1 Gifts n Generosity / personal motives n estate reduction n income shifting (‘86 Act) n income...

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Gifts

Generosity / personal motives estate reduction income shifting (‘86 Act) income tax deduction (charity) issue of control

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Gift

1. Property lawdonative intentdelivery

2. Income taxdetached and disinterested

generosity

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Gift (cont.)

3. Gift tax less than adequate consideration in

money or money’s worthdirect / indirectpart gift / part salebasis issues

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Indirect Gift

Mom & Dad50% stock$1,500,000

FAMCO

Daughter50% stock$1,500,000

FAMCO redeems Mom & Dad’s stock for cash and notes totaling $1,000,000.

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2503 Taxable Gifts

(a) total amount of gifts

(b) annual exclusionpresent interest rule$10,000 / donee inflation adjustment

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2503 Taxable Gifts (cont.)

(c) transfer for minor control issue present interest if

by or for benefitno substantial restrictionpass at age 21estate or GPA if death

UGMA / UTMA

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2503 Taxable Gifts (cont.)

(e) educational / medical exclusionqualified transferto provider

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2503 Taxable Gifts (cont.)

2513 - split gift electionspouse one halfconsentall

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Trusts

Legal title

v.

Beneficial ownership (equitable)

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Trusts

A) Expressprivatepublic inter vivostestamentaryactivepassive / stand by

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Trusts

A) Settlor, trustor, grantor

B) Trustee

C) Beneficiary

D) Capacity

E) Intentcy pres

F) Res

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Trusts

Issues of Income and Principal Accumulation trust Discretionary trust Ascertainable standard provision Income trust Annuity trust Total return unitrust Sprinkle trust

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Trusts

Asset ProtectionControlWealth transfer isuesPerpetuities

Asset ManagementTax SavingsSpend Thrift Provisions

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Trusts

Asset Protection (cont.)Alaska and Delaware TrustsOffshore TrustsSpecial Needs Trusts

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Trusts

Trusts as a Separate Taxable Entity

Estate TrustBene

IndividualBene’s

IndividualBene’s

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Life Estate

A to B for lifereversionper autre vieterm of yearssuccessive terms and Rule Against

Perpetuitiesremainder

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Remainder

a. vested

A to B for life, remainder to C.

b. contingent

A to B for life, remainder to C if then living.

A to B for life, remainder to C if attains age 35, if not, to D.

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Crummey Powers

demand right judicial historyIRS resistance

usesILIT2503 (c) window2503 (b) trust

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Crummey Powers (cont.)

$70,000 / year

2 daughters: Crummey +

½ inc.; ½ rem 5 grandchildren: Crummey +

contingent interests

Trust