Postmortem Estate Planning Techniques

Question 1

Estate valuation strategy

Answer 1

• You could use the altnerate valuation date strategy (which is SIX MONTHS after date of death)
• ALL OR NOTHING election, meaning all assets must be valued on that date
• Qualify:
  
  • IRS only allows this when results in a reduction in the gross estate and in the overall tax liablity of the estate
  • If decedent’s ENTIRE ESTATE pass to the surviving spouse WITHOUT any gift/estate taxes due, then ORIGINAL VALUE DATE MUST BE USED
  • Any asset that declines AUTOMATICALLY IN VALUE must be valued on the date of death
  • Any assets that is transferred or sold out of the estate within SIX MONTH PERIOD must be valued on date of transfer

Question 2

Disclaiming property

Answer 2

• When any person that is a named bene of somone’e estate can diclaim property.. must be:
  
  • in writing
  • an irrevocable choice AND
  • executed withn NINE MONTHS of property transfer date
  • Must not have received any benefit from the proeprty before disclaiming
• No one can forced someone to dislcaim property

Question 3

Disclaimer trust

Answer 3

• Captures property disclaimed by the surviving spouse under a will or trust
• Discalimed amount is usually equal to exemption amount so that the decedent’s unified credit is available to offset estate tax on the transfer
• Disclaimer trust is a terminable interest trust than can benefit the surviving spouse and children
• Proeprty held in this trust will bypass BOTH spuoses’ estates taxation

Question 4

Disclaiming property rather than portability election advantages

Answer 4

• appreicating assetes transferred to trust will not be taxed in spouses’ estate
• Offers some creditor protection

Question 5

Election against a will

Answer 5

• To protect surviving spouse so that they are not disinheriteid from will
• Allows them to obtain their legal share of an estate without going through court or contesting wills

Question 6

Homestead exemption

Answer 6

• Protects real property from creditor claims

Question 7

Payment of estate taxes through installments

Answer 7

• This is for an estate that holds cloesely held business
• May defer payment of estate taxes ONLY ATTRIUBATE TO THE CLOSELY HELD BUSINESS
  
  • the rest must be paid immediately
• To qualify:
  
  • Decedement must be US citizen or resident
  • Decednet’s interest in the closely held business must exceed 35% of the gross estate
• 10-year term to pay and not tax deductible

Question 8

Section 303 stock redemption

Answer 8

• If decednet and family owns more than 50% in a corporation, they may be able to sell or exchange stock to pay for estaet and admin expenses and taxes without incurring tax as a divident distribuiton
• Stock must make up more than 35% of decednat’s adjusted gross estate

Question 9

Special use valuation

Answer 9

• For closely held family businesses such as farmers, ranchers, etc
• Values real land based on its CURRENT USE rather than FMV
• To qualify
  
  • Business must be made up of real property that has FMV of at least 25% of the total value of gross estate
  • Real and personal business assets must make up at least 50% of estate
  • Real property must have been owned 5/8 prior years
  • Must have been used for buiness
  • Executor must file for this election