Ch 9 - Misc Marital Relationship Issues Flashcards Preview

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Flashcards in Ch 9 - Misc Marital Relationship Issues Deck (13):
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●Without a valid will

●Descent and distribution statutes

  • •Vary from state to state
  • •Unnecessary confusion/complexity
  • •Tax reduction opportunities lost
    • -no maximum marital deduction
    • -no tax allocation

● Specific distribution wishes ignored

What is Intestacy

1

●Allows a minimum statutory share of decedent spouse’s estate to pass to surviving spouse Does not include share of property not passing by intestacy

●Election must be written and filed in accordance with state statute

What is the Spousal Right of Election Against the Will

2

Review and modify all legal instruments

  • •Wills
  • •Trusts

Review and modify fiduciary relationships

What are the Implications of Transfers Incident to Divorce and Separation

3

Section 2516 (whether adequate consideration is received for transfers pursuant to divorce)

Valid agreement Divorce within 3-year period (agreement 2 years before divorce to 1 year after) = Adequate consideration (no gift taxation)

What are Property Transfers Pursuant to Divorce

4

●Income tax deduction for premium-paying spouse (Exception to General Rule) ●Inclusion of premiums in recipient-spouse’s gross income

What happens to Life Insurance Subject to Divorce Decree Property Settlement

5

●No income tax recognition for capital assets exchanged that have built-in capital gain

●No income tax problems for cross ownership of life insurance

What happens to Transfers Between Spouses During Marriage or at Divorce

6

●Arizona ●California ●Idaho ●Louisiana ●Nevada ●New Mexico ●Texas ●Washington ●Wisconsin (UMPA)

List the Community-Property States

7

  • ●Birth state
  • ●State of tax payments
  • ●Voting registration
  • ●Property situs
  • ●Citizenship state
  • ●Length of residence
  • ●Business location
  • ●Community ties and activities

What are Domicile Factors

8

Property interests… acquired in a community-property state… during marriage… are presumed… to be owned equally by spouses. (Presumption of community status if source uncertain)

What is Community Property

9

Retains ownership character throughout marriage:

  • ●Property acquired prior to marriage
  • ●Property acquired by gift
  • ●Property acquired by inheritance, bequest, devise
  • ●Property acquired as result of court award
  • ●Property transmuted into separate property

What is Separate Property

10

●Be aware of entering into marriage and/or changing property identity when there are:

  • - prior tax problems
  • - child or spousal support problems
  • - liens, levies, judgment Income of either spouse (i.e., innocent spouse) and/or commingled assets may be available for garnishment or liens by courts/taxing authorities

What are Community Property “Uh Oh’s”

11

(Pertains to personal property of migrating spouses)

●Governs disposition/treatment of community property for spouses dying as domiciliaries in common-law states

●Presumption of community character for property acquired in community-property state If acquired with or traceable to community funds

●Joint tenancy/common tenancy retain separate identity in community states

What is the Uniform Disposition of Community Property Rights at Death Act

12

●Life insurance purchased with community funds is deemed half owned and half transferred by each spouse

●Allocation of premium rule applies when both community and separate funds are used to pay premium. Community portion is that provided by community property funds

How does Life Insurance impact Community Property