MARITAL EXEMPTION IN ESTATE TAXATION.   Term Paper ID:23255 Click to get this paper

Essay Subject: Legality, methods of implementation, benefits, terminal interest, court decisions, testamentary division, IRAs, life insurance.... More...

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Paper Abstract: Legality, methods of implementation, benefits, terminal interest, court decisions, testamentary division, IRAs, life insurance. Paper Introduction: ESTATE TAXATION: MARITAL DEDUCTION Introduction “When the typical wealthy business owner dies, it’s a big payday for the IRS.” The estimate is that in such cases estate and other taxes usually “rob the family of over 50 percent (sometimes over 75 percent for certain types of assets) of the family wealth.” Such outcomes occur because the federal estate tax is a progressive tax beginning at 18 percent and eventually reaching 55 percent on the part of each taxable estate in excess of $3,000,000. This research examines the marital exemption, the effective application of which, can help to avoid such situations. The marital deduction is designed to permit a surviving spouse to avoid all or some of the federal estate tax until her or his own death. Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. other taxesusually rob the family of over the part of each taxable estate inexcess permit a surviving spouse to was establishedby the Economic Recovery Tax for thebenefit of the survivor a married person will decide to tax marital deductions are allowable-whenstrict requirements to citizen spouses include making an outright A basic technique in marital deduction planning is to claim The exemption equivalent is payableto the the size of theestate and the nature of the to the other by will are spouse will have the use date Any estate tax that would otherwise be imposed is no need to liquidate assets to pay the estate tax The Marital Deduction and A death A United States citizen can inheritany citizen inherits assetsin this manner Interest Property Prior to the transfer transfer to a survivingspouse of requirements to qualify for the marital beneficiary can haveany rights in the property during b B ii of the Internal Revenue Code defines person including the spouse has any power to appointany the power to require the property to surviving spouse and its full The QTIP provision as written appears Thisinterpretation allows an executor to attempt to minimize ofdiscretion a decedent can provide The issue in the estates ofthe spouses are equalized but property abequest in trust will qualify for amount of property guaranteed to pass courtshave not seen the issue in amount not elected asQTIP would pass to another other than the spouse Thus The Eighth Circuit Court and theSixth Circuit Court reached in situations similar to these three cases unless winningswere payable in equal annual installments The taxpayer and spousetransferred at leastquarterly Each spouse could withdraw the survivor for lifeeach lottery installment received after was the complete pass-through to the surviving spouse of the by thesurvivor Testamentary Division and Marital Deduction In a situation credit The two bequests divided theblock such that each purposes even though the willdivided the stock into marital deduction Taking Letter Ruling to includes a control block the ruling's rationalemight permit a or qualified retirement plan outright is the mostadvantageous the surviving spouse to an the IRA or plan and as spouse is not the first spouse and the the proceeds andelecting that the portion of the IRA proceeds which are taxable whenreceived payable in installments to a QTIP benefits distributable in installments to a QTIP trust for of proceeds only upon thedeath of surviving spouse survivorship life insurance typically isused to fund the transfer of property assignificant paidupon the death of the a survivorship policy to fund estate to the estate tax deferred at hisdeath and the be evaluated as a cost If tax at the first spouse'sdeath This estate may grow at adifferent rate Substantial cost savings can beachieved by transferring fast disposition at thefirst spouse's death with insurance proceeds to pay to avoid all or some ofthe federal estate tax L Ms Sure Ways to Enrich R M What Should I Leave My IRS Letter Ruling TAM Krause A J and Franklin Abbin B M Carlson D K and Baker B C Reflections USC United States Internal Revenue Service Regulations Washington United Section c J O Parker Fine-Tuning the Use of the Regulations on QTIP Trusts Trusts Estates February R M Hochberg July R M Hochberg What Should I Leave My States Internal Revenue Service Regulations Washington United States Government Printing IRS Letter Ruling IRS Letter Ruling TAM Est The Tax Adviser November G D Holding Estates November Ross Hill and Baker Ibid Ibid a big payday forthe IRS The estimate is the federal estate tax is which can help to avoid such death The Marital Deduction Since the allowance until the death of the survivingspouse by transferring all of allowance of a marital deduction byelection for the ultimate disposition of her or hisproperty by the use transfers to alienspouses Typical methods her or him a general power of appointment shelter trust frequently is provided touse remainder over to the children husband and wife retirement andinsurance benefits that name the through the use of theunlimited estate estate taxes thatanyone else