IRD, postmortem Estate Planning, nontraditional relationship relationships Flashcards
Alternate evaluation date (AVD)
- 6 months after the decedent death
If elected, following conditions must be met:
- Must reduce the total value of the gross estate
- Amount of federal tax liability must be reduced as a result of filing the election
- Generally, it must be applied to all the properties in the gross estate. Some exceptions apply.
- Cannot be elected for assets that decrease in value with a mere passing of time
What are the three situations where the executor cannot elect the alternate valuation date in order to step up the basis of assets that increase in value after death?
Assets that passed to the spouse using the unlimited marital deduction
Assets that pass to qualified charities
Assets passing to children that are equal or less than $13,610,000 no state tax due
Property that is disposed of between the date of death and the AVD is valued as of what?
Date of distribution
What are the exceptions to the AVD election?
Wasting assets: reduction in value by the mere lapse of time like annuity payout, retirement plans payout, mortgage payouts, or notes receivable
Assets sold: sold or distributed before the AVD are valued as the proceeds received on the date of sale or distribution
What is a disclaimer?
Is a refusal by a primary beneficiary to accept the property
Federal tax purposes, if the disclaimer is qualified, if they disclaim, it is regarded as never having received the property. As a result, no transfer is considered to have been made by the disclaim for federal gift, state or generation-skipping transfer tax purposes.
In order for the disclaimer to be qualified, what following requirements must be met?
- Must be an irrevocable refusal to accept the interest
- Must be submitted in writing
- Must be received within 9 months after the later of; date in which the transfer creating the interest was made or day on which the person disclaiming reaches age 21
- Donee cannot have accepted any interest in the benefits
- Interest will pass without the disclaiming person’s direction to someone else
What is a disclaimer trust?
- Possible for the spouse to disclaim the property and yet receive a stream of income from the disclaimed request, accomplished through a disclaimer trust
- Transferred to a irrevocable trust and income is paid to the surviving spouse
Spouse may retain your lifestyle in the trust assets, however cannot retain any power to invade the corpus. One exception may be invaded using an ascertainable standard.
Can tenancy by the entirety property be disclaimed?
No
Section 303 stock redemption?
Business must be incorporated (closely held stock)
Value of stock must exceed 35% of decedents adjusted gross estate
Amount of stock redeemed as capital gain cannot exceed the sum of the estate taxes plus administration expenses
Elected for state liquidity
Installment payment of estate taxes (6166)
- Property must be in a sole proprietorship, partnership, or corporation. (aggregation is allowed if more than 20% interest in each business.)
- Interest must be carried on as of the day of death
- Value of business must exceed 35% of decedents gross estate
- During first four years (of 14 years) can pay interest only on taxes due
- The interest rate will be 2% on the first $1 million (index to $1,850,000 and 2024)
- The 2% is not deductible
Used for estate liquidity
Special use valuation (2032A)
- Real estate use for farming or a closely held business
- Several rules to qualify; 50% of the gross estate must consist of real and personal property, 25% of the gross estate must consist of a real property
- $750,000 reduction in decedent gross estate ($1,390,000 and 2024)
Must be qualified use: 5 out of 8 year rule before death. Must own for 10 years after death or be subject to recapture
