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20.2056(b)-7(h), Examples 7 and 8; (3)  The QTIP election was a protective election under Treasury Regulation Sec. Alternatively, which is more fun to contemplate, she might wish to augment/maximize her exemption so that she can use it to entice a new husband to marry her to gain that benefit (since a wealthy new husband could use her exemption on a gift tax return to protect gifts of his wealth to his children from a prior marriage). c. 65C,§ 1(d), as amended, and applicable to estates of decedents dying on or after January 1, 1986, the Massachusetts gross estate includes the value of all property transferred by the decedent within three years of the date of the decedent's death, except for the following: 1) a bona fide sale for full and adequate consideration; 2) property with a value of $10,000 or less transferred to any person during a calendar year; 3) property transferred more than three years before the date of death. The husband’s executor, confused by the complexity of the estate tax rules, meant to treat the trust that these assets passed to as a bypass trust. Qualified Terminable Interest Property (QTIP) - for Massachusetts estate tax purposes, property. c. 65C, S 1(f); iii) QTIP for marital deduction (Code § 2056), under M.G.L. An election under this section is irrevocable. c. 65C. 2) notwithstanding Code § 2040, the gross estate includes one-half of the value of any property held by the decedent and spouse as joint tenants or as tenants by the entirety, where the decedent and spouse are the only joint tenants.

c.65C, § 3(c). Under M.G.L. a) Under M.G.L. I'm trying to get my estate in order, I spoke with an attorney and when he mentioned the above 3 things I got confused. c. 65C, § 14(a), before amendment, effective before December 31, 1985, for all Massachusetts real estate included in the Massachusetts gross estate, the Massachusetts estate tax lien arises at the date of death of the decedent and continues until the tax is paid in full or until ten years from the due date of the return, whichever is earlier. Code - the Internal Revenue Code of the United States, as amended and in effect on January 1, 1975, unless otherwise indicated.

Under special use valuation, farm property is valued on its actual use as a farm. What changes did the new legislation make in the computation of the Massachusetts estate tax? 2001-38 was issued before, and clearly does not contemplate portability, the question many wrestled with was whether Rev. c. 202, § 32, as amended, effective December 31, 1985, a non-resident executor, in order to obtain from the probate court a license to sell Massachusetts real estate, must file in the probate court a Massachusetts estate tax closing letter or Massachusetts release of estate tax lien issued by the Commissioner, showing that the Massachusetts estate tax has been paid or that no tax is due. Federal Gross Estate - the gross estate as defined under the Code, except that for estates of decedents dying on or after January 1, 1986: 1) notwithstanding Code § 2035, the gross estate includes the value of all property in which the decedent had an interest and made a transfer by trust or otherwise within three years of death except where, a) a bona fide sale for adequate and full consideration is made, or, b) the value of the property transferred to any donee is $10,000 or less during the calendar year, and. 2) for which a deduction was allowed for Massachusetts estate tax purposes. Historically, a married couple avoided federal estate tax on the first death, and minimized federal estate tax overall, by using a common two pronged approach. Previously, under Revenue Procedure 2001-38, 2001-2 CB 1335, QTIP elections for trusts were not allowed unless such an election was necessary to reduce the estate tax to zero. a) Under M.G.L. Submitted by dbowman on March 2, 2017 - 2:48pm. Under M.G.L. Revenue Procedure 2001-38 provided relief from unnecessary QTIP elections (namely ones in which there was not a taxable estate) by disallowing the election unless the estate was subject to estate tax. Your IP: 209.236.71.91 This provision now expressly applies to the estates of non-resident as well as resident decedents.

The election of alternate valuation is made in accordance with Code § 2032 in effect on January 1, 1985, as follows: 1) the election must decrease the Massachusetts gross estate and the Massachusetts estate tax liability; 2) the election must be made within one year after the due date of the estate tax return or one year after the expiration of a valid extension to file the return; and. property. First, assets up to the federal estate tax exemption amount, $5 million inflation adjusted ($5,450,000 in 2016) to a trust that the surviving spouse could benefit from but which was not included in her estate. Under M.G.L. To make the election, the executor lists, on a schedule attached to the estate tax return, the assets that are to go into the QTIP trust. Now the estate of the first spouse can elect to port the unused exemption to the surviving spouse without the need for a special trust. 0000016868 00000 n

