Clients About Estate and Gift Corporate Documents

Excerpt from Corporate Documents :

So your wife can renounce the business given to her and then pass it without gift tax to the children. Disclaimers must be made within 9 months of the death of the first decedent if they are to avoid gift tax. An appropriate disclaimer may also be a very effective tool to assist in a poorly written estate plan.


The joint tenancy form of ownership could result in many unintended and unfavorable consequences. For example, the entire property is usually subject to attachment by a creditor of any one of the joint tenants. There are also significant estate, gift, and income tax problems that are created from joint tenancy. If not given attention and consideration as part of a comprehensive estate plan, holding property together as a couple, can create bad results in terms of overpaying taxes.

Explanation: Solely half of the value of property held by you in joint ownership with the right of survivorship can be included in the estate of the first spouse to die unless that property was purchased solely by the decedent's spouse income or resources prior to 1977. It appears that is not the case so the property passes to the survivor and will qualify for the unlimited marital deduction. This inclusion will have no significant estate tax effect. The problem is in most cases, the survivor will have a different basis for the capital gain purposes should he or she sell the property after the first spouse expires: one-half will be the value of a half interest in the property as of the date of the death of the first decedent; the other half will be one-half of the historical pre-death adjusted cost basis (purchase price as adjusted) of the property in the hands of the husband and wife. It is wiser to sell before the first spouses dies rather than after. Or in the least, put the house under one name rather than both for at least one of the homes.


Even though an estate tax deduction is not currently available for lump sum distributions under qualified pension and profit-sharing plans, there are some options to keep open that remain for approved plans. A good illustration would be the appellation of a spouse as a beneficiary of a plan would authorize the employee benefit for the marital deduction. There also is an assortment of crucial income tax options available to a plan beneficiary which should be talked about with your tax adviser, specifically retirement planning purposes.


A good way to avoid more estate taxes continues to be the ownership of life insurance by a trust. The benefit to creating an irrevocable insurance trust is that the person's life insurance benefits will be taken out of their taxable estate after their death. How does it do this? It does this by making the trust the holder of the policy, rather than the person. The downside to this would be that, in order to create this type of trust, the person needs to give up all rights to the life insurance policy, leaving you with few options. It is imperative to consider all circumstances before choosing this kind of option.

If a new policy is purchased by a properly written up trust, the entire proceeds of the policy can pass through the estate of both spouses, without tax. For your case, it would be an existing policy that is owned by you that is transferred to a trust. The insured then must live through the transfer by a minimum of three years in order for the amount garnered by the life insurance to be free of estate taxes. In each case, the trust must be irrevocable - a fact which requires that requires careful thought and caution to be given before such a trust is made. The trust agreement must be drawn up in a way that will keep your family's assets safe.


Although there is currently no gift tax in Minnesota, there are some limits to gifts due to the federal gift tax. The amount of gifts that an individual can make without incurring gift tax liability is now $13,000 per donee per year. This amount will increase to account for inflation and rising costs of living. This means that $26,000 may be given by a married couple each year to each child, grandchild, or others without incurring gift taxes (regardless of whose property is. Moreover, an unlimited gift tax exclusion is provided for amounts paid on behalf of the donee for medical expenses and school tuition, provided that the payment is made directly to the school, doctor, hospital, etc. who or which provides the service.

Since your daughter Barbara has two children, you cannot give them $26,000 annually for school tuition and but you can for medical expenses. You can also give gifts of $26,000 to your two children and offer to pay the legal fees of your son. This can all create tax excluded money that goes directly to your family. You can also give gifts between each other that will not accrue taxes no matter the amount. The only problem is you would have to survive the three years after you give your gift in order for it to leave your estate and not get taxed. A lifetime gift is a wonderful way to reduce estate tax.

A payment made directly to a child or grandchild for tuition will not qualify for the exclusion. The IRC, as amended, eliminated most of the income tax advantages of trusts for children. Nevertheless, various trust options are still available to achieve income, gift and estate tax savings in relation to gifts for children or grandchildren. These include "grandparent trusts" which permit funding of educational or similar trusts up to the $13,000-$26,000 annual gift exclusion; and various forms of charitable trusts.


Generation-skipping trusts are also known as dynasty trusts. The GST tax in general imposes a tax at a rate of 45% on all transfers outright or in trust for grandchildren or more remote descendants to the extent that the aggregate of such transfers exceeds a $2.0 million total exemption per transferor.

These long-term trusts are designed to avoid estate taxes when one generation transfers wealth to the next generation. Over four generations, estate tax savings could add up to 70%. A grantor can set up a dynasty trust during lifetime using the grantor's annual gift tax exclusion and/or $1 million gift tax exemption. Dynasty trusts can also be done at death with the grantor's estate tax exemption. When the beneficiaries die, the assets in the trust pass to the next generation free of estate and gift tax. Individuals can leverage their GST tax exemption with life insurance too.

Typically, a separate dynasty trust is created for each of the grantor's children. During the lifetime of the child, the income and principal can be used for health, education, maintenance and support of the child. When the child dies, the assets will pass to his/her children in equal trust shares and the scenario will repeat itself for as long as the applicable state laws will allow.

12. Asset Protection

Let's say you do not have adequate excess liability coverage, a simple accident could have disastrous consequences for your estate and leave your struggling financially. When was the last time you had a comprehensive review of all your property, casualty, and liability coverage? We can coordinate this review so that your insurance consultant understands which trusts or entities may own certain assets, and the values of your estate, to help ensure a proper analysis. Did you know that courts can tax through corporations, partnerships, and limited liability companies if you don't respect the formalities of these entities? That could put your home and much of your savings at risk.


The IRC authorizes gift/estate tax savings through a trust known as a Qualified Personal Residence Trust ("QPRT") to which the owner/grantor (the creator of the trust) can transfer a home to someone in they wish to bequeath to and the person lives in that property until the grantor's time of death. There is however a disadvantage of the QPRT in that the property will have a carry-over basis; that is; the children's tax basis in the property will be the same as that of the grantor. That just means that based on the current value of the property, they'll have to pay taxes on it.


A Revocable Living Trust is an arrangement by written document in which a person's assets are held, managed and distributed by a trustee or co-trustees. You can be the trustee or co-trustee of your own Trust. Trust separates legal…

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