Taxes: Estate Tax

Question 1

Taxes:
Estate Tax
Gross Estate

Answer 1

Gross Estate
- property owned by decedent at death and certain transfers.
- measure of value of estate for Estate Tax purposes
Probate Estate
- cash, stocks, assets. collection of assets for legal purposes
Property transferred by decedent at death
- transfer of property by operation of law (right of survivorship)
- other: retained life estates, revocable gifts, transfers triggered by death, and life insurance
Valuation
- included in estate @ FMV
- either on date of death or 6 months later, or when property is disposed of if before 6 months
- only alternate valuation if gross estate and tax payable will decline
- Special Use Valuation:

Question 2

Taxes:
Estate Tax
Gross Estate
Specific Inclusions

Answer 2

Specific Inclusions

• Life Insurance if:
  
  1. decedent had right to designate beneficiary or
  2. decedent’s estate or executor is beneficiary
• Jointly Owned Property if:
  
  • value of interest as tenant in common
  • 50% of first spouse to die
  • jointly owned property with right of survivorship (unmarried), the proportion of the consideration the decedent provided
• Retained Interest
  
  • retain control
  • retained power to designate
• Transfers within 3 years of death
  
  • transfer of retained interest, revocable transfers, and transfers of life insurance
  • property included @ date of death value
  • gift tax on gifts made within 3 years of death

Question 3

Taxes:
Estate Tax
Marital Deduction

Answer 3

Marital Deduction
- spouse must receive property outright and control its destination
- property passing to surviving spouse as result of joint tenancy qualifies
- only net value of property subject to mortgage
- property rights that are terminable do not qualify
- deduction is unlimited
Qualified Terminal Interest Property
- election made to give spouse less than complete interest in trust
- get all trust income annually for life, but decedent determines final beneficiary
- property included in surviving spouses estate when survivor dies
No Marital Deduction for Non-Citizen Spouses
- exception: qualified domestic trust

Question 4

Taxes:
Estate Tax
Other Deductions

Answer 4

Other Deductions

• debts of the estate
• final expenses (funeral and admin)
• casualty and theft losses
• charitable contributions

Question 5

Taxes:
Estate Tax
Calculation

Answer 5

Calculation
Property in Gross Estate
- Expenses, Debts, & Losses
= Adj Gross Estate
- Marital & Charitable Deductions
= Taxable Estate
\+ Adj Taxable Gifts
= Estate Tax Base
X Tax Rates
= Tentative Tax
- Gift Tax Paid/Payable
- Unified Credit
- Foreign Death Tax Credit
- Taxes on Prior Transfers
= Estate Tax Payable

Due 9 months after death

Question 6

Taxes:
Estate Tax
Generation Skipping Tax

Answer 6

Generation Skipping Tax

• supplemental tax that prevents generation skipping
• tax in addition to gift tax