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Legislative Update: Highlights of Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Special Alert - July 2011) |
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Chapter 1: |
Getting Started |
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- § 1:1 : Introduction1-2
- § 1:2 : The Interview1-4
- § 1:3 : Domicile1-7
- § 1:4 : Human and Family Problems1-11
- § 1:5 : Family History1-12
- § 1:5.1 : The Need for Information1-13
- § 1:6 : The Family’s Assets1-16
- § 1:6.1 : Registration of Assets1-19
- § 1:7 : Tax Facts1-20
- § 1:8 : Summary of the Estate, Gift, and Generation-Skipping Tax Provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 and a Forecast of Estate Tax Reform1-24
- § 1:8.1 : Overview of Significant Changes to the Estate, Gift, and Generation-Skipping Taxes1-24
- § 1:8.2 : Increase in Exemptions, Rate Reductions, and Repeal1-27
- [A] : Estate and Generation-Skipping Taxes1-27
- [B] : Gift Tax1-28
- § 1:8.3 : Repeal of Family-Owned Business Deduction1-28
- § 1:8.4 : State Death Tax Credit Phased Out and Replaced with Deduction1-29
- § 1:8.5 : Modified Carry-Over Basis Regime1-32
- [A] : Basis Increase Permitted for Certain Property1-33
- [B] : Liabilities in Excess of Basis Disregarded1-34
- [C] : Exclusion of Gain on Sale of Principal Residence1-35
- [D] : Transfers of Appreciated Carry-Over Basis Property to Satisfy Pecuniary Bequests1-35
- § 1:8.6 : Planning and Drafting Considerations1-35
- § 1:8.7 : Overview of GST Tax Changes1-39
- § 1:8.8 : Automatic Allocation of GST Exemption to Certain Indirect Skips1-40
- § 1:8.9 : Retroactive Allocation of GST Tax Exemption1-41
- § 1:8.10 : Severing of Trusts1-41
- § 1:8.11 : Modification of Valuation Rules1-42
- § 1:8.12 : Relief Provisions1-42
- § 1:8.13 : Substantial Compliance Rules for Allocating GST Tax Exemption1-43
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Chapter 2: |
The Marital Deduction |
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- § 2:1 : Introduction2-2
- § 2:2 : Size of the Deduction2-5
- § 2:2.1 : Setting Aside a Bypass Trust2-7
- § 2:2.2 : Exploiting the Spouse’s Credit2-8
- § 2:3 : Factors Favorable to Deferral2-14
- § 2:4 : Factors Unfavorable to Deferral2-18
- § 2:5 : Portability of Exemptions2-26
- § 2:5.1 : Portability Election2-27
- § 2:5.2 : Calculating the Deceased Spousal Unused Exclusion Amount2-27
- § 2:5.3 : Sunset Provisions2-31
- § 2:5.4 : Planning with Portability2-31
- § 2:6 : Specific Bequests2-32
- § 2:7 : The Pecuniary Legacy2-34
- § 2:8 : The Fractional Share Legacy2-39
- § 2:9 : Choosing the Formula2-41
- § 2:10 : Eligible Bequests2-44
- § 2:10.1 : Outright Bequests2-44
- § 2:10.2 : Bequests in Trusts2-44
- § 2:10.3 : The Classic Marital Deduction Trust2-45
- § 2:10.4 : The Estate Remainder Trust2-48
- § 2:10.5 : The Income-Only Trust2-49
- § 2:11 : Disclaimers2-62
- § 2:12 : Eligible Portions2-64
- § 2:13 : The Noncitizen Spouse2-65
- § 2:14 : The Qualified Domestic Trust2-68
- § 2:15 : Simultaneous Death2-75
- § 2:16 : The Arithmetic2-75
