TreatiseAnswer Book

Private Clients Legal & Tax Planning Answer Book (2016 Edition)

 by G. Warren Whitaker, Leiha Macauley, Darren M Wallace, Natalia Murphy, Day Pitney LLP
 
 Copyright: 2016

 Product Details >> 

Product Details

  • ISBN Number: 9781402426100
  • Page Count: 470
  • Number of Volumes: 1
  •  

Private Clients Legal & Tax Planning Answer Book provides practical guidance for estate planning for individuals. This Q&A resource addresses complex client questions related to the benefit and protection of the client’s assets, dispositions to current and future family members, the uses of trusts and other vehicles, and current and future charitable donations.

Authored and edited by G. Warren Whitaker and a team of experts from Day Pitney LLP, this Answer Book covers the different ways in which assets can be owned and transferred; best practices in executing wills and trusts; estate, gift and generation-skipping transfer taxes; and retirement accounts, charitable giving, and family and marital issues.

Stockpiled with highlighted practice tips, Private Clients Legal &Tax Planning Answer Book also provides guidance on issues related to incapacitation, international concerns, and managing the estate planning team (attorneys, accountants, trust officer, etc.)

  Table of Contents
Chapter 1: Introduction
  • : Definitions2
  • : Estate Planning2
  • Q 1.1 : What is legal and tax planning for private clients?2
  • : Assets3
  • Q 1.2 : What are assets?3
  • : Transferring Assets4
  • Q 1.3 : How do individuals transfer assets?4
  • : The Role of a Trust in Estate Planning5
  • Q 1.4 : What is the trust and how does it figure in estate planning?5
  • : Types of Trusts6
  • Q 1.5 : What are the different types of trusts?6
  • : Transfer Taxes7
  • Q 1.6 : What are transfer taxes?7
  • : Techniques for Transfer Tax Reduction8
  • Q 1.7 : What are the most common techniques for reducing transfer taxes?8
  • : Incapacity9
  • Q 1.8 : What is planning for incapacity?9
  • Q 1.9 : How can assets be protected from creditors?9
  • : Cross-Border Implications10
  • Q 1.10 : What estate planning issues arise for non-U.S. persons, non-U.S. assets and U.S. citizens residing abroad?10
Chapter 2: Ownership, Title and Transfer of Assets
  • : Forms of Individual Ownership Defined12
  • : Individual Ownership12
  • Q 2.1 : What are the different forms by which an individual may own assets during their life, and how do assets held in each manner pass at death?12
    • Q 2.1.1 : What is “Individual Ownership”?12
  • : Joint Tenancy with Right of Survivorship13
    • Q 2.1.2 : What is “Joint Tenancy with Right of Survivorship”?13
  • : Tenancy by the Entirety15
    • Q 2.1.3 : What is “Tenancy by the Entirety”?15
  • : Tenants in Common16
    • Q 2.1.4 : What is “Tenants in Common”?16
  • : In Trust for/Payable or Transfer on Death17
    • Q 2.1.5 : What is “In trust for/Payable on Death/Transfer on Death”?17
  • : Minor’s Account18
    • Q 2.1.6 : What is “Minors account: UTMA/UGMA”?18
  • : Beneficiary Designation19
    • Q 2.1.7 : What is a “Beneficiary Designation”?19
  • : Forms of Ownership by an Entity19
  • Q 2.2 : How are assets treated when they are owned by an entity rather than an individual?19
    • Q 2.2.1 : How are assets held in a trust treated?19
    • Q 2.2.2 : How are assets held in a corporation or limited liability company treated?20
    • Q 2.2.3 : How are assets held in a partnership treated?20
  • : Ownership in Community Property States20
  • Q 2.3 : How is ownership of assets treated in a community property state?20
Chapter 3: The Will
  • : Purpose and General Considerations22
  • Q 3.1 : What is a will?22
    • Q 3.1.1 : Is a will a necessary part of a person’s estate plan?24
    • Q 3.1.2 : Are there types of assets that cannot pass by will?25
    • Q 3.1.3 : Should a settlor of a lifetime trust also make out a will?25
    • Q 3.1.4 : Should a testator ever have more than one will?26
    • Q 3.1.5 : How may a testator revoke or amend a will?26
    • Q 3.1.6 : When should a testator change an existing will?27
    • Q 3.1.7 : Should a testator hire a lawyer to draft a will?27
    • Q 3.1.8 : How should a testator prepare for a meeting with a lawyer to discuss drafting a will?28
  • : Legal Requirements and Execution Formalities29
  • Q 3.2 : What are the legal requirements of a will?29
    • Q 3.2.1 : What are the execution formalities?29
  • : Common Provisions for Passing Probate Property30
  • Q 3.3 : What types of provisions does a will contain for passing a testator’s probate property?30
    • Q 3.3.1 : How may a testator bequeath tangible personal property?31
    • Q 3.3.2 : How may a testator devise real property?33
    • Q 3.3.3 : Do any special considerations apply when a testator devises real property located in a state that is not his or her domicile?35
    • Q 3.3.4 : How may a testator provide a cash legacy to a beneficiary?35
    • Q 3.3.5 : How may a testator dispose of the residuary estate?36
    • Q 3.3.6 : How may a testator provide for a surviving spouse?36
    • Q 3.3.7 : May a testator disinherit a surviving spouse?37
    • Q 3.3.8 : How does a testator’s divorce typically affect the provisions of an existing will?38
    • Q 3.3.9 : How may a testator provide for his or her children?39
    • Q 3.3.10 : Does a testamentary trust have any disadvantages compared to a lifetime trust?41
    • Q 3.3.11 : How does a testator provide for a surviving pet?42
  • : Selection and Duties of an Executor43
  • Q 3.4 : Who may a testator select to be an executor?43
    • Q 3.4.1 : What are the duties of an executor?44
    • Q 3.4.2 : May a person or institution selected as an executor refuse to serve?44
    • Q 3.4.3 : Is an executor paid for his or her service to the estate?45
  • : Selection and Duties of a Guardian for Minor Children45
