Wealth & Risk Management Blog

William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘Widow’

IRS QTIP Ruling: Perils of Future Changes

Posted by William Byrnes on August 25, 2011


Clients often want to use Qualified Terminal Interest Property trusts (QTIPs) to separate certain funds to care for a surviving spouse, while retaining some measure of control over the general distribution of the funds—whether they will be distributed to children or a charity. But navigating the QTIP rules as client’s circumstances naturally endure change can be cumbersome.  The danger exists when errors that seem trivial, result in eliminating any transfer tax benefit of the trust.

A recent IRS private letter ruling (PLR 201117005) provides us with a good reminder of the QTIP rules and an example of creative QTIP planning that provides the surviving spouse with adequate lifetime income while giving the grantor (and the surviving spouse) a degree of post-death control over disposition of the trust assets.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber)

For a graphic illustration of the QTIP trust, see the Concepts Illustrated practice aid at G—Credit Shelter Trust and QTIP Trust.

For coverage of QTIPs and other techniques useful in estate planning for blended families, see the Advisor’s Journal article Estate Planning for Blended Families (CC 07-16).

For in-depth analysis of marital deduction planning, see Advisor’s Main Library: G—The Marital Deduction.

Posted in Uncategorized | Tagged: , , , , , , , | Leave a Comment »

Does the New Estate Tax Make the Bypass Trust Obsolete?

Posted by William Byrnes on January 17, 2011


President Obama’s tax compromise introduces a new estate tax concept for 2011 and 2012, the deceased spouse unused exclusion amount (DSUEA).  Essentially, the DSUEA allows a surviving spouse to utilize the unused exclusion amount of the first spouse to die.  The new law raises an important planning question: Is the bypass (credit shelter) trust obsolete as an estate planning device? Also: Do existing bypass trusts need to be amended in light of the new law?

In general, under the new estate tax, an estate’s exclusion amount, referred to as its applicable exclusion amount, is the sum of two components: the basic exclusion amount and the DSUEA. The basic exclusion amount for estates of decedents dying in 2011 and 2012 is $5 million. The second part of the equation, the DSUEA, is the amount of the first-to-die spouse’s exclusion amount that is not used by the that spouse’s estate. Note that a surviving spouse’s DSUEA is equal to the unused exclusion amount of the surviving spouse’s last deceased spouse.  Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of Obama’s tax agreement, including its estate tax provisions, in Advisor’s Journal, see Obama Tax Agreement Faces Stiff Resistance in Congress (CC 10-112) and Obama Tax Agreement Passed by House (CC 10-117).

For in-depth analysis of the estate tax, see Advisor’s Main Library: Estate, Gift and GST Taxes.

Posted in Estate Tax | Tagged: , , , , , , , | Leave a Comment »

What’s Next for the Estate Tax?

Posted by William Byrnes on November 13, 2010


The estate tax is scheduled to explode in 2011. Analysts have assumed for years that Congress would act to fix the estate tax before it expired in 2010 and reverted to its pre-2001 levels in 2011, but it is looking more and more likely that the current Congress will hand the problem off to the next Congress on January 11, 2011.  Although movement during the lame duck session is possible, it is not likely to generate any positive action on the estate tax.

Whether Congress acts on the estate tax or not, 2011 will likely bring drastic changes to the estate tax, requiring your clients to do significant tinkering on their estate plans. In the interim, estate planning professionals will continue to use disclaimer planning as a stop gap measure to deal with 2010′ s estate tax uncertainty. For instance, rather than split an estate’s assets between credit shelter and marital deduction trusts—which is unnecessary when there is no estate tax—all of the assets are devised to the spouse or the marital deduction trust.  The surviving spouse can then disclaim up to the tax-free amount— … Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the estate tax conundrum in Advisor�s Journal, see Estate Tax Chaos (CC 10-02).

For in-depth analysis of the federal estate tax, see Advisor�s Main Library: Section 2 A—Overview Of The Federal Estate Tax And Its Calculation.

Posted in Estate Tax | Tagged: , , , , , , , | Leave a Comment »

 
%d bloggers like this: