Product Image

Estate Planning Essentials:Tax Relief for Your Clients' Estates

Author/Moderator: Carla Gordon, CFP, CSA, MSFS
Publisher: AICPA
Availability: In Stock
See Below To Add To Cart
View Online Catalog
Add This Page

Description

What is the estate tax? What is the gift tax? How are they inter-related? Explore the use of wills, trusts, and life insurance as vehicles to reduce the estate tax. Whether your client is accumulating wealth or planning for its distribution upon death, you can advise them on the most tax efficient way to structure their affairs to minimize the taxation on the transfer of their wealth to intended beneficiaries.

Objectives: 
  • Grasp the structure of the estate and gift tax
  • Minimize transfer taxes by incorporating exemptions and credits to due
  • Advise clients on filing requirements for Forms 706 and 709

Prerequisite:  None

Table of Contents

  • Chapter 1 - Understanding Estate Planning
    • Learning Objectives
    • Introduction
    • Obstacles to Estate Planning
      • The CPA’s Role
      • Limits on the CPA’s Role
    • The Estate
      • Gross Estate
      • Probate Estate
    • Data Collection for Estate Planning
    • Estate Planning Documents
    • Estate Planning Objectives
    • Concerns and Constraints
    • Beneficiary Competency
    • Financial Needs
    • Life Expectancy and Health
    • Value of the Gross Estate
    • Titling of Owned Property
    • Liquidity of Property
    • State Laws
    • Implementation and Monitoring
    • Summary
    • Questions
  • Chapter 2 - Unified Transfer Taxation
    • Learning Objectives
    • Introduction
    • Estate Tax
      • No Tax on Smaller Estates
      • Exemption Equivalent
    • Gift Tax
    • Changes Under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)
      • Gift Taxation after 2009
      • Annual Gift Tax Exclusion
      • Gift Splitting
    • Capital Gains Tax Considerations
      • Carryover Basis for Lifetime Gifts
      • Step-Up in Basis for Bequests
    • Valuing Property for Transfer Tax Purposes
    • Alternate (Alternative) Valuation Date
    • Special Use Valuation
    • Valuing Publicly Traded Securities
      • Valuing Publicly Traded Stocks
      • Blockage Discount
      • Valuing Publicly Traded Bonds
      • Valuing Nonmarketable/Nonnegotiable Bonds
    • Valuing Closely Held Stock
      • Minority Discount
      • Lack of Marketability Discount
    • Valuing Life Insurance
      • New Policies
      • Existing Policies
      • Paid-Up Policies
    • Valuing Commercial Annuities
      • Joint and Survivor Annuity
      • Valuing Private Annuities
    • Valuing Real Estate
      • Co-Ownership Considerations
    • Valuing Life Estates, Remainder Interests, and Reversionary Interests
      • Valuing a Term Certain Annuity
      • Valuing a Remainder Interest in a Trust
      • Valuing a Term Income Interest in a Trust
      • Valuing a Single Life Annuity
      • Valuing a Life Income Interest from a Trust
      • Valuing the Remainder Interest from a Trust also Including a Life Income Interest
    • Estate Freezing
      • Substantial Interest Rule
      • Valuing Transferred and Retained Interests
      • Qualified Payments
      • Other Rights Devalue the Retained Interest
      • Preferred Stock Recapitalization
      • Transfer Tax Implications
    • Qualified Personal Residence Trust (QPRT)
      • QPRT Example: Meet the Fields
    • Summary
    • Questions
  • Chapter 3 - Federal Estate Tax
    • Learning Objectives
    • Introduction
    • The Gross Estate
    • Owned Property
    • Tangible Personal Property
    • Intangible Personal Property
    • Property Subject to Indebtedness
    • Property Owned in Joint Tenancy with Rights of Survivorship or Tenancy by the Entirety
