S1 died in December of 2013, when the exemption amount for the estate tax was $5,250,000. At his death, S1 owned property worth $12 mil. During his lifetime, S1 did not make any taxable gifts. At S1's death, an AsuperB Trust Plan was put into effect, with S1's property being put into the Super-B Trust. When S2 died in February of 2015, she owned property worth $1,430,000 S1's executor has not yet filed S1's estate tax return. Assume the value of the Super-B Trust has not changed during the period between S1's death and S2's death (i.e., still $12 mil.). When S1's estate tax return is filed, to what extent, if any, should S1's executor make the QTIP election for S1's $12 mil.super-B Trust? For this question, disregard the implications, if any, of the PTC. Also, assume that S1's executor will not elect portability with respect to any of S1's 2013 AEA.
a. Since the estate tax rates are the same in both 2013 and 2015, there is no advantage or disadvantage regarding the QTIP election in S1's estate--it doesn't matter.
b. S1's executor should make the QTIP election with respect to $4 mil. of the value in the Super-B Trust (i.e., a 1/3 QTIP election), which pushes S2's taxable estate to $5,430,000 and leaves S1's taxable estate at $6.5 mil.
c. None of the other answers is correct. See my Supporting Documents submission for my answer, reasoning, and/or computations.
d. S1's executor should not make the QTIP election with respect to the Super-B Trust, which leaves S2's taxable estate at $1,430,000 and leaves S1's taxable estate at $12 mil.
e. S1's executor should make the QTIP election with respect to the full $12 mil. of the value in the Super-B Trust (i.e., a 100% QTIP election), which pushes S2's taxable estate to $13,430,000 and leaves S1's taxable estate at $0.
f. S1's executor should make the QTIP election with respect to $6,750,000 of the value in the Super-B Trust, which pushes S2's taxable estate to $8,180,000 and leaves S1's taxable estate at $5,250,000.
EDIT QUESTION
At his death in 2012, Zoltan's will provided for the creation of a trust into which his entire $15 mil. estate was to be transferred. The terms of the trust provide for Zoltan's wife to receive the income from the trust for as long as she lives. Upon the death of Zoltan's widow, the trust is to be terminated and distributed in equal shares to Zoltan's surviving children (or to the grandchildren, in the event that a child pre-deceased Zoltan's widow), except that the trust would not be terminated until the youngest of the remainder beneficiaries of Zoltan's trust reached the age of 30. All of Zoltan's children were alive when he died, but all of the children had died by the time Zoltan's widow died. Because Zoltan had not used any of his GST exemption during his lifetime, his entire GST exemption ($5,120,000 in 2012) was automatically allocated to his testamentary trust at his death. On a timely filed estate tax return, Zoltan's executor made a $6,000,000 (i.e., 40%) QTIP election with respect to this trust. When Zoltan's widow died, the youngest grandchild was 25; therefore, the trust continued to hold the property for the benefit of the grandchildren for 5 more years. Determine the GST due, if any, at each of the following event dates.
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A.
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$2,998,504 (allow for rounding)
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B.
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$2,074,800 (allow for rounding)
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C.
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$ 3,457,800 (allow for rounding)
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D.
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$5,120,000
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E.
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None of the answers is correct. See my submission in Supporting Documents for my answer and/or computations.
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F.
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$7,000,000
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G.
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$3,143,679 (allow for rounding)
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H.
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$0
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I.
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$2,766,400 (allow for rounding)
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After the QTIP election, Zoltan s taxable estate is $9,000,000 ($15 mil. less $6 mil. MD). Zoltan's testamentary trust was funded with $13,642,000 (Zoltan's $15,000,000 TE less estate tax of $1,358,000).
- A. B. C. D. E. F. G. H. I. The death of Zoltan's widow in 2015, when the trust was worth $20 mil.
- A. B. C. D. E. F. G. H. I. When Zoltan s youngest grandchild reached the age of 30 and the trust property was distributed to the grandchildren, when trust value was $25 mil.
