This two-part article examines developments in estate planning and compliance between June 2011 and May 2012. Part I discusses developments regarding gift tax and trusts, an outlook on estate tax reform, and annual inflation adjustments for 2012 relevant to estate, gift, and generation-skipping transfer (GST) tax. Part II, in the October issue, will cover developments in estate tax.
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TOPICS
Taxation of Estates & Trusts
State Taxation of Trusts: Credit for Taxes Paid to Other States
The state income taxation of trusts and estates has become an increasingly complicated and challenging task for trustees and their tax advisers.
Draft Form 706 Provides Check Box to Not Elect Portability
Draft Form 706 addresses portability of a deceased spouse’s unused estate and gift tax exclusion amount and provides a check box for the executor to opt out of electing portability of the unused portion.
Computing the Includible Portion for Graduated GRATs
Recent regulations provide practitioners a reminder that planning discussions with clients considering graduated GRATs should include a review of the potential consequences presented if the grantor dies prematurely
IRS Issues Rules on Portability Election
The IRS has issued temporary regulations on how to elect to use a deceased spouse’s unused exclusion from estate taxes, also known as the portability election.
Final Regs. Issued on Ordering Rules for Estates and Trusts
The IRS issued final regulations requiring that a provision in a trust or will that indicates the source out of which amounts are to be paid must have an independent economic effect aside from income tax consequences if the allocation is to be respected for federal tax purposes.
Trust Deductions: Knight, Prop. Regs. Still Govern
Preparers of fiduciary tax returns for tax years 2011 and 2012 will not be required to unbundle fiduciary fees, but they still must treat payments readily identifiable as subject to the 2% floor separately from a bundled fiduciary fee.
IRS Extends Portability Election for Some Estates
Some executors who missed a deadline to apply a decedent’s unused estate and gift tax exclusion amount to a surviving spouse received an extension.
Important Lessons Regarding Valuation Issues
Taxpayers with high income and high net worth should be diligent regarding the valuation process and ensure they have used thorough and well-documented appraisal methodologies.
Transfers to Skip Trusts in 2010: Not Necessarily Free from GST Tax
Planning opportunities exist to minimize the generation-skipping transfer tax by severing trusts to which generation-skipping transfers were made in 2010.
Estate Planning for International Clients
It is essential for clients with multiple citizenship or residency to understand that the timing and manner of cross-border wealth transfers fundamentally affect their ability to minimize tax burdens.
Estimated Amount of State Income Tax Claim Not Deductible on Estate Tax Return
The Ninth Circuit held that an estate could deduct as a claim against it only the amount of state income tax and interest with respect to the income on a transaction that the estate ultimately paid, not the amount that it estimated at the time of the decedent’s death it would have to pay on the income.
Portability Election Extended for Some Estates
Some executors who missed a deadline to apply a decedent’s unused estate and gift tax exclusion amount to a surviving spouse received an extension Feb. 17.
Tax Court Rules Notice Not Required for Crummey Powers
In Turner, the Tax Court ruled that actual notice of a benficiary’s Crummey withdrawal right is not required to satisfy the present-interest requirement for the gift tax annual exclusion.
Estate Tax Treatment of Grantor Retained Interests Clarified
The IRS issued final regulations providing guidance on the portion of property (held in trust or otherwise) includible in the grantor’s gross estate if the grantor has retained the use of the property or the right to an annuity, unitrust, graduated retained interest, or other payment from the property for life, for any period not ascertainable without reference to the grantor’s death, or for a period that does not in fact end before the grantor’s death.
Final Regs. on Listed Transactions for GST Tax
The IRS issued final regulations that add transactions that reduce or eliminate the GST tax as listed transactions or transactions of interest and require the disclosure of those transactions under Sec. 6011.
Estate May Deduct Interest on Loan Between Two Trusts
The Tax Court held that an estate could deduct as an administration expense interest incurred when a trust that was part of the estate borrowed funds to enable the estate to pay its federal estate tax.
New Tax Provisions for 2012
With the ringing in of the new year, several new tax provisions took effect.
Estate Tax Protective Claim and Portability Election Procedures Detailed
The IRS issued guidance on filing a protective claim for refund of estate tax and notifying the IRS that the claim is ready for consideration, and to alert executors to the need to file Form 706 to make an election allowing the decedent’s spouse to receive the decedent’s unused estate and gift tax exemption.
The 10 Most Powerful Postmortem Planning Pointers for Trusts and Estates
Taking control of the postmortem planning process can be a powerful way to save tax dollars for the decedent’s estate and family.
TAX PRACTICE MANAGEMENT
2025 tax software survey
AICPA members in tax practice assess how their return preparation software performed during tax season and offer insights into their procedures.