    • Gifts Made within Three Years of Death
    • Gift Taxes Paid within Three Years of Death
    • Retained Interests in Property
    • Reversionary Interests in Property
    • Life Insurance on Which the Decedent Held Ownership Incidents
    • Joint and Survivor Annuities
    • Powers of Appointment
      • General Power of Appointment
      • Limited Power of Appointment
    • Special Exclusion for Family-Owned Businesses
      • Determining the Exclusion Amount
      • Changes to Family Business Rules Under EGTRRA 2001
      • Recapture Rules
    • Determining the Adjusted Gross Estate (AGE)
      • Administrative Fees
      • Deductible Debts of the Decedent
      • Casualty and Theft Losses
    • The Taxable Estate
      • Unlimited Marital Deduction
      • Qualifying Terminal Interest Property for the Marital Deduction
      • Unlimited Charitable Deduction
    • Tentative Tax Base
    • Net Estate Tax
      • Applicable Credit Amount
      • Credit for State Death Taxes
      • Reduction of the State Death Tax Credit under EGTRRA
      • Credit for Gift Tax on Gifts made before 1977
      • Credit for Foreign Death Taxes
      • Credit for Tax on Prior Transfers
      • Deaths More than Two Years Apart
    • Calculating Federal Estate Tax
    • Federal Estate Tax Return
    • The Generation-Skipping Transfer Tax
    • Reporting the Generation-Skipping Transfer Tax
      • Lifetime Gifts
    • Testamentary Bequests
      • Transfers in Trust
      • Valuing the Transferred Property
      • Transfers not Subject to the Tax
      • Gifts in Trust
      • Direct Skips
      • Skips Involving Relatives
      • Skips Involving Non-Relatives
      • GSTT under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)
    • Summary
    • Questions
  • Chapter 4 - Property Ownership and Powers of Appointment
    • Learning Objectives
    • Introduction
    • Sole Ownership
    • Joint Tenancy with Right of Survivorship (JTWROS)
      • Probate Avoidance
      • Income Tax Considerations
      • Capital Gains Considerations
    • Estate Tax Consideration with JTWROS Property
      • Step-Up in Basis
      • Nonspousal JTWROS
      • Gift Tax Implications
    • Tenancy by the Entirety
      • Gift Tax Implications
      • Estate Tax Implications
    • Community Property
      • Quasi-Community Property
      • Separate versus Community Property
      • Commingled Property
      • Estate Tax Implications
      • Gift Tax Implications
    • Tenancy in Common
      • No Survivorship Rights
    • Powers of Appointment
    • General Powers of Appointment
      • Gift Tax Implications for a General Power of Appointment
      • Lapse of the Power
      • Estate Tax Implications for General Powers of Appointment
    • Limited Powers of Appointment
      • Ascertainable Standard
      • Special Power of Appointment
    • Summary
    • Questions
  • Chapter 5 - Personal Gifting and the Federal Gift Tax
    • Learning Objectives
    • Introduction
    • Advising the Client as to Gifting
      • Donee Selection
      • A Completed Gift
    • Tax Implications of Gifting
      • Estate/Gift Tax Implications of Lifetime Gifts
    • Taxation of Gifts under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) 5-6 Gift Taxation after 2009
    • The Annual Gift Tax Exclusion
      • Present Interest Considerations
      • Present Interest versus Remainder Interest
      • Income Tax Implications
    • Gift Splitting
    • Choosing Property to Be Gifted
      • Cash Gifts
      • Gifting Appreciated Property
      • Basis in Appreciated Property
      • Potential Pitfall with Gifts of Appreciated Property
    • Gifts of Property Valued below Basis
    • Gifts of Depreciated Property
