Table of Contents

Course Learning Objectives. v

Description / Introduction. v

Part 1 - Estates, Estate Taxes and Estate Planning Tools. 1

Estate Tax Defined. 1

Estate Planning. 1

Attorney. 1

Accountant 2

Insurance Agents. 2

Financial Planner 2

Administration. 2

Internal Revenue Service (IRS) 2

Intestacy. 3

Probate Court 3

Trustee. 3

Executor / Executrix. 3

Family Responsibilities. 3

Tools and Techniques for Estate Planning. 4

The Probate Process. 4

Disposing of Property using a Will 5

Disposing of Property without a Will 5

Non-Probate Transfers. 6

Joint Tenancy with Right of Survivorship. 6

Tenancy in Common. 6

Retirement Accounts. 6

Payable on Death Accounts (POD) 6

Life Insurance of a Decedent 7

Gifts Completed. 7

Transfers Executed by Means of a Trust 7

Trusts. 7

Trusts Defined. 7

Reasons for Using a Trust 8

Living vs. Testamentary Trusts. 9

Building Blocks of a Trust 9

Trusts - Revocable. 9

Trusts - Living. 9

Reversion Defined. 9

Living Trust Advantages. 10

Living Trust Disadvantages. 10

Pour-Over Will 10

Trusts - Irrevocable. 10

Trusts - Testamentary. 11

The Taxation of Trusts. 11

Grantor Trusts. 11

Grantor Retained Income Trusts. 12

Using Revocable Trusts. 13

Estates Compared to Living Trusts. 13

Using Irrevocable Trusts. 14

2018 Trust Income Tax Rates. 14

Capital Gains Treatment in Trusts. 14

Deduction of Estate Planning Expenses. 14

Deduction of Expenses. 15

Gift Tax with Respect to Trusts. 15

Estate Tax with Respect to Trusts. 15

Unlimited Marital Deduction. 16

Marital Deduction Trust 16

Qualified Terminable Interest Property (QTIP) Trust 16

“A-B” Trusts. 17

“A-B-C” (QTIP) Trust 18

Tax Basis. 19

Alternative Valuation. 19

Revocable Living Trust Clauses. 19

Identification Clause. 19

Trustee Clause. 19

Property Transfer Clause. 19

Revocation and Amendment Clause. 20

Income and Principle Clause. 20

Recital Clause. 20

Trustee Requirements. 20

Advantages of Hiring Corporate Trustees. 20

Advantages of Hiring Individual Trustees. 21

Trust Termination Clause. 21

Life Insurance Trust 21

Annual gift tax exclusion. 21

Unlimited Donees. 21

Gifts Exceeding $15,000. 22

Lifetime Exclusion for an Estate. 22

Unlimited marital deduction. 22

Gift Splitting. 23

Consent to Gift Split Applies to All Gifts. 23

IRC Reference. 24

5-year deferral and 10-year installment payment 25

Installment sale to family members. 25

Self-canceling installment notes. 25

Private annuities. 25

Crummey Trusts. 26

Charitable Remainder Trusts. 26

Minor Trusts. 26

Family Limited Partnerships. 27

Grantor Retained Annuity Trust 27

Qualified Personal Residence Trusts (QPRTs) 27

Grantor Retained Annuity Trusts (GRATs) 28

Grantor Retained Unitrusts (GRUTs) 28

Past and Present Exemptions and Estate Tax Rates. 28

Estate Planning Goals. 28

Estate Plan Outcomes. 29

Types of Estate Taxes. 29

Part 1 Review Questions. 30

Part 2 - Estate Tax Calculation. 31

The Gross Estate. 31

Liabilities of the Decedent 32

Administration Expenses. 32

Court decree. 32

Consent decree. 32

For example. 33

Debts. 33

IRC Reference. 33

Dower, Curtesy, or Statutory Share of the Living Spouse. 33

Power of Appointment 34

Joint Tenants with Right to Survivorship. 34

Transferred property in which the decedent retained an interest 35

Government Obligations. 36

Life Insurance Proceeds. 36

Annuities and Survivor Benefits. 37

Medical Insurance Expenses. 37

Medical Insurance Reimbursements. 37

Gifts within 3 Years of Death. 38

IRC Reference. 38

IRC Reference. 38

Example. 39

Gifts of Life Insurance. 40

“Inter Vivos” Transfers. 40

Community Property. 40