  • Q 3.5 : Who may a testator select to be a guardian for his or her minor children?45
    • Q 3.5.1 : What are the duties of a guardian?47
  • : Probate and Administration49
  • Q 3.6 : What is probate?49
    • Q 3.6.1 : If so desired, can a person structure his or her estate to avoid probate altogether?50
    • Q 3.6.2 : What is estate administration?52
    • Q 3.6.3 : How long does an estate administration last?54
    • Q 3.6.4 : Is an estate administration expensive?55
  • : Disclaiming an Interest in Testator’s Estate56
  • Q 3.7 : Can a beneficiary disclaim his or her interest in a testator’s estate?56
    • Q 3.7.1 : What is a qualified disclaimer?56
    • Q 3.7.2 : Why would a beneficiary disclaim an interest in a testator’s estate?56
Chapter 4: The Trust
  • : Creating a Trust60
  • Q 4.1 : How is a trust created?60
  • Q 4.2 : Must a settlor’s intention to create a trust be in writing?60
  • : Types of Trusts61
  • Q 4.3 : What are the forms of trusts?61
  • Q 4.4 : What type of property may be transferred to a trust?61
  • : Beneficiaries62
  • Q 4.5 : Who may be beneficiaries of a trust?62
  • : Trust Purposes63
  • Q 4.6 : For what purposes may a trust be established?63
  • : Duties of the Trustee63
  • Q 4.7 : What duties does a trustee have?63
    • Q 4.7.1 : What is an example of a trustee’s breaching the duty of loyalty?64
    • Q 4.7.2 : What is involved with the trustee’s duty to exercise reasonable care and skill?64
    • Q 4.7.3 : What is the duty of impartiality?64
    • Q 4.7.4 : What are other important trustee duties?65
  • : Powers of the Trustee66
  • Q 4.8 : What are the trustee’s powers in connection with the trust property?66
  • : Rights of the Beneficiaries66
  • Q 4.9 : What are a beneficiary’s rights if a trustee breaches a duty?66
  • : Taxation of Trusts67
  • Q 4.10 : How are trusts taxed for income tax purposes?67
  • Q 4.11 : What are the general income tax rules for irrevocable trusts?67
  • Q 4.12 : What deductions are allowed for trusts?68
  • : Calculation of Trust Income68
  • Q 4.13 : How is trust income calculated?68
  • Q 4.14 : What is Distributable Net Income (DNI)?69
  • : Powers of Appointment69
  • Q 4.15 : What is a power of appointment?69
  • Q 4.16 : What is a general power of appointment?70
  • Q 4.17 : What is a limited power of appointment70
  • : Grantor Trusts71
  • Q 4.18 : What is a “grantor trust”?71
  • : Duration of a Trust73
  • Q 4.19 : For how long can a trust continue?73
  • : Changes in Trustee Duties74
  • Q 4.20 : What modern changes have been made by some states to the trustee’s duties?74
Chapter 5: The Estate Tax
  • : Historical Development78
  • Q 5.1 : How did the estate tax come into being?78
  • : Definition79
  • Q 5.2 : What is the estate tax?79
  • : Value of Includible and Excludible Property79
  • Q 5.3 : What property is included in the decedent’s gross estate?79
  • Q 5.4 : What property is generally excluded from the gross estate?80
  • Q 5.5 : What is the “fair market value” of property?80
  • : Federal Estate Tax Calculation80
  • Q 5.6 : How is the federal tax on estates calculated?80
  • : Deductions81
  • Q 5.7 : What deductions are available to reduce the estate tax?81
    • Q 5.7.1 : What is the so-called “marital deduction”?81
    • Q 5.7.2 : What is the “charitable deduction”?81
    • Q 5.7.3 : What is the state death tax deduction?81
  • : Exclusion Amount82
  • Q 5.8 : What is the applicable gift and estate tax exclusion amount and the applicable credit amount? What is the top tax rate?82
  • : Sample Computations83
  • Q 5.9 : How exactly is the federal estate tax computed?83
  • Q 5.10 : How is the estate tax reported?86
  • : Treatment of Joint Property86
  • Q 5.11 : How is joint property includible in the taxable estate?86
  • Q 5.12 : May a surviving spouse use a predeceased spouse’s unused exclusion from estate tax?87
  • Q 5.13 : Will a same-sex spouse be considered a surviving spouse for purposes of the marital deduction and DSUE for estate tax purposes?88
  • : Alternate Valuation89
  • Q 5.14 : What is alternate valuation and when is it used?89
  • : State Estate Taxes89
  • Q 5.15 : What estate taxes are levied by the individual states?89
Chapter 6: The Gift Tax
  • : General Considerations94
  • Q 6.1 : What constitutes a gift?94
    • Q 6.1.1 : What types of property are subject to the gift tax?94
    • Q 6.1.2 : Who pays the gift tax?94
    • Q 6.1.3 : Are all gifts taxable?95
    • Q 6.1.4 : Are there state gift taxes?95
  • : Nontaxable Gifts and Deductions95
  • Q 6.2 : What types of gifts are nontaxable or deductible?95
    • Q 6.2.1 : What is an annual exclusion gift?95
    • Q 6.2.2 : Is there a limit to the number of annual exclusion gifts a donor can make during his or her lifetime?96
    • Q 6.2.3 : What if the gift exceeds the amount of the annual exclusion?97
    • Q 6.2.4 : Do gifts to a trust qualify for the annual exclusion?98
    • Q 6.2.5 : Are payments of a donee’s medical expenses and school tuition nontaxable?99
    • Q 6.2.6 : What is the marital deduction?99
    • Q 6.2.7 : Are gifts to charities deductible?100
    • Q 6.2.8 : Are gifts to political organizations nontaxable?100
    • Q 6.2.9 : Are gifts by nonresident noncitizens taxable?101
  • : Gift Tax Exemption and Rate Brackets101
  • Q 6.3 : What is the current gift tax exemption?101
    • Q 6.3.1 : Is there any relation between the gift tax and estate tax exemption?101
    • Q 6.3.2 : What is the rate of gift tax?102
    • Q 6.3.3 : Are there advantages to making lifetime gifts instead of testamentary bequests?102
    • Q 6.3.4 : Are there possible disadvantages to making lifetime gifts instead of testamentary bequests?105
  • : Reporting of Gifts and Computation of the Gift Tax106
  • Q 6.4 : How does a donor report taxable gifts?106
    • Q 6.4.1 : How is the gift tax computed?106
