IRS Code Sections

Retained Life Interest

A. Transfer where transferor retains possession, enjoyment, right to income; or

B. right to designate possession, enjoyment of property or income

• (A) includes retaining right to vote of controlled corp (controlled corp = 20%)
• Release of any of the above = transfer

• Gifts w/ in 3 Years of Death; Estate includes
• 1. value of property gifted; and

2. value of any gift taxes paid.

This includes the release of powers under 2036, 2037, 2038

Transfers Taking Effect at Death

estate shall include the value of all property if—

• (1) property can be obtained only by surviving the decedent, and
• (2) Decedent has retained a reversionary interest in the property (and the value of such reversionary interest exceeds 5 percent of the value of such property.)
• “reversionary interest” includes a possibility that property —
• (1) may return to him or his estate, or
• (2) may be subject to a power of disposition by him,

but such term does not include a possibility that the income alone from such property may return to him or become subject to a power of disposition by him

also, if B had a GPOA he/she didn't exercise, this doesn't apply?

Revocable Transfers

- Estate shall include value of property: To the extent of any interest therein where the enjoyment thereof was subject at the date of his death to alter, amend, revoke, or terminate

- or released w/in 3 yrs of death

1. A power to consume, invade, or appropriate property for the benefit of the possessor which is limited by an ascertainable standard

• 2. not exercisable by the possessor except
• in conjunction with the creator of the power

3. not exercisable by the possessor except in conjunction with a person having a substantial interest, in the property subject to the power, which is adverse to exercise of the power in favor of the possessor

General Power of Appointment (Gift Tax)

- invade / appoint to estate, creditors, etc.

- if limited by ascertainable standard, then NOT a GPOA

- doesn't count if can't invade/appoint only with another party

- exercise or release of power = transfer

Disclaimers

1. in writing

2. received w/ in 9 months (by rep, transferor, etc.) of transfer or 21st bday

3. not accepted/used interest

4. passes to the spouse of decedent or someone other than transferor without any action on part of disclaimant

Marital Deduction

• 2056(B)(7)(b): defines QTIP
• "Qualified Terminable Interest Property"
• - all income
• - may not appoint any part of property to anyone but SS (only for SS use), except upon death

Also get marital deduction for life estate where SS has power to appoint upon death

Unified Credit Against Gift Tax

Unified Credit Against Estate Tax

2010(C)(1): Credit = what tax would be if computed with respect to applicable exclusion amount (which is currently $5 million)

Imposition and Rate of Tax

Over 500K = $155,800 + 35% of everything over $500k

1. A power to consume, invade, or appropriate property for the benefit of the possessor which is limited by an ascertainable standard


2. If the power is not exercisable by the decedent except in conjunction with the creator of the power

• 3. not exercisable by the decedent except
• in conjunction with a person having a substantial interest in the property, subject to the power, which is adverse to exercise of the power in favor of the decedent (exercise in his own favor is adverse interest)

Estate Tax Provision

a power which is exercisable in favor of the decedent, his estate, his creditors, or the creditors of his estate; except that

if limited by an ascertainable standard relating to the health, education, support, or maintenance of the decedent shall not be deemed a general power of appointment

If exercisable only with consent/actions

Imposition of Gift Tax

Qualified Domestic Trust

1. at least 1 Trustee US citizen or domestic corp; has right to withhold from distribution the tax imposed

2. such trust meets Treas regs to collect

3. election made by Executor

• All "revocable trusts" are by definition grantor trusts.
• An "irrevocable trust"
• can be treated as a grantor trust if any of the grantor trust definitions
• contained in Internal Code §§ 671, 673, 674, 675, 676, or 677 are met.

672(c)

• Related or subordinate party
• any nonadverse party who is -
• (1) grantor's spouse if living with the grantor;

• (2) any one of the following: The grantor's father, mother,
• issue, brother or sister; an employee of the grantor; a corporation or any employee of a corporation in which the stock holdings of the grantor and the trust are significant from the viewpoint of voting control; a subordinate employee of a corporation in which the grantor is an executive.

Gift: 345,800

Estate: 1,455,800

Gift: 330,800

Estate: 1,730,800

Gift & Estate: 1,730,800

$780,000 + 45% of all in excess of $2 million

155,800 + 35% of amount over $500k

155,800 + 35% of amount over $500k

$780,800 + 45% of amount over $2 million

(even though UC was only 345,800)