Tag: estate-tax
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Tax Consequences of a Power to Terminate a Nonmarital Trust
Trust documents often include a provision to end the trust if it becomes too small to manage or if its purpose is achieved before the stated end date. This power can have tax consequences, so it’s important to consider before including it in a trust document. There are two types of powers to terminate a…
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A Potpourri of Potential Pitfalls To Avoid with Qualified Domestic Trusts
In Florida, when one or both spouses are not U.S. citizens, special planning is needed for their estate. If the surviving spouse is not a U.S. citizen, they cannot receive a marital deduction for estate tax unless the property is held in a Qualified Domestic Trust (QDOT). This rule was created to prevent noncitizen spouses…
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Alternate Valuation: The Silver Lining to the Cloud Over the Market?
In 1998, the stock market took a big hit, causing a lot of people to lose money. But one good thing that can come out of it is potential estate tax savings. If someone dies when the stock market is high, their estate might have to pay a lot in taxes. But if the stock…
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Planning for Large Estates After TRA 97: A New Look at Some Old (Charitable) Friends
The Taxpayer Relief Act of 1997 didn’t actually provide relief for many rich people because the estate tax credit is only available for estates worth less than $10 million. This means that larger estates still face a 55 percent tax rate, just like before. As a result, estate planning techniques like life insurance trusts and…
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TRA 97 Is Not the Only Reason to Review Existing Estate Plans Involving Closely Held Stock
The Taxpayer Relief Act of 1997 provided a tax benefit for family-owned businesses, allowing an exclusion from a person’s taxable estate. This is important to consider when making estate plans involving closely held stock. There have been significant cases and IRS rulings that affect estate planning for closely held stock. In a hypothetical scenario, a…
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Estate Planning with Tenancy by the Entireties Property
Last New Year’s Eve, the IRS issued final regulations about disclaimers of tenancy by the entireties property, which was a cause for celebration for estate planners. However, there is still a problem in Florida that needs to be resolved before a surviving spouse can disclaim their interest in such property. This article will discuss the…
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A Practical Discussion on Advising the Lottery Winner
If someone in Florida wins the lottery, their advisors need to understand the tax issues related to their winnings. It’s important to plan ahead to save as much money as possible on income, gift, estate, and generation-skipping taxes. If a client wins, they should not sign the ticket until they figure out who owns it.…
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Planning to Maximize the Section 2013 Credit
The TPT credit, allowed by the tax code, is a benefit for estate planning and administration. It can help in filing federal estate tax returns and can be used to plan for maximizing its potential benefit. It’s important to understand how it works and to consider it in both estate planning and administration phases. The…
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Estate, Gift, and Trust Tax Changes Made by Taxpayer Relief Act of 1997
In 1997, the Taxpayer Relief Act made changes to estate and gift tax laws. It increased the unified credit for estate and gift taxes, meaning people could exempt more money from these taxes. The maximum federal tax rate also increased for very large estates. However, compared to previous tax acts, the overall impact of the…
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Rethinking the Valuation of Family Limited Partnerships Holding Passive Assets
Appraisers have a hard time figuring out how much to discount the value of an interest in a family limited partnership (FLP) because FLPs are different from regular business entities. Non-family members wouldn’t want to buy into an FLP, so the discount could be as high as 80%. But owners wouldn’t want to sell at…
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Evaluating and Making a Choice of No Entity for Real Property Held for Investment or Lease
A tax co-tenancy is an investment structure for real estate that offers some tax advantages. It doesn’t require a separate tax return, allows for separate like-kind exchanges, and provides a step-up in basis when a co-tenant dies. This can be a good option for investors who want to simplify their taxes and have more flexibility…
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Generation-Skipping Transfer Tax: Its Bite Is Worse Than its Bark
Chapter 13 of the tax code has really complicated rules about the generation-skipping transfer (GST) tax. It’s a big deal because it can cause huge tax problems for families and their advisors. The GST tax rate is 55 percent and it applies to transfers of property from one generation to a generation two or more…
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Estate of Simplot: The Tax Court Applies a Significant Premium to Voting Privileges
The Simplot case involves the transfer of stock in a family-owned company after the founder’s death. The court ruled that a “premium” should be applied to the transfer of minority voting stock, and that the premium for a controlling interest would be substantially greater. This decision could impact estate and gift tax reduction strategies involving…
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The Use of Disclaimers for Flexibility in Planning for Qualified Retirement Assets
Estate planning attorneys help couples with a lot of money prepare their wills and trust agreements to minimize estate taxes. They create a plan called an AB plan, which allows the couple to use two credits to shelter up to $1,300,000 after both spouses pass away. The attorney also helps the couple retitle their assets…
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The Use of Disclaimers for Flexibility in Planning for Qualified Retirement Assets
Estate planning attorneys help couples prepare wills and trust agreements to minimize estate taxes. They create a plan, called an AB plan, for married couples to use two unified credits and shelter up to $1,300,000 after both spouses pass away. The attorney also helps the couple retitle their assets and designate beneficiaries for their retirement…
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Understanding Estate Planning with Qualified Personal Residence Trusts
A QPRT is a type of trust where someone transfers their house to a trustee and retains the right to live in it for a certain number of years. It’s a way to save on taxes and make the most of the exclusion amount. However, it’s best to act fast, as there’s a possibility that…
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The New York (and Other States) Death Tax Trap
Many retirees move to Florida from other states and keep a home in their former state. These individuals, known as “snowbirds,” may face unexpected taxes on their properties in their former state. Changes to estate tax laws in 2001 and the creation of a new tax regime in 2010 could affect their estates. Before EGTRRA,…
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Estate of Thompson: Respecting the Formalities of the Family Limited Partnership
The article discusses the use of family limited partnerships (FLPs) in estate planning. It gives an example of a case where the IRS scrutinized the use of FLPs for tax purposes. In this case, a man named Theodore Thompson set up two FLPs with his children to reduce estate tax. However, the IRS determined that…
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Florida Homestead Transfers: The Advantages of Short-term Qualified Personal Residence Trusts
When it comes to planning what happens to a Florida homestead after the owner passes away, there are special rules that say it must go to the spouse and children. This can be a problem if the owner wants someone else to inherit the home. One way to get around this is by putting the…
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Fiduciary Allocations of the Generation-skipping Transfer Tax Exemption
“Summary: A law firm is helping a company with a legal case involving a defamatory article. The company’s reputation and business are at stake, so the law firm is working hard to win the case for them.” The generation-skipping transfer tax exemption allows individuals to transfer assets to their grandchildren without paying extra taxes. If…
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Tax Planning Stategies with Equity Derivatives
A derivative is a financial contract that gets its value from the price of another asset. There are different types of equity derivatives, like options and collars. An option gives the buyer the right to buy or sell a stock at a specific price within a certain time period. A collar is a combination of…
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The Economic Growth and Tax Relief Reconciliation Act of 2001: Estate, Gift, and Generation-skipping Transfer Tax Law Changes
The Economic Growth and Tax Relief Reconciliation Act of 2001 made temporary changes to the federal estate, gift, and generation-skipping transfer taxes. The act gradually increased the exemption amount for estate tax over eight years, eventually repealing the estate tax in 2010. However, the act also includes a sunset provision, which means the estate tax…
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Family Limited Partnerships: To Qualify or Not to Qualify for the Bona Fide Sale for Full and Adequate Consideration Exception Under §2036
The recent cases have looked at whether certain rules apply to FLPs, and how to avoid those rules. The focus is on a specific exception that allows for a genuine sale of property. This article will analyze those cases and discuss ways to plan to avoid the rules by meeting the exception. This exception is…
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The Ins and Outs of the Florida Estate Tax
The Florida estate tax is connected to the federal estate tax, so if no federal estate tax is owed, then no Florida estate tax is owed. The tax law in 2001 changed the responsibilities of personal representatives of estates under federal and Florida law. A resident who passes away in Florida is subject to the…