively direct charitable contributions.

• Cash contributions to private non-operating foundations are limited to 30% of the donor’s contribution base for the tax year.
• Contributions of long-term capital gain property to private non-operating foundations are limited to basis and are limited to 20% of the taxpayer’s contribution base.
  1) Certain appreciated stock traded on a public stock exchange may use FMV instead of basis.
• Generally must distribute at least 5% of net investment assets each year
• Limits on contribution deductibility -

Question 9

ILLIQUID ESTATES - SECTION 303

What is section 303?

Answer 9

1) stock redemption
- closely held corporation
- treated as disposition of asset
- stock value must exceed 35% of AGE
- Redeemed amount cannot exceed federal and state death taxes (including generation-skipping taxes) plus funeral and administrative expenses.

Question 10

ILLIQUID ESTATES - SECTION 6166

What is section 6166?

Answer 10

Deferred payment of estate tax up to 5 years then pay 10 annual installments

• applicable to farm and closely held business
• corporation, partnership, sole proprietorships
• Interest rate is 2% on a portion of business/farm asset value.
• Interest is 45% of rate applicable to tax underpayment for remainder.
• Interest payments are due during deferral period.

**Value of farm or closely held business interest must exceed 35% of adjusted
gross estate.
***Collateral or bond required to secure debt.

Question 11

DEFERRAL AND MINIMIZATION OF ESTATE TAXES

What are these?

Section 2032?
Section 2032A?
Section 303?
Section 6166?

Answer 11

Section 2032—alternate valuation date
Section 2032A (special use valuation)
Section 303 (illiquid asset) - stock redemption
Section 6166 -  (illiquid asset) deferred payment of estate tax

Question 12

What forms of ownership avoid probate?

Answer 12

JTWROS, Tenancy by Entirety

Question 13

What forms of ownership will go through probate?

Answer 13

Tenancy in Common, Community Property