IRC Reference. 41

Qualified Terminable Interest Property (QTIP) 42

IRC Reference. 43

Part 2 Review Questions. 44

Part 3 - Valuing the Gross Estate. 46

Deductions for the Gross Estate. 48

Expenses. 48

IRC Reference. 50

IRC Reference. 51

Charitable Contributions. 51

Marital Transfers. 52

State Death Tax Deduction. 54

Gross Estate Credits. 55

Applicable credit amount (ACA). 55

Portability of unused applicable exclusion amount 55

Portability provisions. 55

IRC Reference. 57

Irrevocable Election of Portability. 58

Individuals that can Make a Portability Election for an Estate. 58

Portability Examples. 59

Portability Provisions to the Surviving Spouse's Estate. 59

IRC Reference. 60

Portability Provisions when Surviving Spouse is Not a US Citizen. 61

IRC Reference. 63

Examine returns of deceased spouses. 64

Estates of nonresidents who are not citizens DSUE amounts. 64

Federal estate tax paid on prior transfers. 64

Foreign Death Taxes. 64

Credit for gift taxes on pre-1977 gifts. 65

IRC Reference. 65

Estate Tax Payment and Return. 66

Reporting of value not required for certain property. 66

Return Due Dates. 67

IRC Reference. 69

Alternate Valuation Method Recapture. 69

Assessment Period. 70

Basis reporting requirement 70

Portability election for unused applicable exclusion amount 70

IRC Reference. 71

Tax charged to property. 72

Estate taxation on nonresident aliens. 72

IRC Reference. 74

Part 3 Review Questions. 76

Part 4 - Gift Taxes and Generation Skipping Taxes. 78

Gift Tax Defined. 78

Unified Transfer Tax System.. 79

Lifetime Exclusion for an Estate. 79

Why Gift Taxes are Required. 79

Timing of a Gift 80

Gifts to an Entity. 80

Crummey Trusts. 80

Gifts to Minors. 81

Outright gifts. 81

2018 Trust Tax Brackets and Rates on Ordinary Income. 82

Guardianship. 82

Custodial arrangements. 82

Present Interest of Gifts to a Minor. 82

Qualified State Tuition Programs. 83

Not all Gifts are Subject to Gift Tax. 83

Gift that do not exceed annual exclusion. 83

Gifts to a Spouse. 83

Charitable Gifts. 83

Transfers to charitable organizations not subject to federal gift tax. 84

Political Contributions. 84

Qualified Tuition Payments. 84

Medical Costs. 84

Annual Exclusion Amount 84

Unlimited Donees. 84

Gifts Exceeding $15,000. 85

Present Interest vs. Future Interest 85

Gift Splitting. 86

Consent to Gift Split Applies to All Gifts. 86

Gift Splitting Requirements. 88

Community Property States. 90

Gift Tax Return. 90

Gift Tax Return Due Date: 92

Valuation. 92

Real Estate. 93

Valuation Understatement 94

Computing Gift Tax. 95

Generation Skipping Transfers. 96

Transfer Types. 96

Exemption Amount 96

How to compute generation skipping transfer tax. 97

Generation Skipping Terminations Tax (GSTT) 97

Generation Skipping Distribution Tax (GSDT) 98

Direct Skip Gift Tax (DSGT) 98

Direct Skip Estate Tax (DSET) 98

Filing the return and paying the GSTT. 98

Gifts and bequests from expatriates. 99

Tax Cuts and Jobs Act – Changes related to Estate, Gift, and Generation-Skipping Transfers Taxes. 101

Modifications to Estate, Gift, and Generation-Skipping Transfers Taxes. 101

I. Other Provisions. 108

1. Temporarily allow increased contributions to ABLE accounts, and allow contributions to be eligible for saver’s credit 108

Part 4 Review Questions. 113

Review Questions Feedback. 115

Part 1 Review Questions Feedback. 115

Part 2 Review Questions Feedback. 118

Part 3 Review Questions Feedback. 121

Part 4 Review Questions Feedback. 125

Glossary. 128

Index. 131

Final Examination. 134

CPASelfstudy.com Course Evaluation. 142