    • Gifts of Life Insurance Policies
    • Gifts of Closely Held Stock
      • Gifts of Property in Other States
    • Gifts to Minors
      • Income Tax Implications with Gifts to Minors
      • Uniform Gift to Minors Act (UGMA)
      • Uniform Transfer to Minors Act (UTMA)
    • Trusts for Minor Beneficiaries
      • Income Trust – 2503(b) Trust
      • Minority Trust – 2503(c) Trust
    • Determining Federal Gift Tax
      • Exempt Transfers for Education and Medical Care
      • Gift Tax Marital Deduction
    • Exceptions to Terminable Interest Property Rules
    • Qualified Income Interest
      • Gifts to a Non-U.S. Citizen Spouse
      • Divorce Considerations
    • Gift Tax Charitable Deduction
      • Gift Tax Exemption for Qualified Disclaimer
    • The Applicable Credit
    • Calculating Federal Gift Tax
      • Single Taxpayer
      • Gift-Splitting
      • Marital Gift
    • Using the Applicable Credit
      • Aggregating Prior Gifts
    • The Federal Gift Tax Return
      • Gifts to Spouses
      • Split Gifts
      • Gifts to Charity
      • Gifts of a Future Interest
      • When to File
    • Summary
    • Questions
  • Chapter 6 - Marital and Charitable Deduction Planning
    • Learning Objectives
    • Introduction
    • The Marital Deduction
    • Terminable Interests
    • Exceptions to Terminable Interest Property Rules
    • Qualified Income Interest
    • Methods for Marital Transfer
    • Property in Joint Tenancy
    • Life Insurance
    • Marital Trusts
      • Marital Trust (“A” Trust)
      • Power of Appointment Trusts
      • QTIP Trust
      • Estate Trust
    • Nonmarital Trusts
      • Bypass Trust
    • Combining Marital and Nonmarital Trusts
      • No “Deduction” for Alien Spouse
    • Charitable Deductions
    • Why Depreciated Property Is Inappropriate for Charitable Giving
    • Requirements for Deductibility
    • Long-Term Gain Property
    • Types of Charitable Organizations
      • Public Charities
      • Private Nonoperating Foundations
    • Charitable Gifts Exceeding Income Limitations
    • Irrevocable Transfer
      • Present Value Gifts Deductible
    • Charitable Remainder Trusts
      • Charitable Remainder Annuity Trusts (CRATs)
      • Advantages of the Charitable Remainder Annuity Trust (CRAT)
      • Disadvantages of the Charitable Remainder Annuity Trust (CRAT)
      • Charitable Remainder Unit Trust (CRUT)
      • Advantages of the Charitable Remainder Unit Trust (CRUT)
      • Disadvantages of the Charitable Remainder Unit Trust (CRUT)
      • Design Issues for CRUTs
      • NIMCRUT
      • Pooled Income Fund
    • Other Charitable Giving Arrangements
      • Charitable Lead Trusts (CLTs)
      • Charitable Stock Bailout
      • Bargain Sale
      • Charitable Gift Annuity
      • Remainder Interests
      • Use Interests
    • Wealth Replacement to Heirs
      • Wealth Replacement Trust
    • Meet Leo Tracey
      • Advantages to the Outright Gift
      • Disadvantages to the Outright Gift
      • Charitable Remainder Trust
      • The Problem with Gifting the Antique Furniture
    • Summary
    • Questions
  • Chapter 7 - Wills, Intestacy, and Probate
    • Learning Objectives
    • Introduction
    • The Will
    • Advantages of Wills
    • Limitations to Wills
      • Dower and Curtesy
      • Disinheriting Children
      • Precatory Language
      • Limitations on Charitable Bequests
      • Testamentary Capacity
      • Operations of Law Supercede Wills
      • Homestead and Property Allowances
      • Funeral Instructions
    • Wills as Legal Instruments
      • Will versus Deed
    • Will Validity Requirements
    • Parties to Wills
      • The Executor/Executrix
      • Naming the Executor
      • Executor Competency
      • Executor Proximity
      • Executor Fees
      • Attorneys
    • Unique Will Arrangements
      • Holographic Will
      • Noncupative (Nuncupative) Will
    • Joint Wills
      • Joint and Mutual Will
      • Reciprocal Wills
      • Problems with Joint and Reciprocal Wills
    • Will Structure
      • Exordium Clause
      • Payment of Debts Clause/Debts Clause
      • Payment of Taxes Clause
      • Abatement Clause
      • Disposition of Tangible Personal Property Clause/Tangible Personal Property Clause
      • Disposition of Residential Real Estate Clause
      • Specific Bequests Clause (Dispositive Clause)
      • Ademption Clause
      • Power of Appointment Clause
      • Residuary Clause
      • Trust Provisions Clause
      • Appointment of Executors and Trustees Clause
      • Administrative and Investment Powers Clause
      • Appointment of Guardian for Minor Children
      • Simultaneous Death Clause
      • The Testimonium
      • The Attestation Clause
    • The Pourover Will
    • Intestacy
      • Unintentional Intestacy
      • Domicile
    • Pitfalls of Intestacy
      • Problems with Real Property
      • Intestacy Statutes
      • How Intestacy Addresses the Spouse
    • How Intestacy Addresses Children
      • Adopted Children
      • Illegitimate Children
      • Advancements
    • How Intestacy Addresses Siblings and Parents
    • The Probate Process
      • Probate is not about Taxation
    • Disadvantages of Probate
      • Delay
      • Publicity
    • Advantages of Probate
    • Ways to Avoid Probate
      • Joint Tenancy with Right of Survivorship
      • Transfer by Contract
      • Funded Revocable Trust
    • Ancillary Probate
    • Summary
    • Questions
  • Chapter 8 - Trusts
    • Learning Objectives
    • Introduction
    • Trust Parties
      • The Settlor
      • The Trustee
      • Selecting a Trustee
      • Duties of the Trustee
      • The Beneficiary
      • Incidental Beneficiaries
    • Trust Design and Structure
    • Complex versus Simple Trusts
    • Living versus Testamentary Trusts
      • Testamentary Trust
    • Revocable versus Irrevocable Trusts
      • The Revocable Trust
      • The Irrevocable Trust
    • Funded versus Unfunded Trusts
    • Common Trust Provisions
      • Discretionary Provision
      • Sprinkling (Spray) Provision
      • Spendthrift Provision
      • Rule against Perpetuities
    • Tax Implications of Trusts
      • Distributable Net Income (DNI)
      • Multiple Trust Considerations
      • Income Tax Considerations for Grantor Trusts
    • Gift Tax Implications
    • Using the Annual Gift Tax Exclusion
      • Concerns Regarding Non-Income-Producing Property
      • Exclusion Opportunities with an Irrevocable Trust
    • Crummey Powers (Crummey Provision)
      • Effective Withdrawal Limits under Crummey Powers
    • Additional Gifts in Trust
    • Types of Trusts
      • Clifford Trust
      • Spousal Remainder Trust
    • Types of Currently Popular Trusts
      • Support Trust
      • Pourover Trust
      • Asset Protection Trust
      • Generation Skipping Trust
      • The Funded Revocable (Living) Trust
      • Standby Trust
    • Summary
    • Questions
  • Chapter 9 - Intrafamily Property Transfers
    • Learning Objectives
    • Introduction
    • Bargain Sale
    • Installment Sale
    • Forgiving Installment Payments: Income and Gift Tax Consequences
    • Special Rules for Notes between Related Parties
    • Self-Canceling Installment Note (SCIN)
      • Reduction in Value
      • Gift and Estate Tax Implications
    • Private Annuity
      • Income Tax Implications
      • Estate Tax Implications
    • Remainder Interest Transactions (RITs)
      • Gift/Estate Tax Consequences
