Advanced Marital, Formulas, & Document Analysis

What qualifies for the marital deduction?

Property transferred between spouses during life or at death, which can reduce or eliminate estate tax liabilities.

What is a terminal interest in the context of the marital deduction?

An interest that is limited to the spouse's lifetime, allowing for property to pass at the death of the surviving spouse.

When does portability apply in estate planning?

Portability applies when a deceased spouse's unused estate tax exemption can be transferred to the surviving spouse.

How must portability be elected?

By filing a timely estate tax return (Form 706) for the deceased spouse, regardless of whether tax is owed.

What are General Powers of Appointment in taxation?

Powers that allow the holder to determine who will receive property during their lifetime or at their death, affecting taxation.

How are Limited Powers of Appointment taxed?

Powers that restrict the appointee's ability to transfer property, impacting the income and estate tax calculations differently.

What is a QTIP trust?

Qualified Terminable Interest Property trust that allows a surviving spouse to receive income from the trust during their lifetime.

What are the benefits of a QTIP trust?

Allows deferral of estate taxes until the surviving spouse's death, providing flexibility and control over the trust assets.

What are the requirements for a QTIP trust?

Must provide all income to the surviving spouse, and must elect QTIP treatment on the estate tax return.

What options are available with QTIP trusts?

Grantor can choose to include certain assets, dictate the amount distributed, and designate beneficiaries.

What is a QDT or QDoT?

Qualified Domestic Trust that allows a non-citizen spouse to receive benefits while deferring estate taxes.

What are the features of QDT or QDoT?

Allows transfers to non-citizen spouses without immediate taxation if certain conditions are met.

What benefits do QDTs provide?

Provide tax benefits similar to marital deduction, ensuring favorable treatment in transferring assets.

What are the requirements for a QDT?

Must ensure that at least one trustee is a U.S. citizen, and distributions must be made according to specific regulations.

How are non-citizen spouse rules applied in gift and estate taxation?

Non-citizen spouses are subject to different exemption limits for gifts and estate taxes compared to citizen spouses.

What is pecuniary formula clause taxation?

Refers to clauses that provide a specific sum of money, impacting estate tax calculations and valuations.

How does fractional formula clause taxation work?

A clause specifying distributions as a fraction of the estate, affecting valuation and tax implications differently.

What balance should be assessed between marital and credit shelter?

Balancing growth and income to optimize tax efficiency and ensure adequate support for both spouses.

Who determines the grantor’s capacity in estate planning?

The individual granted the power of attorney or designated by the trust to assess the grantor's competency.

What are apportionment statutes?

State laws that define how estate taxes are allocated among the beneficiaries of an estate.

How do common law trusts generally operate regarding revocation?

They are considered irrevocable unless the trust document explicitly grants the power to revoke.

What is the purpose of equalizing estates between spouses?

To maximize tax efficiency, ensure fair distribution, and optimize estate benefits for both parties.

What tax implications can arise from property transferred between spouses?

Potentially larger transfer exemptions and benefits, depending on the marital deduction eligibility.

How do income taxes affect the choice of appointive powers?

Income generated by property subject to appointive powers can lead to varied tax implications for the appointee.

What type of income does a QTIP trust generate for the surviving spouse?

The income distributed to the surviving spouse is taxable as ordinary income.

What options exist for distributing income from a QTIP trust?

Trustee can determine frequency and amount of distributions, subject to trust terms.

What are the implications of using a General Power of Appointment?

It can include the appointed property in the holder's estate, potentially increasing tax liability.

What factors affect the choice of termination clauses in estate planning?

The timing of distributions, types of beneficiaries, and anticipated tax implications.

How can terminal interests benefit estate tax strategies?

By allowing for deferral of taxes until the death of the surviving spouse, optimizing cash flow during their lifetime.

What is the significance of electing QTIP treatment on an estate tax return?

It allows the estate to defer taxes, providing more income to the surviving spouse during their lifetime.

Generation skipping transfers occur in which of the following circumstances?

Only when assets aren’t subject to gift and estate tax in each generation.

Allocation of the generation skipping transfer tax exemption for an irrevocable trust subject to a taxable termination is made by which of the following?

Donor (or donor’s estate) at the time the trust was funded.

A transferor funds a trust for benefit of her grandchildren. This is an example of what type of transfer?

Direct skip

The purpose of