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Chapter 3: |
The Nonmarital Share |
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- § 3:1 : Introduction3-1
- § 3:1.1 : The Exemption Equivalent of the Unified Credit3-2
- § 3:1.2 : Source of Payment of Estate Taxes and Administration Expenses3-5
- § 3:2 : Sprinkling Trusts3-9
- § 3:2.1 : Generation-Skipping3-13
- § 3:2.2 : Power of Appointment3-13
- § 3:2.3 : Basis Considerations3-15
- § 3:3 : Invasion of Principal3-18
- § 3:3.1 : 5-and-5 Power3-18
- § 3:4 : Further Use of Sprinkling Trusts3-20
- § 3:4.1 : Generation-Skipping Tax3-20
- § 3:5 : Charitable Provisions3-21
- § 3:5.1 : Form of Bequest3-22
- [A] : Pooled Income Fund3-22
- [B] : Charitable Remainder Trust3-22
- [C] : Charitable Lead Trust3-27
- § 3:5.2 : Private Foundation Rules3-29
- § 3:5.3 : Taxation3-31
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Chapter 4: |
Providing for Children |
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- § 4:1 : Fundamental Considerations4-1
- § 4:1.1 : The Lawyer’s Role4-3
- [A] : Use of Trusts4-4
- [B] : Provisions for Flexibility4-7
- [C] : Picking the Right Age4-9
- § 4:1.2 : Guardianships4-10
- § 4:1.3 : Uniform Gifts or Transfers to Minors Act4-11
- [A] : The Family Business4-13
- [B] : Section 2503(c) Trusts4-17
- [C] : Straight Income Trusts4-19
- § 4:2 : Child As Trustee4-21
- § 4:3 : When Parents Die4-22
- § 4:3.1 : One Trust for Children4-24
- § 4:3.2 : Choice of Guardian4-25
- § 4:4 : Further Tax Aspects4-27
- § 4:4.1 : Distributable Net Income4-28
- § 4:4.2 : Capital Gains4-28
- § 4:4.3 : The Kiddie Tax4-30
- § 4:4.4 : Withheld Income4-31
- § 4:5 : Support4-32
- § 4:5.1 : Items of Support4-35
- § 4:6 : Generation-Skipping Transfers4-38
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Chapter 5: |
Making Gifts |
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- § 5:1 : Introduction5-1
- § 5:1.1 : The Applicable Credit Amount5-2
- § 5:2 : Advantages of Gifts5-5
- § 5:3 : Contemplation of Death5-12
- § 5:4 : A Transfer That Is Not a Gift5-18
- § 5:5 : What the Children Want5-18
- § 5:6 : Gifts with Strings to Children5-21
- § 5:7 : Interplay of Taxes5-21
- § 5:7.1 : When Tax Savings Are Subordinate5-26
- § 5:8 : Discretionary Trusts5-28
- § 5:9 : The Private Annuity5-30
- § 5:10 : Installment Sale5-36
- § 5:11 : Short-Term Trusts5-41
- § 5:12 : Trust and Leaseback5-43
- § 5:13 : Loans5-44
- § 5:14 : Net Gifts5-49
- § 5:15 : Personal and Household Effects5-52
- § 5:16 : The Residence5-54
- § 5:17 : Transfers to Charity and Family5-56
- § 5:18 : Charitable Remainder Trusts5-57
- § 5:19 : Charitable Lead Trusts5-64
- § 5:20 : Gifts for Conservation and Historic Purposes5-68
- § 5:21 : Stock of Family Corporations5-69
- § 5:22 : Tangible Personal Property5-71
- § 5:23 : Valuation of Gifts5-72
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Chapter 6: |
Generation Skipping |
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- § 6:1 : Introduction6-2
- § 6:2 : Statutory Framework6-3
- § 6:3 : Taxable Terminations6-4
- § 6:3.1 : Requirements for Taxable Terminations6-5