    • Q 6.4.2 : What is gift-splitting by spouses?108
    • Q 6.4.3 : How are non-cash gifts valued?109
    • Q 6.4.4 : Is there a statute of limitations for assessment of the gift tax?109
  • : Select Gift Tax Considerations110
  • Q 6.5 : When is a gift by check complete?110
    • Q 6.5.1 : When is a gift of shares of stock complete?110
    • Q 6.5.2 : When is a gift of real estate complete?110
    • Q 6.5.3 : Is a taxable gift made upon creation of a tenancy with a donee?110
    • Q 6.5.4 : Is a taxable gift made upon creation of a joint bank account with a donee?111
    • Q 6.5.5 : Is the gratuitous transfer of a partial interest in property a taxable gift?112
    • Q 6.5.6 : Can a donor retain powers over a gift?112
    • Q 6.5.7 : Is an indirect gratuitous transfer of property a taxable gift?113
    • Q 6.5.8 : Does a power of appointment implicate the gift tax?115
    • Q 6.5.9 : Gifts made within the three years preceding the donor’s death118
Chapter 7: The Generation-Skipping Transfer Tax
  • : Definition122
  • Q 7.1 : What is the Generation-Skipping Transfer Tax?122
  • : Lifetime Exemption123
  • Q 7.2 : Is there a federal exemption for the GST tax, like exemptions for gift and estate taxes described in prior chapters?123
  • : Includible Transfers124
  • Q 7.3 : What transfers are subject to GST tax and what are grandfathered trusts?124
  • : Excludible Transfers125
  • Q 7.4 : Are certain transfers excluded from being subject to GST tax?125
  • : Determining the Generation of Transferor and Transferee126
  • Q 7.5 : How do you know what generation someone is in?126
    • Q 7.5.1 : Who is the transferor?127
    • Q 7.5.2 : Can the transferor ever change?127
    • Q 7.5.3 : What if spouses split gifts?128
    • Q 7.5.4 : What is a “skip person”?128
    • Q 7.5.5 : What is a “non-skip person”?128
  • : Determining Generation Within Families128
  • Q 7.6 : How do you assign generations within families?128
    • Q 7.6.1 : Who is considered a family member?128
    • Q 7.6.2 : Generational assignment within families129
  • : Predeceased Ancestor Rule130
    • Q 7.6.3 : What is the predeceased ancestor exception?130
  • : Determining Generation Outside of Families131
  • : Individuals131
  • Q 7.7 : How do you assign generations outside of these family relationships?131
  • : Entities132
  • Q 7.8 : How do you assign generational levels when property is being transferred to a trust or other entity, rather than outright to an individual?132
  • : Interest in Property or Trust132
  • Q 7.9 : What is an “interest in property” or an “interest in trust”?132
  • : Types of GST Transfers133
  • Q 7.10 : What are the three types of generation-skipping taxable transfers?133
  • : Direct Skip133
    • Q 7.10.1 : What is a direct skip?133
  • : Taxable Termmination134
    • Q 7.10.2 : What is a taxable termination?134
  • : Taxable Distribution136
    • Q 7.10.3 : What is a taxable distribution?136
  • : Calculating the GST Tax137
  • Q 7.11 : How is the GST Tax Calculated?137
    • Q 7.11.1 : What is the applicable fraction?137
    • Q 7.11.2 : What is the inclusion ratio?138
    • Q 7.11.3 : What is the applicable rate?139
    • Q 7.11.4 : What is the taxable amount?139
  • : Allocation of the GST Tax Exemption139
  • : Voluntary Allocation139
  • Q 7.12 : How do you voluntarily allocate GST tax exemption to a transfer?139
  • : Automatic Allocation140
  • Q 7.13 : What is the automatic allocation of GST tax exemption?140
  • : Late Allocation142
  • Q 7.14 : What is a late allocation of GST tax exemption?142
  • : Estate Tax Inclusion Period (ETIP)143
  • Q 7.15 : What is the estate tax inclusion period, or ETIP, and how does it affect the allocation of GST tax exemption?143
  • : Qualified Severance144
  • Q 7.16 : What is a qualified severance?144
  • : Reverse QTIP Election145
  • Q 7.17 : What is the “reverse QTIP election”?145
  • : Delaware Tax Trap145
  • Q 7.18 : What is the Delaware tax trap, and why are you mentioning it in this chapter on GST?145
Chapter 8: Life Insurance
  • : Definitions and Insurance Categories148
  • Q 8.1 : What is life insurance?148
    • Q 8.1.1 : What is term life insurance?148
    • Q 8.1.2 : What is “permanent life insurance” and how does it differ from term coverage?148
    • Q 8.1.3 : What is Premium Financed Life Insurance?149
    • Q 8.1.4 : What is Private Placement Life Insurance?149
  • : Taxation150
  • Q 8.2 : Are life insurance policies subject to income tax during the life of the insured?150
    • Q 8.2.1 : How is life insurance taxed at the death of the insured?150
  • : Life Insurance Trust151
  • Q 8.3 : What is a life insurance trust and what is its role in estate planning?151
    • Q 8.3.1 : How are life insurance trusts used as a part of a gifting plan?151
    • Q 8.3.2 : May life insurance trusts be created for both existing and new policies?151
    • Q 8.3.3 : How is an existing insurance policy transferred by the insured to a life insurance trust treated?151
    • Q 8.3.4 : Why is it significant that the ownership of a life insurance trust is not attributed to the insured?152
    • Q 8.3.5 : Can the gifts to the life insurance trust be designed to qualify for the annual exclusion?152
    • Q 8.3.6 : Can the terms of a life insurance trust be changed after it is created?153
    • Q 8.3.7 : What happens at the death of the insured?153
    • Q 8.3.8 : What are the income tax issues with life insurance trusts?153
Chapter 9: Retirement Accounts
  • : In General156
  • Q 9.1 : What types of retirement plans exist?156
  • : Qualified Retirement Plan156
  • Q 9.2 : What is a Qualified Retirement Plan?156
  • : Defined Benefit Plan157
  • Q 9.3 : What is a “Defined Benefit Plan”?157
  • : Types of Defined Contribution Plans157
  • Q 9.4 : What is a “Defined Contribution Plan”?157
    • Q 9.4.1 : What is an Employee Stock Ownership Plan (ESOP)?157