who inherits property might longer the surviving spouse lives the greater Whatever the surviving spouse spends or consumes during heror would leave the country to avoid the estate taxat the spouse is a citizen As noted above however nomarital the estate inherit more than of assets a decedents dying after Section b of the InternalRevenue property The propertytransferred is termed surviving spouse the surviving spouse must be entitledto made on thedecedent's tax return to treat the isentitled to the income from surviving spouse Additionally if the are complied with the property will thesurviving spouse's death will be subject to tax as a marital deduction thereby reducing taxes however has interpreted the rules in a provision isimportant when the taxes on the secondcan be a valuable planning tool qualify for QTIP treatment with thebalance going to a Service in not allowing QTIP treatment for anamount limited rev'g TC the surviving spouse was theexecutor election was tantamount to giving theexecutor violating the clear purpose ofCongress in enacting the QTIP provisions problems exist as the IRS A QTIP With Lottery Winnings Under the lottery rules prevailing convey one-half to thetaxpayer's and his spouse's individual revocable trusts Post-death income was payable monthly to thesurviving In the letter ruling themade Code provides an automaticmarital deduction only if stock into two interests-one eligible for the maritaldeduction shares must be valued as asingle be applied to the shares passing to andthe bequest funding divided controlling into The Marital Deduction and IRAs Designating the proceeds for the estate tax maritaldeduction and preserves however a testator may wants her or his surviving to others upon the death of thesurviving spouse of the IRA and have these proceeds qualify for the his death A lump sum distribution it represented one approach but position thatcomplying with the principles of Revenue the insurance industry has developed survivorship or second-to-die lifeinsurance life insurance isoften used to insure the life of insurance is not always the most the life of the spouse with the shorter lifeexpectancy Such defer theinter-generational transfer of property and associated estate deduction is borrowing money from iscalled by the government at the survivor's death Viewed deductionmay represent an unattractive loan compared to borrowing from a a securities portfolio will likelygrow deduction iseconomical for some assets such as those with lower borrowing or liquidation of slow growth'assets can help to avoid such situations The d USTC paragraph Berger H J IRS Loses Estate The Tax Adviser July Est of Dean A Chenoweth TC Treatment for IRAs and Qualified Retirement Plans Trap For the Unwary Funding QTIP With Closely Held the Use of the Bracket Run Trusts Final Regulations on QTIP Trusts Trusts Estates February Ibid United States Internal Revenue Code B C Baker Reflections onSurvivorship Life Insurance Trusts Estates The IRS's General Aversion to With Closely HeldStock The Tax Adviser December Ibid Internal Revenue Service Regulations Section b h W Nager B M Abbin and D K Carlson and R S Franklin QTIP Trusts As ESTATE TAXATION MARITAL DEDUCTION Introduction percent sometimes over percent forcertain of This research examines the avoid all orsome of the federal estate Act of a married person under the protection of the leave her or his entireestate in a form that qualifies are met-for transfers to spouses who are gift orbequest creating a trust that pays themaximum available marital deduction limited only by the amount credit shelter trust for the benefit of assets being left to the surviving all typical approaches tousing the and enjoyment of theassets that are left upon thedeath of one spouse theestate taxes that would ordinarily be Foreign Spouse No marital deduction amount free of estate taxes from her To the extent that the surviving of a terminable interest to a survivingspouse did not a terminable interest in property that does deduction Thesequalifying requirements are as follows the property must the remainder of the life of aqualifying income interest for life part of the property to be sold orconverted into productive property within value will be deductible fromthe decedent's gross to allows a decedent to givean executor discretion as the combinedestate tax burdens on question involves a willthat allows is not owned equally Allowing theexecutor to pay some the marital deduction if the executor to the spouse The IRS hasdefended its interpretation of Sec the same light In Est trust that did not qualify there was no qualifying income interest The Fifth Circuit similar conclusions Individuals whose willscontain discretionary QTIP one resides in the jurisdictions of their rights to a revocable trust all principal from her or the other spouse's death The trust's annual lottery installment Section b where the decedent owned a bequest constituted a non-controlling interest TheIRS two non-controlling blocks The IRS also the extreme estate tax could resultif only charities and greater-than-proportionate number of non-controlling sharesto fund a credit shelter bequest estate planning option from a tax viewpoint IRA to defer income tax on the fundsuntil much principal as needed for her or testator has children of aprior marriage proceeds be payable in a lump by the beneficiary When the trust for themarital deduction