- § 6:3.2 : Taxable Amount6-6
- § 6:3.3 : Basis Adjustment6-7
- § 6:4 : Taxable Distributions6-7
- § 6:4.1 : Requirements for Taxable Distributions6-8
- § 6:4.2 : Taxable Amount6-8
- § 6:4.3 : Income Tax Consequences6-8
- § 6:5 : Direct Skips6-9
- § 6:5.1 : Requirements for Direct Skips6-10
- § 6:5.2 : Crummey Withdrawal Powers6-10
- § 6:5.3 : No Trust Look-Through6-11
- § 6:5.4 : Taxable Amount6-12
- § 6:5.5 : Basis Adjustment6-13
- § 6:6 : Skip Persons and Generation Assignments6-13
- § 6:6.1 : General Rules6-13
- § 6:6.2 : Persons with a Deceased Parent6-13
- § 6:6.3 : Trusts As Skip Persons6-17
- § 6:7 : Interest in Property6-17
- § 6:7.1 : Statutory Rules6-18
- § 6:7.2 : Charitable Split-Interest Trusts6-19
- § 6:8 : Excluded Transfers6-20
- § 6:9 : The Rate of Tax6-23
- § 6:10 : The GST Exemption6-24
- § 6:10.1 : Separate Trusts6-24
- § 6:10.2 : Exemption for Both Spouses6-28
- § 6:10.3 : Allocating the GST Exemption6-32
- § 6:11 : The Inclusion Ratio6-40
- § 6:11.1 : General Rules6-40
- § 6:11.2 : Charitable Lead Trusts6-41
- § 6:11.3 : Recalculating the Inclusion Ratio6-42
- § 6:12 : Estate Tax Inclusion Period6-43
- § 6:13 : When There Are Multiple Skips6-45
- § 6:14 : Planning for the Generation-Skipping Transfer Tax6-47
- § 6:14.1 : Protecting Exempt Trusts6-47
- § 6:14.2 : Exploiting the GST Exemption6-51
- § 6:14.3 : Choosing Between the GST Tax and Estate Tax6-52
- § 6:14.4 : Drafting Concerns6-54
- § 6:15 : Nonresident Aliens6-55
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Chapter 7: |
Grantor Retained Interest Trusts, Combined Purchases, and Sales of Remainder Interests; And Appendix 7A: Qualified Personal Residence Trust |
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- § 7:1 : Introduction7-2
- § 7:2 : Historical Perspective7-3
- § 7:3 : Overview of Section 27027-5
- § 7:3.1 : Chapter 14 Generally7-5
- § 7:3.2 : Grantor Retained Income Trust7-6
- § 7:3.3 : Section 27027-7
- § 7:4 : Grantor Trusts with Retained Payments7-11
- § 7:4.1 : Qualified Interests7-11
- § 7:4.2 : Satisfying the Annuity or Unitrust Obligation with Notice7-13
- [A] : Prior to Regulations7-13
- [B] : Regulations Proscribing Payment of Annuity with a Note7-16
- § 7:4.3 : Valuing the Retained Interest7-17
- § 7:4.4 : Measuring the Effectiveness of a GRAT7-20
- § 7:4.5 : Selecting the Term of the GRAT7-23
- § 7:4.6 : Estate Tax Consequences7-24
- § 7:4.7 : GST Tax Consequences7-28
- § 7:4.8 : Income Tax Consequences7-28
- § 7:4.9 : Comparing a GRAT to Other Planning Techniques7-31
- [A] : Outright Gift7-31
- [B] : Loan7-32
- [C] : Sale to Family Member7-32
- [D] : Sale to Intentionally Defective Grantor Trust7-33
- § 7:5 : Qualified Personal Residence Trust7-36
- § 7:5.1 : Personal Residence7-37
- § 7:5.2 : Other Assets7-40
- § 7:5.3 : Conversion to a GRAT7-41
- § 7:5.4 : Estate and Gift Tax Consequences7-43
- § 7:5.5 : Practical Considerations7-44
- § 7:5.6 : Prohibition Against Reacquisition7-47
- § 7:5.7 : Joint Ownership7-49
- § 7:5.8 : Measuring the Effectiveness of a QPRT7-50
- § 7:6 : Joint (Combined) Purchases7-52
- § 7:7 : Sales of Remainder Interests7-56