    • Split Interest Purchase (SPLIT)
      • Estate/Gift Tax Implications
    • Grantor Retained Income Trust (GRIT)
    • Effective Grantor Trusts
      • Grantor Retained Annuity Trust (GRAT)
      • Transfer Tax Implications
      • Grantor Retained Unit Trust (GRUT)
    • Business Interest Transfer Techniques
    • Personal Holding Company
      • Transfer Tax Implications
      • Income Tax Implications
    • S Corporation
    • Preferred Stock Recapitalization
      • Transfer Tax Implications
    • Family Limited Partnership (FLP)
      • Requirements for a Family Limited Partnership (FLP)
      • Income Tax Implications
      • Transfer Tax Implications
    • Sale-Leaseback
      • Income Tax Implications
      • Transfer Tax Implications
    • Gift-Leaseback
    • Summary
    • Questions
  • Chapter 10 - Life Insurance Contracts in Estate and Succession Planning
    • Learning Objectives
    • Introduction
    • Life Insurance as a Financial Planning Tool
      • Joint Life Insurance (First to Die)
      • Joint and Survivor Life Insurance (Second to Die)
      • Using Joint and Survivor Life Insurance in Estate and Financial Planning
      • Split Dollar Life Insurance
      • Using Split Dollar Life Insurance in Estate and Financial Planning
    • Life Insurance to Fund Buy/Sell Agreements
    • Cross Purchase Buy/Sell Agreement
      • Design Considerations for Cross Purchase Buy/Sell Agreements
    • Stock Redemption (Entity) Buy/Sell Agreement
      • Tax Implications
      • Choosing the Arrangement
      • Key Person Life Insurance
      • Group Term Life Insurance
    • Tax Implications of Insurance
    • Life Insurance Trusts
    • Irrevocable Life Insurance Trust
    • Funded Irrevocable Life Insurance Trust
      • Unfunded Irrevocable Life Insurance Trust
      • Design Considerations
      • Crummey Powers
    • Family Split Dollar Life Insurance
    • Transfer for Value
    • Accelerated Benefits
      • Accelerated Benefits in the Estate Plan
    • Installment Payout of Death Benefits (Settlement Options)
      • Tax Implications of Installment Payouts
    • Gift Tax Consequences of Life Insurance
      • New Policies
      • Existing Policies
      • Paid-Up Policies
    • Estate Tax Consequences of Life Insurance
      • Estate as Beneficiary
    • Beneficiary Decisions
      • Revocable versus Irrevocable Designations
      • The Common Disaster Clause
    • Annuities
      • Annuitizing the Contract: Payout Options
      • Fixed versus Variable Annuity
    • Income Tax Consequences of Annuities
    • Estate Tax Consequences of Annuities
      • Joint and Survivor Annuity
    • Summary
    • Questions
  • Chapter 11 - Postmortem Planning
    • Learning Objectives
    • Introduction
    • Will Contests
    • Spousal Election against the Will
    • Family Settlement Agreements
    • Homestead Allowance
    • Exempt Property Award
    • QTIP Election
    • Disclaimers
      • Maximizing the Unified Credit through Disclaiming
      • Maximizing the Marital Deduction through Disclaiming
      • Qualified Disclaimer
    • Disclaimer Trust
      • Disclaiming a Joint Interest
    • Postmortem Income Tax Strategies
      • Comparing Tax Rates
      • Medical Expenses
      • Estate Administration Expenses
      • Executor Fees
    • United States Savings Bonds
    • Timing Considerations
      • Joint Filing
      • The Estate’s Tax Year
      • Alternate
    • Liquidity Planning
      • Special Use Valuation
    • Section 303 Redemption
      • Determining Eligibility
    • Installment Payment of Estate Taxes under Section 6166
      • A Qualifying Estate
    • Increasing Basis in Partnership Assets
    • Summary
    • Questions
  • Chapter 12 - Latest Developments