Xavier is unmarried. At his death in 2009, Xavier s will provided for the creation of a trust into which his entire estate was to be transferred ($7 mil. less $1,575,000 estate tax). The terms of the trust provide for Xavier's children to receive the income from the trust for as long as any of them still live. Upon the death of Xavier's last surviving child, the trust is to be terminated and distributed in equal shares to Xavier s surviving grandchildren, except that the trust would not be terminated until the youngest of Xavier s surviving grandchildren reached the age of 30. Because Xavier had not used any of his GST exemption during his lifetime, his entire GST exemption ($3.5 mil. in 2009) was automatically allocated to his testamentary trust at his death. When the last of Xavier s children died in 2015, the youngest grandchild was 25; therefore, the trust continued to hold the property for the benefit of the grandchildren for 5 more years. Determine the GST due, if any, at each of the following event dates. Allow for rounding in answers.
- A. B. C. D. E. F. G. H. I. Xavier's death, taxable estate is $7 mil. and his testamentary trust is funded in amount of $5,425,000
- A. B. C. D. E. F. G. H. I. The death of Xavier's last surviving child in 2015, when the trust was worth $10 mil.
- A. B. C. D. E. F. G. H. I. When Xavier s youngest grandchild reached the age of 30 and the trust property was distributed to the grandchildren trust value at this time was $18.5 mil.
A. $1,074,286
B. None of the answers is correct. See my submission in Supporting Documents for my answer and/or computations.
C. $2,000,000
D. $2,800,000
E. $1,395,000
F. $1,419,355 (allow for rounding)
G. $0
H. $990,000
I. $3.5 mil.
When Norbert died in 2015, he was married and owned property worth $12 mil. In previous years (prior to 2011), Norbert had made taxable gifts totaling $3 mil. (all of which went to skip persons and used $3,000,000 of Norbert's GST exemption). Norbert's will calls for the following trusts to be funded at his death, as needed: a bypass trust (i.e., a B Trust), to be funded at the lesser of Norbert's remaining AEA or remaining GST exemption (GST-exempt, not QTIP'd), and as many as 4 "C Trusts," each to be funded as Norbert's executor determines appropriate. Norbert's executor has determined that Norbert's taxable estate should equal his unused AEA. Be careful that you understand what the attributes of each C trust means. For each of the 5 trusts identified below, determine the amount at which each should be funded. If more than one answer seems to make sense, do what will provide the best GST planning results and/or result in the fewest trusts. If a trust should not be funded, select $0 as your answer.
- A. B. C. D. E. F. G. H. B Trust (not QTIP'd, 0%
- A. B. C. D. E. F. G. H. (not-QTIP'd,0% inclusion ratio)
- A. B. C. D. E. F. G. H. C Trust (not-QTIP'd,100% inclusion ratio)
- A. B. C. D. E. F. G. H. C Trust (QTIP'd,100% inclusion ratio)
- A. B. C. D. E. F. G. H. C Trust (QTIP'd,0% inclusion ratio)
A. $2,000,000.
B. $2,430,000.
C. $5,430,000.
D. $12,000,000.
E. $0.
F. $3,430,000
G. $4,430,000.
H. $7,570,000.
Lawrence died in 2015 leaving a taxable estate of $8,180,000. All of Lawrence's children had died leaving surviving children (i.e., Lawrence's grandchildren). Accordingly, Lawrence's entire estate was bequeathed to his grandchildren. Determine the GST due, if any, as a result of Lawrence's death. Hint: Don't forget about the effect of the estate tax on the GST tax base.
a. None of the other answers is correct. See my Supporting Documents submission for my answer/computations.
b. $3.2 mil.
c. $660,000
d. $1,100,000
e. $785,714
f. $0
g. $471,428
Lawrence died in 2015 leaving a taxable estate of $8,180,000. All of Lawrence's children are alive, and each is wealthy in his or her own right. Accordingly, Lawrence's entire estate was bequeathed to his grandchildren. Determine the GST due, if any, as a result of Lawrence's death. Hint: Don't forget the effect of the estate tax on the GST tax base. Another hint: The fact that Decedent's entire estate was bequeathed to grandchildren and there is no residuary estate to pay any GST tax is important. Allow for rounding.