In subsequent private rulings particularly themarital deduction Life Insurance and the Marital Deduction the surviving spouse where the proceeds can be used to to provide the liquidity to pay estate estate tax savings can be achieved in insured spouse to facilitate the transfer of propertyto the taxes presupposes use of the marital deduction In banking terms interest rate is pegged at the annual growth rate of givenprojected estate growth the interest' cost of this government loanexceeds analysis may be refined by applying and a closely-held business at yet another rate growth' assets to the next the estate tax Summary This research examined until her or his own death the IRS Modern Machine Shop October Easton R W The Spouse Financial World September Holding R S QTIP Trusts As IRA Beneficiary Is There Significant Recent Developments in Estate Planning Part on Survivorship Life Insurance Trusts Estates April States Government Printing Office I L Blackman Bracket Run Trusts Estates November M E Taxation Without Representation Financial World October Spouse Financial World September Ibid Hochberg Taxation N P office Section b f Kurtz H J Berger IRS of Dean A Chenoweth TC The AhmansonFoundation F Jr Getting QTIP Treatment for IRAs and that in such cases estate and a progressive tax beginning at percentand eventually reaching percent on situations Themarital deduction is designed to of the unlimited marital deduction his or her gross estate to or qualified terminable interest property QTIP has increasedthe likelihood that of a QTIP Unlimited gift and estate to attain estate tax marital deductions fortransfers over the entire trustprincipal and creating a QTIP trust up the available unified credit This unlimited marital deduction applies regardless of surviving spouse as beneficiary andbequests from one spouse tax marital deduction These benefits are as follows The surviving be required to pay at a later the benefit of thedeferral of the tax Thus there his lifetime will never be subjected to the time of their own deduction exists when a non-United States federalestate tax will be imposed Qualified Terminable Code provides a marital deduction for a qualifying terminable interest property or QTIP andmust meet four a qualifying income interest for life no other interest as QTIP property Section all of the property payable annually or morefrequently and no property is becomes unproductive the survivingspouse must be given be treated aspassing to the as a part of the survivingspouse's estate at the death of the first spouse a way that has reduced the actual amount minimum combined estate taxes result if The Internal Revenue Service Regulations state that no part of non-QTIP trust The executor's discretion resultsin no only by the executor's discretion The appellate charged with making the QTIP election Any a power to appoint property to someone and allowed the deduction for theamount elected by the executor will presumably continueto challenge QTIP elections in an actual case gross During thetheir lifetimes the individual trusts would distribute net income spouse The trust was required to pay to clear that an essential qualification element annuity payments are receivable directly and one to use the unified controlling interest for estate tax themarital trust in computing the non-controlling interests Conversely if the estate surviving spouse as beneficiary to receive theproceeds of an IRA all income tax options including a rollover of theproceeds by spouse to receive only the incomefrom Such an outcome may be particularly important where thesurviving maritaldeduction by naming a QTIP trust as beneficiary of will result in immediate incometaxation on the taxable clearly not the exclusive method forqualifying IRA balances Ruling is the only way toqualify IRA policies that provide for the payment the working spouse to provide financialsecurity for the cost effective wayof using insurance proceeds an estate plan would use the insurance proceeds tax by usingthe marital destination A decision to acquire thegovernment The loan amount is equal in this fashion use of the marital deduction can bank orpurchasing life insurance to pay the estate at a general capital market rate whereas real projected growthrates but costly for other assets to pay the gift tax or through testamentary maritaldeduction is designed to permit a surviving spouse Tax Marital Deduction Case The Tax Adviser February Blackman I Hochberg R M Taxation Without Representation Financial World October Hochberg Trusts Estates February IRS Letter Ruling Stock The Tax Adviser December Nager R W Estates November Ross M E Hill P S United States Internal Revenue Code Title United States Code Title United States Code USC April C Teitell The IRS Issues Final Loan Guarantees onQTIP Trust Planning The Tax Adviser Internal Revenue Code Section b B ii United Berger Ibid Nager Abbin and Carlson Significant RecentDevelopments in Estate Planning Part IRA Beneficiary Is There An Alternative to Trusts When the typical wealthy business owner dies it's types of assets of the family wealth Such outcomes occurbecause marital exemption the effective application of tax until her or his own normally is ableto postpone the imposition of estate tax estate tax maritaldeduction Additionally the for the marital deduction because thespouse dying first can control citizens ofthe United States Special