    • Q 9.4.2 : What is a Keogh plan?158
    • Q 9.4.3 : What is a 403(b) plan?158
    • Q 9.4.4 : What is a pension plan?158
    • Q 9.4.5 : What is a profit-sharing plan?158
  • : IRAs158
  • Q 9.5 : What is an Individual Retirement Account (IRA)?158
    • Q 9.5.1 : What is a Traditional IRA?158
    • Q 9.5.2 : What is a Roth IRA?159
    • Q 9.5.3 : What are SEP-IRA and SIMPLE IRA?159
  • : Benefits of a Retirement Plan159
  • Q 9.6 : What are the Primary Benefits of a retirement plan?159
  • : Early Withdrawal Penalties159
  • Q 9.7 : Is there a penalty for early withdrawals from a retirement plan?159
    • Q 9.7.1 : Are there exceptions to the 10% early withdrawal penalty?160
  • : Taxation on Distributions161
  • Q 9.8 : How are retirement plan distributions income taxed?161
  • : Minimum Required Distribution Rules161
  • Q 9.9 : What are the minimum required distribution rules during the lifetime of the participant?161
  • Q 9.10 : What are the Minimum Required Distribution rules after the death of the participant?161
    • Q 9.10.1 : What is the “Designated Beneficiary” of a retirement account?162
    • Q 9.10.2 : What if the Designated Beneficiary is the surviving spouse?162
    • Q 9.10.3 : What if the Designated Beneficiary is not the surviving spouse?162
    • Q 9.10.4 : How does a trust qualify as a Designated Beneficiary?164
  • : Additional Types of Trusts165
  • Q 9.11 : What additional kinds of trusts are there?165
    • Q 9.11.1 : What is a conduit trust?165
    • Q 9.11.2 : What is an accumulation trust?165
  • Q 9.12 : What if the plan requires a faster payout than the law allows?166
  • : Spousal Rights166
  • Q 9.13 : Does a participant’s spouse have unique rights over the participant’s retirement account?166
  • : Spousal Planning Options166
  • Q 9.14 : What planning options are available for spouses?166
  • : A Trust As Beneficiary168
  • Q 9.15 : In what situations should a trust be named as beneficiary of a qualified retirement plan or IRA?168
  • : Portability169
  • Q 9.16 : What is portability?169
    • Q 9.16.1 : How does portability impact estate planning using retirement benefits?169
  • : Qualifying As a QTIP Trust170
  • Q 9.17 : How does a trust for the benefit of a surviving spouse qualify as a QTIP Trust when it owns retirement assets?170
  • : Income Tax Implications171
  • Q 9.18 : What is the income tax on retirement assets paid to a trust?171
  • Q 9.19 : Are there ways to minimize trust income taxes?171
  • : Charitable Giving173
  • Q 9.20 : Is it beneficial to name a charity as beneficiary of a retirement account?173
  • Q 9.21 : What options are available to a participant who would like to make charitable gifts after the participant’s death?173
  • Q 9.22 : What common planning options are available for participants who wish to make lifetime gifts of retirement assets to charity?174
    • Q 9.22.1 : What are qualified charitable distributions (QCD)?175
Chapter 10: QPRTs, GRATs and Other Irrevocable Inter Vivos Trusts in Tax Planning
  • : In General180
  • Q 10.1 : What are inter vivos trusts and how are they used for tax planning?180
  • : Types of Inter Vivos Trusts181
  • Q 10.2 : What kinds of specialized inter vivos trusts are set up by individuals for tax-planning purposes during their lifetimes?181
  • : Minor’s Trust182
  • Q 10.3 : What is a minor’s trust?182
  • : Crummey Trust182
  • Q 10.4 : What is a Crummey trust?182
  • : QPRTs184
  • Q 10.5 : What is a Qualified Personal Residence Trust (QPRT)?184
    • Q 10.5.1 : What are the tax-planning advantages of a QPRT?184
    • Q 10.5.2 : What are the requirements for a QPRT?185
    • Q 10.5.3 : How is a QPRT treated for estate tax purposes?186
    • Q 10.5.4 : What happens if the property is sold during the QPRT term?187
    • Q 10.5.5 : How are carrying costs covered during the QPRT term?187
  • : GRATs and GRUTs188
  • Q 10.6 : What are grantor retained annuity trusts (GRATs) and grantor retained unitrusts (GRUTs)?188
    • Q 10.6.1 : What is the purpose of a GRAT?189
    • Q 10.6.2 : What are the tax-planning advantages of a GRAT?190
  • : Generation-Skipping Trust191
  • Q 10.7 : What is a generation-skipping trust?191
  • : Dynasty Trust192
  • Q 10.8 : What is a Dynasty Trust?192
Chapter 11: Marital Deduction and Other Tax-Qualified Trusts
  • : Marital Deduction198
  • : Definition and Benefits198
  • Q 11.1 : What is the marital deduction and how does it affect tax planning?198
    • Q 11.1.1 : What are the benefits of deferring estate taxes?199
  • : Requirements200
    • Q 11.1.2 : What is required in order for an interest to qualify for the unlimited estate tax marital deduction?200
    • Q 11.1.3 : Who qualifies as a surviving spouse?200
    • Q 11.1.4 : What does the requirement that the property pass to the surviving spouse mean?200
    • Q 11.1.5 : What is the special rule for limited survivorship restriction?201
  • : Nondeductible Terminable Interest Rule201
    • Q 11.1.6 : What is a terminable interest? What is a nondeductible terminable interest?201
  • : Exceptions202
    • Q 11.1.7 : What is the general power of appointment trust exception to the nondeductible terminable interest rule?202
    • Q 11.1.8 : What is the exception to the nondeductible terminable interest rule for a legal life estate with a general power of appointment?203
    • Q 11.1.9 : What is the exception to the nondeductible terminable interest rule for a life insurance or annuity payment coupled with a general power of appointment?203
    • Q 11.1.10 : What is the exception to the nondeductible terminable interest rule for estate trusts?204
  • : Qualified Terminable Interest Property Trust204
    • Q 11.2 : What is the exception to the nondeductible terminable interest rule for Qualified Terminable Interest Property?204
      • Q 11.2.1 : May a legal life estate qualify for QTIP treatment?205