737110

Excerpts

Chapter 1 - Understanding Estate Planning

Learning Objectives


After reading this chapter, you will be able to
• Explain why clients may resist the estate planning process.

• Evaluate the role of the financial planner in the estate planning process.

• Discuss the difference between estate planning advice and the unauthorized practice of law.

• Distinguish between the gross estate and the probate estate.

• Evaluate documents needed to begin the estate planning process.

• Recognize typical estate planning objectives.

• Determine how client constraints affect estate planning alternatives.

• Discuss why the estate plan should be monitored and may need to be changed.
Introduction

It is important that CPAs and financial planners recognize that there is more to estate planning than minimizing estate tax. An effective estate plan considers the accumulation, preservation, and distribution of a client’s property in light of that individual’s objectives and ever-changing tax rules. Arguably, one’s estate plan is linked to one’s retirement plan and one’s investment plan. If the retirement plan and investments in general are successful, the client leaves property behind at death. Insurance planning is likely to influence the estate plan significantly. Life insurance not only provides for survivors, but also is in itself property with potential estate tax implications. The presence of disability, property and liability insurance coverage for asset protection in the financial plan may greatly affect the amount of a client’s property in life and at death.

The client may have the objective to pass investments or other property to spouses, children, or grandchildren but worries that such recipients (donees) have little, if any, ability to manage money, investments, or property. An effective estate plan can provide investment or property management as needed. Many of the rules affecting an individual’s estate are state statutes. Where a client holds property in more than one state, a proper plan prevents survivors from feeling trapped in a maze of conflicting states’ laws.

Under tax statues operating in 2008, a married couple can transfer property well exceeding $4 million with no shrinkage from estate tax. Under the law that took effect in 2002, that number rises to $7 million in 2009. Under current law, in 2010, federal estate tax will be eliminated altogether (although this elimination of the tax is subject to the “sunset” provision of the 2001 Tax Act, which would reinstate the tax under prior rules in 2011). In the estate planning arena, planners must consider both the big picture and the small picture; clients may fret more over Grandma’s cameo brooch than they do about the IRS.

Obstacles to Estate Planning


Many clients resist estate planning because contemplating one’s own death and the death of one’s spouse creates a knot in the stomach. Other clients may avoid estate planning due to family feuds and tensions. Some clients may have good intentions about preparing estate documents, but perceive themselves as too young or too busy to address estate planning now.

The CPA’s Role

The accountant is likely to find himself or herself in the role of motivator when it comes to the client’s estate plan. The more knowledgeable the planner is about the benefits of an effective estate plan, the better able that planner is to convince clients to implement the process.

Tax-saving opportunities are significant for clients with individual net worth exceeding $2 million. The amount of property that can be transferred after death without transfer tax rises dramatically through tax year 2010, when the amount becomes unlimited. Additionally, married couples have planning opportunities not available to single persons. However, without knowledge about marital transfers, careless estate planning can significantly shrink the amount of family wealth that is ultimately passed to heirs.

Often, families have planning needs that relate little to taxes. Estate planning is crucial for families with minor children in order to determine who will care for them and their property if both parents die. Dependents who are physically or mentally challenged may require special consideration in an estate plan.

Limits on the CPA’s Role

While the accountant or financial planner can lead the client in the estate planning endeavor, the planner should take care not to engage in activities that might be perceived as the unauthorized practice of law. Unless the CPA is a licensed attorney, he or she should not prepare contracts or other papers such as wills and trusts that document a client’s legal rights. Nor should the CPA render legal opinions, unless he or she is a licensed attorney.

However, the accountant will often be asked to make referrals to attorneys in the area who can provide legal services to help the client implement and monitor the estate plan. The CPA is wise to establish referral relationships with the best professionals in the area. Both written and oral recommendations should express that while the CPA/planner diligently reviews the competence of recommended professionals, that CPA/planner is not responsible for recommendations or actions of others.

The Estate

An individual’s estate contains all property to which the individual holds title, as well as any interests or rights in certain property.

Gross Estate

According to federal tax law, the gross estate is the total value of all property interests owned by an individual at the time of his or her death.

Probate Estate

The probate estate includes all property interests that pass under a will. Probate property also includes property subject to state court administration, presuming an individual dies without a will. This is an intestate distribution.

Certain items of property may be in the gross estate but are not in the probate estate. Examples of such property include retirement plan assets, life insurance death benefits, and jointly owned property.

In many states, tangible items of personal property (for example, the decedent’s clothing), are not considered part of the probate estate or subject to the probate process.

737110

Videocourse Details

NASBA Field of Study: Taxes
Level: Basic
Recommended CPE Credit: 12
Text
Product# 737110
Availability:In Stock
Regular:$198.75
AICPA Member:$159.00
Your Price:$198.75
To receive your AICPA member discount, Sign In now, or Register using your AICPA membership number.
Choose the Standing Order Option and get these discounts on your initial purchase:

Publications--10% discount
CPE Self-Study--20% discount

Each new future annual edition will then be automatically shipped to you at a 10% discount.