rules apply for the spouse all the income for lifeand give sheltered bythe unified credit A credit the surviving spouse forlife with the spouse Assets that are held jointly between unlimited marital deduction Three significant benefits are available to her or him undiminished by the is deferred until the death of the surviving spouse The due within nine months after thefirst death exists when non-United States citizens inheritassets for fear that they or his spouse regardless ofwhether or not spouse and all of theother heirs of qualify for the estate tax marital deduction Fortransfers of not give thesurviving spouse testamentary control over the pass from thedecedent to the thesurviving spouse and an irrevocable election must be as one in which the surviving spouse anyone other than to the a reasonable period of time If these provisions estate The value of the property upon to the amount to claim both the decedent and the spouse The IRS the executor to elect any amount as QTIP Such tax on the first estate to reduce hasdiscretion to elect any amount to b often and the Tax Court hasconsistently sided with the of Clayton F d th Cir The IRS and TaxCourt held that the discretionary in astrong opinion rejected this argument as clauses need to review their estates todetermine whether any either the Fifth Sixth orEighth Circuit courts Funding the lottery trust thatwould collect the annual payments and immediately hisrespective trust at any time IRSruled that a QTIP election could be made c of the Internal Revenue controlling block of stock the will divided the ruled that a control block of corporate ruledthat a minority discount had to the surviving spouse were estate beneficiaries assuming a control block funds themarital share Thisprocedure insures qualification of such the spouse reaches age years six months In some cases his supportwith any remaining principal to be paid A testator can limit the a spouse's access to theprincipal sum to the QTIP trust ather or IRS issued Revenue Ruling many practitioners thoughtthat TAM however the IRS has revealed its ruling and audit Because of the popularity of using the unlimited marital deduction pay theestate taxes arising at that time Although single tax upon the death of thesurviving spouse Survivorship life some cases by acquiring asingle life policy on next generation at the insured's spouse death rather than an individualwho avails himself of the marital theestate during the survivorship period The loan with accrued interest' the cost of commercially available credit the marital it separately to eachasset class of the estate For example Accordingly it may be determined that use of the marital generation eitherthrough lifetime gifts with the marital exemption the effectiveapplication of which BibliographyThe Ahmanson Foundation F d th Cir AFTR IRS's General Aversion to Loan Guarantees on QTIP Trust Planning G D Jr Getting QTIP An Alternative to Trusts Estates November Kurtz N P The Tax Adviser November Parker J O Fine-Tuning Teitell C The IRS Issues Ms Sure Ways to Enrich the IRS ModernMachine Shop October Ross P S Hill and Internal Revenue Code Section b R W Easton Kurtz Trap For the Unwary Funding QTIP Loses Estate Tax Marital Deduction Case TheTax Adviser February Ibid d th Cir AFTR d USTC paragraph R QualifiedRetirement Plans Trusts Estates February A J Krause other taxesusually rob the family of over the part of each taxable estate inexcess permit a surviving spouse to was establishedby the Economic Recovery Tax for thebenefit of the survivor a married person will decide to tax marital deductions are allowable-whenstrict requirements to citizen spouses include making an outright A basic technique in marital deduction planning is to claim The exemption equivalent is payableto the the size of theestate and the nature of the to the other by will are spouse will have the use date Any estate tax that would otherwise be imposed is no need to liquidate assets to pay the estate tax The Marital Deduction and A death A United States citizen can inheritany citizen inherits assetsin this manner Interest Property Prior to the transfer transfer to a survivingspouse of requirements to qualify for the marital beneficiary can haveany rights in the property during b B ii of the Internal Revenue Code defines person including the spouse has any power to appointany the power to require the property to surviving spouse and its full The QTIP provision as written appears Thisinterpretation allows an executor to attempt to minimize ofdiscretion a decedent can provide The issue in the estates ofthe spouses are equalized but property abequest in trust will qualify for amount of property guaranteed to pass courtshave not seen the issue in amount not elected asQTIP would pass to another other than the spouse Thus The Eighth Circuit Court and theSixth Circuit Court reached in situations similar to these three cases unless winningswere payable in equal annual installments The taxpayer and spousetransferred at leastquarterly Each spouse could withdraw the survivor for lifeeach lottery installment received after was the complete pass-through to the surviving spouse of the by thesurvivor Testamentary Division and Marital Deduction In a situation credit The two bequests divided theblock such that each purposes even though the willdivided the stock into marital deduction Taking Letter Ruling to includes a control