- § 7:8 : The Private Annuity7-63
- Appendix 7A : Qualified Personal Residence TrustApp. 7A-1
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Chapter 8: |
Life Insurance |
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- § 8:1 : Introduction8-1
- § 8:1.1 : Impact of the 2010 Tax Law on the Use of Life Insurance in Estate Planning8-4
- § 8:1.2 : Life Insurance Products8-6
- § 8:2 : Transfer the Policy?8-8
- § 8:2.1 : Collecting the Proceeds8-10
- § 8:2.2 : Transferring the Policy8-13
- § 8:3 : Insurance Trusts8-16
- § 8:4 : Payment of Estate Tax8-18
- § 8:5 : Second-to-Die Insurance8-20
- § 8:6 : Owner of Policy Dies8-23
- § 8:7 : Premium Payments and Estate Tax8-27
- § 8:7.1 : Premium Payments As Gifts8-31
- § 8:8 : Loans8-39
- § 8:9 : Dissolving Old Borrowing Plans8-42
- § 8:10 : More About Borrowing Against the Policy8-43
- § 8:11 : Group Policies and Premiums8-44
- § 8:12 : Corporate-Owned Insurance8-45
- § 8:13 : Split-Dollar Policies8-47
- § 8:14 : Life Settlements8-58
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Chapter 9: |
Retirement Benefits |
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- § 9:1 : Introduction9-1
- § 9:2 : Estate Tax9-3
- § 9:3 : Income Tax Rules9-6
- § 9:3.1 : Rollovers9-7
- [A] : Rollovers by Participant or Surviving Spouse9-7
- [B] : Rollovers by Nonspouse Beneficiary9-9
- § 9:3.2 : Lump-Sum Distributions—Capital Gains and Averaging Rules (applicable to participants born before January 1, 1936)9-9
- § 9:3.3 : Lump-Sum Elections (Pre-1987 Rules)9-13
- § 9:3.4 : Taxable Amount of Lump-Sum Distributions (Pre-1987 Rules)9-14
- § 9:3.5 : Income Tax Treatment of Employee Contributions9-16
- § 9:3.6 : Roth IRAs9-18
- § 9:3.7 : Income in Respect of a Decedent9-19
- § 9:3.8 : Penalty Taxes on Premature Distributions, Failure to Make Minimum Distributions, and Excess Distributions and Accumulations9-20
- [A] : Tax on Premature Distributions9-20
- [B] : Minimum Distributions9-22
- [C] : Excess Distributions and Accumulations9-25
- § 9:4 : Selecting the Beneficiary9-25
- § 9:5 : Funding the Applicable Credit Amount Trust with Retirement Benefits9-34
- § 9:6 : Use of Retirement Benefits for Charity9-36
- § 9:7 : Payment of Estate Taxes Attributable to Retirement Benefits9-38
- § 9:8 : Retirement9-39
- § 9:9 : Nonqualified Plans9-40
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Chapter 10: |
Valuation and Other Estate and Gift Tax Issues Relating to Closely-Held Enterprises |
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- § 10:1 : Introduction10-2
- § 10:2 : Preliminary Comments Concerning Valuation10-3
- § 10:2.1 : Penalty for Understatement of Value10-4
- § 10:2.2 : Revenue Ruling 59-6010-4
- § 10:2.3 : Statute of Limitations and Adequate Disclosure10-5
- § 10:2.4 : Anticipating the IRS’s Response10-7
- § 10:2.5 : Valuation When No Estate Tax Is Due10-8
- § 10:3 : Valuation Discounts10-9
- § 10:3.1 : Minority Discount10-10
- § 10:3.2 : Discount for Lack of Marketability10-10
- § 10:3.3 : Market Absorption/Blockage Discount10-12
- § 10:3.4 : Fractional Interest Discount10-12
