Estate Flashcards
(33 cards)
Gross Estate Exclusions
- Life Insurance owned by others
- Completed Gifts
- Life Estate (a RETAINED life estate is included in the estate)
Calculation of Transfer Tax System
Cumulative
Lifetime Gift Exemption
$5.43 MM
Annuity Taxation at Death
Subject to income tax on gain above basis
5 or 5 Taxable amount at lapse
$500,000 trust
$25,000; greater of $5K or 5% of trust assets
If taken during life, amt is added back to the estate but nothing from the trust.
HEMS / Ascertainable Standard
Health
Education
Maintenance
Support
NO “comfort”; too general
Gift of Loss Property
ALWAYS sell and take loss, gift cash proceeds
Gift of Out-of-state Property
ALWAYS gift to avoid ancillary probate
Gifts of Present Interest Vehicles /
Qualify for annual exclusion
2503(c)
Crummey Trusts
529 plans
Out-right gifts
2503(b) - the income is present interest; corpus is future interest (no annual exclusion)
Gift Limit to Non-citizen Spouses
$147K (2015)
Taxable Gift Amount
Almost always FMV less $14K annual exclusion (2015)
Taxable G/L on Loss Gift at time of sale
If > donor’s basis = cap gain
FMV date of gift = no gain or loss
Deductible/Exempt Gifts
- Qualified Payments made directly to an educational institution for tuition
- Made directly to a provider for medical care
- Gifts to a spouse (not terminable interest)
- Gifts to a qualified charity
- Gifts to a Political Organization
- Gifts to the President of the US
Deduction for Charitable Contribution of Life Insurance
The lesser of the Policy Value or the basis (limited to 50% of AGI)
This is because this is an ordinary income type asset, not LTCG where you would use FMV
*Also in Income Tax
Powers that cannot be given
- Power to execute or revoke a will
- Power to execute a living will, “healthcare proxy,” “advance medical directive” (right to die)
Distributable Net Income (DNI)
Accounting concept that limits the amount of income from a trust that must be reported by beneficiaries for income tax.
- provides the trust with a deduction for the distributed income
- limits the portion of the distribution that is taxable to beneficiaries
- ensures the character of the distributions remains the same (no double taxation because the trust receives a deduction)
Demand Right Amount on Crummey Provision Trusts
Donee withdraws the lesser of the $14K annual exclusion or value of the gift w/in 30 days
Gift Tax Return Code
Form 709
“Gifts in the one after nine-o-nine”
Taxable gifts (In excess of the $14K annual exclusion) accumulate on this form; records the $5.43MM lifetime exemption and any excess
Estate Tax Return Code
Form 706
“Six-feet-under”
Per Stirpes
Inheritance divided among all initial benes in equal shares. (Dead bene’s heirs get a split of one share)
Per Capita
Inheritance divided equally among all living initial benes and living heirs of dead benes
Totten Trust
Less of a revocable trust and more of a bank account that has the grantor as trustee and passes to a bene at death. Grantor retains right to revoke as any revocable inter-vivos trust
2503(b)
Bad Boy trust - allows income to be distributed to bene, but no demand right on corpus or principal.
Income is subject to income tax of bene and possibly kiddie tax (disadvantage). Better for adult “bad boy” child.
Income portion qualifies for annual exclusion:
Payout 6% on $500K bonds ($30K)
$500K is future interest
$30K is present interest (taxable gift $16K)
2503(c)
Similar to education IRA (529)
Gift of present interest as long as the trust meets qualifications:
- property and income may be expended by or for benefit of donee before age 21
- any remainder passes to the donee at 21
- death before 21, the property must of the donee estate or donee holds general power over trust property
