exemption trust

Taxes General Forum - Tax professionals meeting place and answers to queries. (Moderated) 

Yahoo!   Google   Windows Live   del.icio.us   digg   Netscape

Subject Author Date exemption trust DGF3 10-18-2008  Re: exemption trust joetaxpayer 10-18-2008  Re: exemption trust Stuart Bronstein 10-18-2008  Re: exemption trust Bill Brown 10-18-2008
Posted by DGF3 on October 18, 2008, 2:12 pm Please log in for more thread options I have a couple of questions about funding an exemption trust: 1. What date is used for determining the value of securities placed in the exemption trust. Is it the date of death of the deceased, the date when the exemption trust is funded, or some other date? 2. What are the implications if the total value of the exemption trust is slightly over ($180,000) the $2,000,000 limit when funded. 3. Can securities be removed from the exemption trust to reduce the value to less then the $2,000,000 limit? -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by joetaxpayer on October 18, 2008, 2:36 pm Please log in for more thread options DGF3 wrote: > I have a couple of questions about funding an exemption trust: > > 1. What date is used for determining the value of securities placed in the > exemption trust. Is it the date of death of the deceased, the date when the > exemption trust is funded, or some other date? Assets can be valued on date of death or 6 months later, it's ALL or nome, you cannot pick and choose. > 2. What are the implications if the total value of the exemption trust is > slightly over ($180,000) the $2,000,000 limit when funded. Well, that simply shouldn't happen. If it does, that $180K is subject to estate taxes. The point of the trust is to protect the exemption amount in effect at the time of death, so my trust is worded accordingly, to avoid having to re-create a new trust every time the law changes. For those who feel like they came in to the middle of a movie - One use of a trust is so, upon the death of the first spouse, the exemption amount (now $2M) is not lost by leaving it via unlimited marital exemption to the surviving spouse upon whose death, that original sum would otherwise be taxed. Say an estate is worth $4M. A couple can die and leave $2 each to the kids, or whomever. But if one dies, leaving it all to the surviving spouse, there's now a $4M estate with only a $2M exemption. The trust helps preserve that first $2M. > 3. Can securities be removed from the exemption trust to reduce the value to > less then the $2,000,000 limit? If the trust is set up properly, the exact exemption amount will go to the trust, not a penny more, not a penny less. Joe www.blog.joetaxpayer.com -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Stuart Bronstein on October 18, 2008, 5:18 pm Please log in for more thread options > I have a couple of questions about funding an exemption trust: > > 1. What date is used for determining the value of securities > placed in the exemption trust. Is it the date of death of the > deceased, the date when the exemption trust is funded, or some > other date? Normally the date of death. You can elect to have all assets valued as of the "alternate valuation date," which is six months later. As Joe said, all or none. > 2. What are the implications if the total value of the exemption > trust is slightly over ($180,000) the $2,000,000 limit when > funded. By exemption trust I assume you mean the marital deduction (bypass) trust. The law allows an unlimited marital deduction. So it doesn't matter how much is in there - whatever it is will be exempt from tax on the death of the first spouse to die. But putting all property in there is notmally not the best idea. Most exemption trusts allow an election to apply the marital deduction to some but not all of the property in the trust. Depending on the size of the estate and other factors, a larger or a smaller amount may be more beneficial. Check with your tax professional to determine the amount that should be included in the marital deduction. > 3. Can securities be removed from the exemption trust to reduce > the value to less then the $2,000,000 limit? Depends on what the trust says. But normally the trust will provide a process (either by calculation or by election or both) for reducing the amount that applies to the marital deduction. Remember, though, that if this is a marital deduction "Q-TIP" election, it has to be exercised when the estate tax return is originally filed. Stu -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Bill Brown on October 18, 2008, 6:19 pm Please log in for more thread options Electing the alternative valuation date is only an option if two criteria are met. The total value of the taxable estate must be lower on the alternative date and the estate tax must be lower. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Similar Threads Posted House in Bypass Trust eligible for exemption? April 2, 2008, 5:54 pm Special Needs Trust owning and renting a house to the trust beneficiary February 5, 2007, 1:51 am Reform a Credit Shelter Trust to make it a Grantor Trust? November 19, 2007, 6:10 pm Is the Credit Shelter Trust a Grantor Trust? September 24, 2007, 8:48 pm Re: Is the Credit Shelter Trust a Grantor Trust? September 28, 2007, 3:59 pm Re: Is the Credit Shelter Trust a Grantor Trust? October 8, 2007, 6:43 pm Re: Is the Credit Shelter Trust a Grantor Trust? October 9, 2007, 8:28 pm Re: Is the Credit Shelter Trust a Grantor Trust? October 9, 2007, 8:28 pm Re: Is the Credit Shelter Trust a Grantor Trust? October 11, 2007, 12:41 am Re: Is the Credit Shelter Trust a Grantor Trust? October 11, 2007, 12:41 am