- § 10:3.5 : Planning for Discounts and QTIP Trusts10-13
- § 10:3.6 : Key Person Discount10-14
- § 10:3.7 : Discount for Securities Law Restrictions10-14
- § 10:3.8 : Discount for Built-In Capital Gains10-15
- § 10:3.9 : Substantiating Valuation Discounts10-19
- § 10:4 : Valuation Premiums10-20
- § 10:4.1 : Control Premium10-20
- § 10:4.2 : Swing Vote Premium10-21
- § 10:5 : Transfers Soon Before Death to Achieve Minority Position10-23
- § 10:6 : Family Limited Partnerships10-24
- § 10:6.1 : Discounted Gifts with Retained Control10-25
- § 10:6.2 : Economic Substance Doctrine and Section 270310-27
- § 10:6.3 : Gift on Formation10-36
- § 10:6.4 : Section 2704(b)10-39
- § 10:6.5 : Section 2704(a)10-43
- § 10:6.6 : Potential Estate Tax Inclusion—Section 203610-47
- § 10:6.7 : Annual Gift Tax Exclusion10-58
- § 10:6.8 : Planning Considerations10-61
- § 10:6.9 : Summing Up FLPs10-62
- § 10:7 : Family-Owned Business Deduction10-63
- § 10:8 : Special Valuation of Farms and Qualifying Real Property10-64
- § 10:9 : Estate Freezes10-64
- § 10:9.1 : Prior Attacks on Estate Freezes10-65
- § 10:9.2 : Overview of Section 270110-66
- § 10:9.3 : Statutory Prerequisites10-69
- § 10:9.4 : Transfer of Equity Interest10-70
- § 10:9.5 : Family Relationships10-70
- § 10:9.6 : Applicable Retained Interest10-72
- [A] : Distribution Right10-72
- [B] : Extraordinary Payment Rights10-74
- § 10:9.7 : Exceptions to Section 270110-76
- § 10:9.8 : Valuation of Applicable Retained Interests10-77
- [A] : Extraordinary Payment Rights10-77
- [B] : Distribution Rights10-78
- [C] : Qualified Payment Rights Combined with Extraordinary Payment Rights10-80
- [D] : Ten Percent Threshold10-81
- § 10:9.9 : Subtraction Method of Valuation10-81
- [A] : Step One10-82
- [B] : Step Two10-82
- [C] : Step Three10-83
- [D] : Step Four10-84
- § 10:9.10 : Cumulative, But Unpaid, Distributions10-84
- § 10:9.11 : Adjustments to Avoid Double Taxation10-86
- § 10:9.12 : Income Tax Concerns10-88
- § 10:9.13 : Summing Up Estate Freezes10-94
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Chapter 11: |
Business Interests: Family and Partner Concerns |
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- § 11:1 : Introduction11-2
- § 11:2 : Continuing the Business11-2
- § 11:2.1 : Will the Business Survive?11-2
- § 11:2.2 : Instructions to Fiduciaries11-3
- § 11:3 : Family Problems11-4
- § 11:3.1 : Income for Dependents11-6
- § 11:3.2 : Corporate Redemption11-8
- § 11:3.3 : Different Classes of Stock11-9
- [A] : Section 2701 Concerns11-10
- [B] : Satisfying Family Members Not in Business11-11
- [C] : Post-Death Reorganization11-12
- § 11:3.4 : S Corporation11-14
- [A] : Qualified Subchapter S Trusts11-15
- [B] : Electing Small Business Trusts11-16
- § 11:3.5 : Partnership and Limited Liability Company11-19
- § 11:3.6 : Nonbusiness Assets11-20
- § 11:3.7 : Sibling Rivalry11-21
- § 11:4 : The Deceased Co-Owner11-22
- § 11:5 : The Surviving Co-Owner11-24
- § 11:6 : The Buy-Sell Agreement11-25
- § 11:6.1 : Tax Law Requirements11-27
- [A] : Case Law11-27
- [B] : Pre-October 9, 1990 Agreements11-31