      • Q 11.2.2 : What is the federal government’s administrative position on whether an affirmative election is necessary in order for a trust to qualify for QTIP treatment?205
      • Q 11.2.3 : What is a protective election in the context of a QTIP election?206
      • Q 11.2.4 : What amount of estate tax is attributable to a QTIP trust?206
  • : Portability of Unused Exclusion206
  • Q 11.3 : What is “portability”?206
  • : Requirements207
    • Q 11.3.1 : What are the requirements for portability?207
    • Q 11.3.2 : What is a protective election in the context of a portability election?208
    • Q 11.3.3 : What are the relaxed requirements for a “complete and properly prepared” return and when do they apply?208
  • : “Most Recently Deceased Spouse” Rule209
    • Q 11.3.4 : What amount of unused exemption is a surviving spouse permitted to use?209
    • Q 11.3.5 : At what point in time is the most recently deceased spouse determined?210
    • Q 11.3.6 : Are gifts utilizing DSUE amounts from multiple deceased spouses ever permitted?210
  • : Computing the DSUE Amount210
    • Q 11.3.7 : How must the DSUE amount available be computed?210
    • Q 11.3.8 : When may the surviving spouse use the DSUE amount after the deceased spouse’s death?211
    • Q 11.3.9 : When does the DSUE amount apply in determining the surviving spouse’s exclusion amount?211
  • : Application to Nonresident/Noncitizens212
    • Q 11.3.10 : How do the portability rules apply to nonresidents who are not citizens?212
  • : Planning Suggestions212
    • Q 11.3.11 : How can portability be used in planning?212
    • Q 11.3.12 : What are the advantages of portability?213
  • : Application to Credit Shelter Trusts213
    • Q 11.3.13 : What are the advantages of credit shelter trust planning?213
  • : Qualified Domestic Trust214
  • Q 11.4 : How are transfers to foreign spouses treated for federal gift and estate tax purposes?214
  • : Requirements and Timing214
    • Q 11.4.1 : What are the requirements for a QDOT?214
    • Q 11.4.2 : How are transfers to a QDOT after the decedent’s death treated?215
    • Q 11.4.3 : When should a protective assignment to a QDOT be made?215
  • : How to Make the QDOT Protective Election216
    • Q 11.4.4 : How is the QDOT protective election made?216
  • : Taxable/Nontaxable Events During QDOT Existence216
    • Q 11.4.5 : What are some of the taxable and nontaxable events during the existence of a QDOT?216
  • : Impact of Becoming a Citizen217
    • Q 11.4.6 : What is the effect on the QDOT estate tax when the survivor becomes a U.S. citizen?217
  • : Computing the Estate Tax217
    • Q 11.4.7 : How is the estate tax imposed on the QDOT computed?217
  • : Small Business Trusts218
  • : Subchapter S Corporation218
  • Q 11.5 : What is a Subchapter S corporation?218
  • : Qualified Subchapter S Trust219
    • Q 11.5.1 : What is a Qualified Subchapter S Trust (QSST)?219
  • : Electing Small Business Trust220
    • Q 11.5.2 : What is an Electing Small Business Trust (ESBT)?220
Chapter 12: Asset Protection, Special Needs and Directed Trusts
  • : Self-Settled Asset Protection Trust224
  • Q 12.1 : Can a settlor establish a trust naming the settlor as a beneficiary?224
    • Q 12.1.1 : Can a settlor protect trust assets from his or her future creditors?224
  • : Spendthrift Trust226
  • Q 12.2 : Can a settlor prevent a profligate beneficiary from squandering trust assets?226
    • Q 12.2.1 : How should a spendthrift trust be structured to achieve maximum protection of trust assets from creditors?227
    • Q 12.2.2 : Can a settlor create a fully discretionary spendthrift trust but still provide guidance regarding distributions?228
    • Q 12.2.3 : Does a fully discretionary spendthrift trust always protect a beneficiary’s interest from creditors?230
  • : Spray Trust230
  • Q 12.3 : Can a settlor ensure that a particular beneficiary receives greater support from a trust than another beneficiary?230
    • Q 12.3.1 : How are spray trusts typically used?231
    • Q 12.3.2 : Are there any advantages to using a spray trust?232
    • Q 12.3.3 : Are there any disadvantages to using a spray trust?232
  • : Special/Supplemental Needs Trust233
  • Q 12.4 : Can a settlor provide financial support to a disabled beneficiary while preserving the beneficiary’s eligibility for means-tested government benefits?233
    • Q 12.4.1 : Who may establish a special needs trust?233
    • Q 12.4.2 : How are special needs trusts typically funded?234
    • Q 12.4.3 : What types of distributions can be made from a special needs trust without jeopardizing the disabled beneficiary’s SSI and/or Medicaid eligibility?235
    • Q 12.4.4 : What happens to a special needs trust when the disabled beneficiary dies?235
  • : Directed Trust236
  • Q 12.5 : Can a settlor divide trustee responsibility among two or more individuals or institutions to allow for specialized roles?236
    • Q 12.5.1 : Why might a settlor prefer to use a directed trust?237
    • Q 12.5.2 : What are the specialized roles created by a directed trust?237
    • Q 12.5.3 : What are the responsibilities of the administrative trustee?238
    • Q 12.5.4 : What are the responsibilities of the investment adviser?238
    • Q 12.5.5 : What are the responsibilities of the distribution advisor?239
    • Q 12.5.6 : What are the responsibilities of the trust protector?240
  • : Blind Trust240
  • Q 12.6 : Can a specialized trust be used to shield a settlor from accusations of insider trading or conflict of interest?240
    • Q 12.6.1 : Who must be “blind” in the context of a self-settled blind trust used by a corporate insider?241
  • : Nominee Trust242
  • Q 12.7 : Can a specialized trust be used to conceal the identity of a real property owner?242
    • Q 12.7.1 : Is there any other reason to use a nominee trust?242