0000002461 00000 n Under M.G.L. c. 65C, § 3, before amendment, and applicable to estates of decedents dying before January 1, 1986, a terminable interest in property passing from the decedent to the surviving spouse does not qualify for the Massachusetts marital deduction. The surviving spouse may benefit greatly from an increase in his or her ability to make otherwise taxable inter vivos gifts, to join a subsequent spouse in electing to make split-gifts, and potential asset protection through the use of the QTIP election. Finally, the surviving spouse will not be treated as the transferor of the property for generation-skipping transfer tax purposes under Code Sec. 2016-49 addresses this very question. c. 62C, § 17, before amendment, and applicable to estates of decedents dying before January 1, 1986, a Massachusetts estate tax return (Form M-706) must be filed when the decedent's federal (not Massachusetts) gross estate is over $60,000, or if a Massachusetts release of estate tax lien (Form M-792) or Massachusetts estate tax closing letter (Form M.E.C.L.) 2001-38. 20% provision - for estates of decedents dying on or after January 1, 1986, the statutory rule which provides that the Massachusetts estate tax liability not be more than 20% of the amount of the Massachusetts net estate which exceeds $200,000. 3. Revenue Procedure 2016-49 goes farther to specify some situations in which it does not treat QTIP elections as void.
A portability election is now permitted allowing the deceased spouse's executor to save the deceased spouse's unused estate tax exclusion amount, thereby making the unused exemption available to the surviving spouse. Clients want dysfunctional tax advisers that worry about fictional tax-Chimera. 0000002042 00000 n The IRS, in the new Revenue Procedure 2016-49 modifies and supersedes Rev. The new Revenue Procedure confirms the process by which the IRS will disregard a QTIP election, but it excludes from its scope those estates in which the executor made the portability election in accordance with the regulations under § 2010(c)(5)(A). Another important election available to the executor of a decedent’s estate has come about more recently. 4) to which an election under M.G.L. In other situations, making a partial QTIP election, which is permissible, may be more advantageous. Chapter 711 of the Acts of 1985 substantially revised the Massachusetts estate tax law for the first time in ten years and adopted certain provisions of the Code as amended and in effect on January 1, 1985. We will use this information to improve the site.

Under M.G.L. 4. To protect the surviving spouse from predators and to assure that the intended remainder beneficiaries (e.g., children from the first spouse’s prior marriage) received the inheritance on the death of the surviving new spouse, this bequest that qualified for the marital deduction would be made into a special marital trust called a “QTIP.” This stands for qualified terminable interest property trust.

The taxpayer does so by denoting at the top of IRS Form 706 or 709 "Filed pursuant to Revenue Procedure 2016-49." c. 65C, § 1(d); ii) QTIP inclusion in gross estate (Code § 2044), under M.G.L. Under M.G.L. Evidence sufficient to establish that the QTIP election was not necessary to reduce the estate tax liability to zero based on values as finally determined for federal estate tax purposes and that the executor opted not to elect portability of the DSUE amount may include a copy of the predeceased spouse’s estate tax return filed with the IRS. This type of trust qualified for marital deduction treatment, Portability is the right of an executor to transfer or “port” the unused estate tax exemption from the first spouse to die to the second spouse to die. 2016-49 puts to rest a fear that certain QTIP elections would not be respected by the IRS, even though properly made. Except for the property passing directly to a surviving spouse, Internal Revenue Code Section 2056(b)(1) provides that no marital deduction for an interest passing to the surviving spouse is permitted unless the interest is a "terminable interest." c. 65C, § 2(a) and 3(a), before amendment and applicable to estates of decedents dying before January 1, 1986, where the Massachusetts net estate is $60,000 or less, there is an exemption equal to the Massachusetts net estate and no tax is due.

Domicile - the place which is an individual's true, fixed and permanent home, determined by established common law principles and the facts and circumstances in each case. 0000001321 00000 n What change did the new legislation make in the Massachusetts marital deduction for qualified terminable interest property (QTIP)? Do not include sensitive information, such as Social Security or bank account numbers. All other requirements for the Massachusetts marital deduction must be satisfied for QTIP property to be allowed as a deduction. The Massachusetts estate tax law, M.G.L. Example: Husband dies with $2 million estate. IRS Provides Guidance on QTIP and Portability Elections, Estate Planning: Private Client & Fiduciary Services.

The surviving wife might wish to do this “just in case.” She might worry that a future Congress might reduce the exemption amount and that this might preserve (grandfather) it. c. 65C, § 3(b), before amendment, in general, the Massachusetts estate tax deduction for interest follows the federal deduction. If an election is made to treat property as qualified terminable interest property (QTIP) under section 2523(f) or section 2056(b)(7), the person making the election may, for purposes of chapter 13, elect to treat the property as if the QTIP election had not been made (reverse QTIP election). What are the consequences if the QTIP election is treated as void? Proc. 0000004335 00000 n 2001-38 to eliminate this one worry of tax practitioners (but don’t be concerned we’ll all find other technicalities to obsess over). Commissioner - the Commissioner of Revenue.