- [C] : Three-Pronged Test Under Section 270311-32
- § 11:6.2 : Price Formula11-36
- § 11:6.3 : Funding Through Insurance11-38
- § 11:6.4 : Basis11-40
- § 11:6.5 : Dividend Considerations11-42
- § 11:6.6 : Partnerships11-44
- § 11:6.7 : Other Considerations11-46
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Chapter 12: |
Joint Interests |
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- § 12:1 : Introduction12-1
- § 12:2 : Nature of Ownership Interests12-2
- § 12:2.1 : Property Rights12-2
- § 12:2.2 : State Law12-3
- § 12:3 : Gift Tax12-3
- § 12:3.1 : Creation of Joint Tenancy12-3
- [A] : Annual Exclusion and Gift Splitting12-4
- [B] : Value of Gift12-4
- [C] : Joint Bank Accounts12-6
- [D] : U.S. Savings Bonds12-6
- [E] : Family Residence12-7
- § 12:3.2 : Termination of Joint Tenancy12-7
- § 12:4 : Estate Tax12-8
- § 12:4.1 : General Rule12-9
- § 12:4.2 : Qualified Joint Property12-13
- § 12:5 : Generation-Skipping Transfer Tax12-14
- § 12:6 : Advantages and Disadvantages12-15
- § 12:6.1 : Income Tax Considerations12-15
- [A] : Cost Basis12-15
- [B] : Spousal Joint Tenancies Created Before 197712-18
- § 12:6.2 : Controlling Disposition of Property12-19
- § 12:6.3 : Exploiting the Unified Credit and Disclaimers12-19
- § 12:6.4 : Other Considerations12-22
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Chapter 13: |
Choosing Executors and Trustees |
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- § 13:1 : Introduction13-1
- § 13:2 : Investment Responsibilities13-6
- § 13:3 : Family Members As Fiduciaries13-12
- § 13:4 : Other Fiduciaries13-18
- § 13:4.1 : Banks As Fiduciaries13-20
- § 13:5 : Multiple Fiduciaries13-22
- § 13:5.1 : Limitation of Powers13-23
- [A] : Sprinkling Trusts13-25
- [B] : Life Insurance13-26
- § 13:6 : Successor Trustees13-27
- § 13:6.1 : Appointment13-28
- § 13:6.2 : Removal13-29
- [A] : Scope of Power13-31
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Chapter 14: |
Payment of Transfer Taxes |
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- § 14:1 : Introduction14-1
- § 14:2 : Responsibility for Tax14-3
- § 14:2.1 : Common Law14-3
- § 14:2.2 : Tax Apportionment14-4
- [A] : Broad Tax Clause14-6
- [B] : Marital Deduction Trust14-7
- [C] : Generation-Skipping Tax14-12
- [D] : Trusts and Tax Payment14-15
- [E] : Special Problems/Source of Payment of Taxes14-17
- [F] : Confirming Apportionment14-21
- § 14:3 : Deferral of Estate Tax14-21
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Chapter 15: |
Not to Be Overlooked |
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- § 15:1 : Introduction15-1
- § 15:2 : Costs of Dying15-1
- § 15:3 : Memento Bequests15-5
- § 15:4 : Tangible Property15-6
- § 15:5 : Disclaimers15-11
- § 15:6 : Providing for In-Laws15-23
- § 15:7 : Income in Respect of a Decedent15-24
- § 15:8 : Estate Liquidity15-27
- § 15:8.1 : Life Insurance15-32
- § 15:9 : Care for the Elderly and the Failing15-33
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Chapter 16: |
Index to Manning on Estate Planning |
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