Chapter 13: Charitable Giving
  • : Charitable Gifts246
  • : Tax Treatment—Cash246
  • Q 13.1 : What is the tax treatment of gifts to charitable organizations?246
  • : Tax Treatment—Appreciated Property247
  • Q 13.2 : What is the tax treatment for gifts of appreciated property to tax-exempt organizations?247
  • : Charitable Gift Annuity248
  • Q 13.3 : What is a charitable gift annuity?248
  • : Split-Interest Gifts248
  • Q 13.4 : What are “split-interest gifts”?248
  • : Charitable Remainder Trusts249
  • Q 13.5 : What is a charitable remainder trust?249
  • : CRAT249
    • Q 13.5.1 : What is a charitable remainder annuity trust?249
  • : CRUT250
    • Q 13.5.2 : What is a charitable remainder unitrust trust?250
  • : Charitable Lead Trusts252
  • Q 13.6 : What is a charitable lead trust?252
  • : CLAT253
    • Q 13.6.1 : What is a charitable lead annuity trust (CLAT)?253
  • : CLUT253
    • Q 13.6.2 : What is a charitable lead unitrust (CLUT)?253
  • : Pooled Income Fund254
    • Q 13.7 : What is a pooled income fund?254
Chapter 14: Private Foundations; and Appendix 14A
  • : Definition257
  • Q 14.1 : What is a private foundation?257
    • Q 14.1.1 : Why are the rules governing private foundations so complicated?257
  • : Disqualified Persons258
  • Q 14.2 : Who are “disqualified persons” in the context of private foundations?258
  • : Self-Dealing259
  • Q 14.3 : Are “self-dealing” transactions with disqualified persons allowed?259
  • : Penalty260
    • Q 14.3.1 : What is the penalty for self-dealing?260
  • : Examples of Self-Dealing260
  • Q 14.4 : What are examples of prohibited “self-dealing” transactions?260
  • : Sale, Exchange, or Leasing of Property260
    • Q 14.4.1 : What restrictions are there on the sale, exchange, or leasing of property?260
  • : Lending of Money or Other Extension of Credit261
    • Q 14.4.2 : What restrictions are there on the lending of money or other extension of credit?261
  • : Furnishing of Goods, Services, or Facilities262
    • Q 14.4.3 : What restrictions are there on the furnishing of goods, services, or facilities?262
  • : Payments of Compensation or Expenses262
    • Q 14.4.4 : What restrictions are there on paying compensation or expenses?262
  • : Other Transfer or Use of the Income or Assets of a Private Foundation262
    • Q 14.4.5 : What restrictions are there on other transfers or use of the income or assets of a private foundation?265
  • : Payments to Government Officials265
    • Q 14.4.6 : What restrictions are there on payments to government officials?265
  • : Exceptions for Corporate Charities266
    • Q 14.4.7 : Are there exceptions to the self-dealing rules for corporate charities?266
  • : Distribution Requirements266
  • Q 14.5 : What are the distribution requirements for a private foundation?266
  • : Permissible Distributions268
  • Q 14.6 : What kinds of distributions are permitted for charitable purposes from a private foundation?268
  • : Grants to Organizations268
    • Q 14.6.1 : What kinds of grants to organizations are permitted?268
  • : Grants to Individuals272
    • Q 14.6.2 : What kinds of grants to individuals are permitted?272
  • : Expenditures for Non-Charitable Purposes273
    • Q 14.6.3 : Is any expenditure for non-charitable purposes permitted?273
  • : Influencing Legislation273
    • Q 14.6.4 : May a charitable foundation spend money to influence legislation?273
  • : Influencing Elections and Carrying on Voter Registration Drives274
    • Q 14.6.5 : What restrictions are there on trying to influence elections or carry on voter registration drives?274
  • : Penalties275
    • Q 14.6.6 : What are the penalties for violating these restrictions?275
  • : Excess Business Holdings275
  • Q 14.7 : What are excess business holdings?275
  • : Jeopardizing Investments276
  • Q 14.8 : What are jeopardizing investments?276
  • : Federal Income Tax Liability279
  • Q 14.9 : Is a private foundation subject to federal income tax?279
  • : Federal Filing and Publicity Requirements280
    • Q 14.9.1 : What federal tax return filing and publicity requirements apply to private foundations?280
  • : Private Foundations Versus Public Charities281
  • Q 14.10 : What is a public charity?281
    • Q 14.10.1 : How does a public charity differ from a private foundation?282
  • : Private Foundations Versus Donor-Advised Funds283
  • Q 14.11 : What is a donor-advised fund285
    • Q 14.11.1 : How does a donor-advised fund differ from a private foundation?285
  • Appendix 14A : IRS Sample Conflict of Interest Policy289
Chapter 15: Family Limited Partnerships, Loans and Other Intra-Family Transactions; and Appendices 15A-15B
  • : Family Limited Partnerships296
  • Q 15.1 : What is a family limited partnership?296
  • : Tax Advantages of FLPs297
    • Q 15.1.1 : What are the tax planning advantages of FLPs?297
    • Q 15.1.2 : What steps should be taken in order to maximize the potential estate and gift tax benefits of FLPs?297
    • Q 15.1.3 : Why is the tax planning associated with family arrangements like FLPs so complex?298
  • : Protocols to Be Followed300
    • Q 15.1.4 : What protocols should be followed for existing and new FLPs?300
  • : Intra-Family Loan300
  • Q 15.2 : What is an intra-family loan?300
  • : Tax Advantages301
  • Q 15.2.1 : What are the tax planning advantages of an intra-family loan?301
  • : Other Advantages302
    • Q 15.2.2 : Are there nontax reasons for making family loans?302
  • : Sale of Asset for Promissory Note303
  • Q 15.3 : What is the sale of an asset to a grantor trust for a promissory note?303
    • Q 15.3.1 : Does the IRS approve of sales to grantor trusts?304
  • : How Structured305
    • Q 15.3.2 : What is the typical structure of a grantor trust used in a sale transaction?305
    • Q 15.3.3 : How is the promissory note structured in a sale transaction?305
  • : Income Tax Consequences306