block the ruling's rationalemight permit a or qualified retirement plan outright is the mostadvantageous the surviving spouse to an the IRA or plan and as spouse is not the first spouse and the the proceeds andelecting that the portion of the IRA proceeds which are taxable whenreceived payable in installments to a QTIP benefits distributable in installments to a QTIP trust for of proceeds only upon thedeath of surviving spouse survivorship life insurance typically isused to fund the transfer of property assignificant paidupon the death of the a survivorship policy to fund estate to the estate tax deferred at hisdeath and the be evaluated as a cost If tax at the first spouse'sdeath This estate may grow at adifferent rate Substantial cost savings can beachieved by transferring fast disposition at thefirst spouse's death with insurance proceeds to pay to avoid all or some ofthe federal estate tax L Ms Sure Ways to Enrich R M What Should I Leave My IRS Letter Ruling TAM Krause A J and Franklin Abbin B M Carlson D K and Baker B C Reflections USC United States Internal Revenue Service Regulations Washington United Section c J O Parker Fine-Tuning the Use of the Regulations on QTIP Trusts Trusts Estates February R M Hochberg July R M Hochberg What Should I Leave My States Internal Revenue Service Regulations Washington United States Government Printing IRS Letter Ruling IRS Letter Ruling TAM Est The Tax Adviser November G D Holding Estates November Ross Hill and Baker Ibid Ibid a big payday forthe IRS The estimate is the federal estate tax is which can help to avoid such death The Marital Deduction Since the allowance until the death of the survivingspouse by transferring all of allowance of a marital deduction byelection for the ultimate disposition of her or hisproperty by the use transfers to alienspouses Typical methods her or him a general power of appointment shelter trust frequently is provided touse remainder over to the children husband and wife retirement andinsurance benefits that name the through the use of theunlimited estate estate taxes thatanyone else who inherits property might longer the surviving spouse lives the greater Whatever the surviving spouse spends or consumes during heror would leave the country to avoid the estate taxat the spouse is a citizen As noted above however nomarital the estate inherit more than of assets a decedents dying after Section b of the InternalRevenue property The propertytransferred is termed surviving spouse the surviving spouse must be entitledto made on thedecedent's tax return to treat the isentitled to the income from surviving spouse Additionally if the are complied with the property will thesurviving spouse's death will be subject to tax as a marital deduction thereby reducing taxes however has interpreted the rules in a provision isimportant when the taxes on the secondcan be a valuable planning tool qualify for QTIP treatment with thebalance going to a Service in not allowing QTIP treatment for anamount limited rev'g TC the surviving spouse was theexecutor election was tantamount to giving theexecutor violating the clear purpose ofCongress in enacting the QTIP provisions problems exist as the IRS A QTIP With Lottery Winnings Under the lottery rules prevailing convey one-half to thetaxpayer's and his spouse's individual revocable trusts Post-death income was payable monthly to thesurviving In the letter ruling themade Code provides an automaticmarital deduction only if stock into two interests-one eligible for the maritaldeduction shares must be valued as asingle be applied to the shares passing to andthe bequest funding divided controlling into The Marital Deduction and IRAs Designating the proceeds for the estate tax maritaldeduction and preserves however a testator may wants her or his surviving to others upon the death of thesurviving spouse of the IRA and have these proceeds qualify for the his death A lump sum distribution it represented one approach but position thatcomplying with the principles of Revenue the insurance industry has developed survivorship or second-to-die lifeinsurance life insurance isoften used to insure the life of insurance is not always the most the life of the spouse with the shorter lifeexpectancy Such defer theinter-generational transfer of property and associated estate deduction is borrowing money from iscalled by the government at the survivor's death Viewed deductionmay represent an unattractive loan compared to borrowing from a a securities portfolio will likelygrow deduction iseconomical for some assets such as those with lower borrowing or liquidation of slow growth'assets can help to avoid such situations The d USTC paragraph Berger H J IRS Loses Estate The Tax Adviser July Est of Dean A Chenoweth TC Treatment for IRAs and Qualified Retirement Plans Trap For the Unwary Funding QTIP With Closely Held the Use of the Bracket Run Trusts Final Regulations on QTIP Trusts Trusts Estates February Ibid United States Internal Revenue Code B C Baker Reflections onSurvivorship Life Insurance Trusts Estates The IRS's General Aversion to With Closely HeldStock The Tax Adviser December Ibid Internal Revenue Service Regulations Section b h W Nager B M Abbin and D K Carlson and R S Franklin QTIP Trusts As If this paper is not what you are looking for, you can search again: Search for: or Click 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