a. $3.2 mil.
b. $660,000
c. $0
d. None of the other answers is correct. See my Supporting Documents submission for my answer/computations.
e. $471,428
f. $1,100,000
g. $785,714
Lawrence died in 2015 leaving a taxable estate of $8,180,000. All of Lawrence's children had died leaving surviving children (i.e., Lawrence's grandchildren). However, Lawrence has never been close to his grandchildren. On the other hand, Lawrence and his younger sister's grandchildren (i.e., his great-nephews and great-nieces) have always been very close--both Lawrence's sister and her children had died several years earlier. Lawrence's entire estate was bequeathed to his sister's grandchildren. Determine the GST due, if any, as a result of Lawrence's death. Hint: Don't forget about the effect of the estate tax on the GST tax base.
a. $0
b. $785,714
c. $1,100,000
d. $660,000
e. $471,428
f. None of the other answers is correct. See my Supporting Documents submission for my answer/computations.
g. $3.2 mil.
When two spouses (S1 & S2) die within a relative short time of each other, a tax-saving opportunity may present itself. The combination of the QTIP election and the prior transfer credit (PTC) may reduce the total estate tax owed by S1 and S2. For each of the statements below, select the answer that best represents the viability of the statement to this tax-saving technique.
- A. B. C. D. In S1's estate, the QTIP election should be made such that S1's taxable estate exactly equals his/her remaining AEA.
- A. B. C. D. In S1's estate, the QTIP election should be made such that S2's taxable estate exactly equals his/her remaining AEA. If S2's taxable estate already equals or exceeds his/her AEA, no QTIP election should be made in S1's estate.
- A. B. C. D. S1's executor makes the QTIP election such that S1 and S2's combined estate is divided equally, resulting in equal taxable estates.
- A. B. C. D. If S2's estate is larger than S1's and they want to reduce S2's taxable estate, S1's executor can make a reverse QTIP election, which will pull dollars from S2's TE into S1's TE.
A. This action by S1's executor will usually be a good starting point for optimizing the application of the QTIP/PTC technique. Further fine tuning using trial and error will likely be needed to find the optimal split between S1's and S2's taxable estate amounts.
B. This action by S1's executor is not even permitted under the law.
C. If this action is taken by S1's executor, S1's estate tax will be zero and therefore the PTC will be zero. As a result, the QTIP/PTC technique will have no positive impact on S1 and S2's combined estate tax.
D. At best, this action on the part of S1's executor will not provide optimal results for the QTIP/PTC technique. Indeed, it could result in the PTC being zero if either S1's or S2's taxable estate equaled his or her AEA.
S1 and S2 are married. Both are quite wealthy, each with a separate estate of $9,000,000 (i.e., $18,000,000 combined estate). S1 died on July 17, 2011, at the age of 70. At that time, S2's age was 65, and S2 was in poor health and not expected to live much longer. S1's will provided for his $9,000,000 estate to go into a trust, with an income interest for life going to S2 and the remainder going to S1's children from a previous marriage. S2 died on July 9, 2015. Her separate estate was still worth $9,000,000. Because S1's and S2's separate estates were already equal in value, S1's executor did not make any QTIP election when S1's estate tax return was filed, resulting in a 2011 estate tax of $1,400,000. Before considering the prior transfer credit, S2's 2015 estate tax was $1,428,000. Answer each of the following questions relating to the computation of S2's prior transfer credit. For this problem, assume the applicable federal rate is 4%.
- A. B. C. D. E. F. G. H. I. J. K. L. What is credit limit one?
- A. B. C. D. E. F. G. H. I. J. K. L. What is credit limit two?
- A. B. C. D. E. F. G. H. I. J. K. L. What is S2's prior transfer credit?
A. $1,448,496
B. $480,000
C. $528,091
D. $563,304
E. $1,146,712
F. None of the other answers is correct. See my Supporting Documents submission for my answer/calculations.
G. $0
H. $1,200,000
I. $1,500,000
J. $660,114