    • Q 15.3.4 : What are the income tax consequences of a sale to a grantor trust?306
  • : Gift Tax Consequences307
    • Q 15.3.5 : What are the gift tax consequences of a sale to a grantor trust?307
  • : Estate Tax Consequences307
    • Q 15.3.6 : What are the estate tax consequences of a sale to a grantor trust?307
  • : Generation-Skipping Transfer Tax Consequences308
    • Q 15.3.7 : What are the generation-skipping transfer tax consequences of a sale to a grantor trust?308
  • Appendix 15A : Family FLP Decision Tree for New and Existing Entities311
  • Appendix 15B : Sale to Grantor Trust In Exchange for Balloon Promissory Note313
Chapter 16: Valuation of Assets
  • : Valuation Standard316
  • Q 16.1 : What is the standard for determining the value of property for gift and estate tax purposes?316
  • : Determining Fair Market Value316
  • Q 16.2 : How is fair market value determined for easily valued property?316
  • : Appraisals317
  • Q 16.3 : What about more difficult to value property?317
  • Q 16.4 : Is an appraisal always necessary for difficult to value property? What are the consequences of failure to get a qualified appraisal?319
  • Q 16.5 : What might be needed in addition to an appraisal?319
  • : Valuation Discounts320
  • Q 16.6 : What are valuation discounts?320
  • Q 16.7 : Does a similar discount apply to minority interests in businesses?321
  • Q 16.8 : What are discounts for lack of marketability?322
  • Q 16.9 : Are there other discounts that may be applicable?322
  • Q 16.10 : Do valuation discounts apply to family limited partnerships?323
  • Q 16.11 : What level of discounts can I get?323
  • : Attorney’s Role324
  • Q 16.12 : What is the attorney’s role in the appraisal process?324
Chapter 17: Marital and Family Issues
  • : Spousal Rights328
  • Q 17.1 : What rights and claims does one spouse have against the assets of the other spouse?328
  • : Common Law States328
    • Q 17.1.1 : What are the rights of a spouse against the other spouse during the marriage and on divorce in a common law state?328
    • Q 17.1.2 : What are the rights of a surviving spouse against the estate of the other spouse in a common law state?329
  • : Community Property States330
    • Q 17.1.3 : What are the rights of one spouse against the assets of the other during the marriage, in divorce and on death in community property states?330
  • : Rights of Children331
    • Q 17.1.4 : What are the rights of children against the estates of their parents at death?331
  • : Marital Agreements331
    • Q 17.1.5 : What is the purpose of a premarital agreement?331
    • Q 17.1.6 : What are the requirements of a valid marital agreement?332
    • Q 17.1.7 : What are other types and purposes of marital and cohabitation agreements?333
    • Q 17.1.8 : What role do premarital and postmarital, domestic and living together agreements have in estate planning?333
  • : Blended Family Issues334
  • Q 17.2 : What are blended families and what issues do they face in their estate planning matters?334
    • Q 17.2.1 : What are some important considerations for blended families to consider with respect to their estate planning?334
    • Q 17.2.2 : What do blended families need to consider when thinking about the DSUE, and how should drafting address it?335
    • Q 17.2.3 : What is an independent trustee, and what value does an independent trustee bring to the estate planning for a blended family?336
  • : Impact of Marriage, Divorce or Birth of a Child337
  • Q 17.3 : How does marriage, divorce or the birth or adoption of children affect the validity of estate planning documents?337
    • : Same-Sex Couples Considerations338
      • Q 17.3.1 : What special considerations are there for same-sex couples in estate planning matters?338
Chapter 18: International Issues
  • : In General342
  • Q 18.1 : How are U.S. persons taxed on foreign income and assets?342
  • Q 18.2 : How are non-U.S. persons taxed by the United States?343
  • : Defining U.S. Person and Non-U.S. Person343
  • Q 18.3 : Who is a U.S. person and who is a non-U.S. person?343
  • : Definition of a U.S. Person344
  • : U.S. Citizens344
    • Q 18.3.1 : Who is a U.S. citizen?344
  • : U.S. Residents344
    • Q 18.3.2 : Who is a U.S. resident?344
  • : Definition of a Non-U.S. Person347
  • Q 18.4 : How are non-U.S. persons subject to U.S. income tax?347
  • : Determining U.S. Source Income347
    • Q 18.4.1 : What is U.S. source income for U.S. income tax purposes?347
    • Q 18.4.2 : What is not U.S. source income for U.S. income tax purposes?348
  • : Impact of Tax Treaties348
    • Q 18.4.3 : How do treaties affect taxation of U.S. source income?348
  • : U.S. Estate, Gift and Generation-Skipping Transfer Taxes349
  • Q 18.5 : How are non-U.S. persons subject to U.S. estate, gift and generation-skipping transfer tax?349
  • : U.S. Situs Assets349
    • Q 18.5.1 : What are U.S. situs assets subject to U.S. estate tax for non-U.S. persons?349
  • : Computing Estate Tax350
    • Q 18.5.2 : How is the U.S. estate tax computed for non-U.S. persons?350
  • : Gift Tax351
    • Q 18.5.3 : How is the U.S. gift tax imposed for non-U.S. persons?351
  • : Generation-Skipping Transfer Tax352
    • Q 18.5.4 : How is the U.S. generation-skipping transfer tax imposed for non-U.S. persons?352
  • : U.S. Trust Versus Foreign Trust353
  • Q 18.6 : What is the difference between a U.S. trust and a foreign trust?353
  • : Foreign Trusts354
  • Q 18.7 : How does the United States tax a foreign trust and its beneficiaries?354
    • Q 18.7.1 : What is a foreign grantor trust and how is it taxed?354
    • Q 18.7.2 : What is a foreign non-grantor trust and how is it taxed?355
  • : Foreign Corporations357
  • Q 18.8 : How is the income of foreign corporations owned by U.S. persons taxed?357
    • Q 18.8.1 : What is a Controlled Foreign Corporation and how is it taxed?357
    • Q 18.8.2 : What is a Passive Foreign Investment Company and how is it taxed?357
  • : Reporting of Foreign Assets, Trusts and Transactions358
  • Q 18.9 : What reports must U.S. persons file regarding their foreign assets, trusts and transactions?358
  • : Expatriation360
  • Q 18.10 : What is expatriation and what are the tax consequences?360
    • Q 18.10.1 : Who is a Covered Expatriate?360
    • Q 18.10.2 : What are the tax consequences to being a Covered Expatriate?361
    • Q 18.10.3 : What are the consequences of giving up a green card?362
Chapter 19: Transfers to the Non-U.S. Citizen Spouse
  • : In General364
  • Q 19.1 : How Are Bequests to a Non-U.S. Citizen Spouse Taxed?364
  • : Qualified Domestic Trust365
  • : How Created365
  • Q 19.2 : How is a Qualified Domestic Trust created?365
  • : QDT Requirements366
  • Q 19.3 : What are requirements for a valid Qualified Domestic Trust?366
  • : Tax Treatment of QDT366
  • Q 19.4 : What is the tax treatment of a Qualified Domestic Trust?366
  • : Computing the QDT Tax367
  • Q 19.5 : How is the QDT tax computed?367
  • : Special Circumstances367
  • Q 19.6 : What happens if the surviving spouse becomes a U.S. citizen?367
  • Q 19.7 : How are gifts to a non-U.S. citizen spouse treated?368
  • : Jointly Held Property368
  • Q 19.8 : How is property held jointly with a non-U.S. citizen spouse treated?368
Chapter 20: Incapacity
  • : Incapacity Generally372
  • Q 20.1 : How is incapacity defined?372
    • Q 20.1.1 : Why is it advisable to plan for incapacity?372
    • Q 20.1.2 : How does a person properly plan for incapacity?373
  • : Durable Power of Attorney373
  • Q 20.2 : What is a durable power of attorney and its general requirements?373
    • Q 20.2.1 : Where is a durable power of attorney effective?374
    • Q 20.2.2 : What powers does a principal typically grant an agent under a durable power of attorney?374
    • Q 20.2.3 : Can a principal grant estate planning powers to an agent under a durable power of attorney?374
    • Q 20.2.4 : Can a principal name more than one agent under a durable power of attorney?376
    • Q 20.2.5 : What criteria are useful in selecting an agent under a durable power of attorney?376
    • Q 20.2.6 : What advantages and disadvantages pertain to using a durable power of attorney?377
    • Q 20.2.7 : Is a durable power of attorney available that is effective only if the principal becomes incapacitated?377
  • : Revocable Trust378
  • Q 20.3 : What is a revocable trust and its general requirements?378
    • Q 20.3.1 : How is a revocable trust useful for planning for incapacity?378
    • Q 20.3.2 : What is a standby revocable trust?378
    • Q 20.3.3 : Is using a revocable trust preferable to using a durable power of attorney to plan for incapacity?379
  • : Living Will380
  • Q 20.4 : What is a living will and its general requirements?380
    • Q 20.4.1 : What medical treatments are addressed in a living will?380
    • Q 20.4.2 : When do the provisions of a living will become operative?381
    • Q 20.4.3 : Why is it useful to have a living will?381
    • Q 20.4.4 : Should a person execute more than one living will if he or she moves to or spends significant time in another state?382
  • : Healthcare Proxy/Durable Power of Attorney for Healthcare382
  • Q 20.5 : What is a healthcare proxy and its general requirements?382
    • Q 20.5.1 : What powers does a principal typically grant to an agent under a healthcare proxy?383
    • Q 20.5.2 : What criteria are useful in selecting an agent under a healthcare proxy?383
    • Q 20.5.3 : Is it advisable to name a co-agent under a healthcare proxy?383
    • Q 20.5.4 : Can a person use a healthcare proxy to provide for organ donation?384
  • : Guardianship384
  • Q 20.6 : What is a guardianship?384
    • Q 20.6.1 : Is a guardianship ever preferable to incapacity planning?384
    • Q 20.6.2 : Who may be appointed as a guardian?385
    • Q 20.6.3 : What are the duties and powers of a guardian?385
    • Q 20.6.4 : Does the guardian have the ward’s estate planning powers?386
Chapter 21: Effectively Managing the Estate Planning Team
  • : The Estate Planning Team390
  • : The Client390
  • Q 21.1 : Who is in charge of the estate planning team?390
  • : The EP Attorney391
  • Q 21.2 : What is the role of the estate planning attorney?391
  • : Other Attorneys391
  • Q 21.3 : What other attorneys are involved in the estate planning process?391
  • : The Accountant392
  • Q 21.4 : What is the role of the accountant?392
  • : Bankers392
  • Q 21.5 : What role do bankers play in estate planning?392
  • : Trust Officers393
  • Q 21.6 : What is the role of the trust officer?393
  • : Family Office393
  • Q 21.7 : What is a family office?393
  • : Private Trust Company394
  • Q 21.8 : What is a private trust company?394
  • : The Appraiser395
  • Q 21.9 : What is the role of the appraiser?395
Appendix A: Form 706

  Please click here to view the latest update information for this title: Last Update Information  
 

Share
Email
UPKEEP SERVICE
Your purchase will also sign you up for “Upkeep Service,” whereby you will receive future automatic shipments of updates, new editions and supplements to this edition, as they become available, for a 30-day preview. Updates, new editions and supplements published within 90 days of your purchase will be issued free of charge; all other updates will be subject to an additional charge if kept beyond the preview period, invoiced at the time of delivery. This service will continue until canceled by you at any time. See here.

  • FOLLOW PLI:
  • twitter
  • LinkedIn
  • GooglePlus
  • RSS

All Contents Copyright © 1996-2017 Practising Law Institute. Continuing Legal Education since 1933.

© 2017 PLI PRACTISING LAW INSTITUTE. All rights reserved. The PLI logo is a service mark of PLI.