As a result, the decedent's GST tax exemption may be allocated to the QTIP trust or property. /Filter /LZWDecode

The reverse QTIP election allows the QTIP property to be treated as the decedent spouse’s property for GSTT purposes, but still qualify for the marital deduction. In other words, no QTIP election is deemed to have been made for purposes of GSTT. The Treasury and the IRS can cross off another project from their joint priority guidance plan. This site and its content is meant to alert you to legal services, issues, and planning measures that may be appropriate for you, and is not a substitute for an attorney client relationship where specific advice is provided.

After 1981 we pretty much stopped giving even that much control to … Therefore, the Decedent’s GSTT exemption can be allocated to the QTIP trust even …

Under a reverse QTIP election, the decedent's estate is permitted to treat the decedent as the transferor for generation-skipping transfer (GST) tax purposes. The reverse QTIP election allows the QTIP property to be treated as the decedent spouse’s property for GSTT purposes, but still qualify for the marital deduction. To be deemed a transferor there can be no intervening income interests, such as generally is the case of QTIP trusts where the spouse has an income interest in the trust. In 2012, Congress passed the American Taxpayer Relief Act. An election under this paragraph (c) is made by attaching a statement to a copy of the return on which the reverse QTIP election was made under section 2652(a)(3). In Rev. 2001-38 provided that any unnecessary QTIP election would be null and void. ����P��1B Proc. Marital Deduction Increases Portability and Allows Second Basis “Step Up”. Where a decedent’s assets pass to a surviving spouse and the decedent obtains a marital deduction, the amount of the marital deduction may increase the amount of the decedent’s unused federal estate tax exemption amount that may be transferred to the surviving spouse (since assets qualifying for the marital deduction do not absorb any of the federal estate tax exemption). Consider the following: An intervivos QTIP trust is drafted to benefit both spouses during their lives, with the result that wealth is removed from the wealth transfer tax system while remaining an available means of cash flow and financial security for you for life. With the new portability rule and the high federal estate tax exemptions, many married clients may want to have assets pass in trust for the benefit of the surviving spouse (for non-tax reasons, such as asset protection), allow maximum portability of the estate tax exemption, and allow the assets to obtain a second step-up in basis on the surviving spouse’s death. Under the portability rules, if a decedent passes away without utilizing the entire $5,490,000 federal estate tax exemption amount, any “unused” exemption may be “ported” or transferred to the decedent’s surviving spouse if certain conditions are met (such as filing a federal estate tax return for the decedent). Proc.

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All Rights Retained as to formats, processes, and content. Proc. Another consequence of this QTIP election is that the assets in the QTIP trust remaining upon the surviving spouse’s death are included in the surviving spouse’s estate for federal estate tax purposes and, as a result, also obtain a step-up (or step-down) in income tax basis upon the surviving spouse’s death (thereby lowering potential income taxes to the beneficiaries upon a subsequent sale of the assets previously held in trust). a reverse QTIP election is that the decedent remains, for GST tax purposes, the transferor of the QTIP trust for which the election is made. For more on reverse QTIP … The executor can choose to put some or all of the deceased spouse’s assets earmarked for the QTIP into the trust. As a result, the decedent’s GST exemption may be allocated to the QTIP trust. Proc. Then, you might want to do your GST exemption allocation planning differently, in which case you wouldn’t make a reverse QTIP election. By making such a reverse QTIP election, an allocation of the GST $1,000,000 …

Obtaining A Double Step-Up: IRS Confirms Expanded Use Of QTIP Elections. 2001-38 Clarifies the Availability of QTIP Elections for Portability. MARITAL DEDUCTION TRUSTS Therefore, QTIP elections may be used for portability purposes and to enhance both estate and income tax planning. In such a case, the decedent’s entire $5,490,000 federal estate tax exemption is transferred to the surviving spouse (meaning the spouse would have up to $10,980,000 of exemption to utilize at her death, enough to shield $8,000,000 of estimated assets) and because a QTIP election was made, the trust will also obtain a potential step-up in income tax basis upon the surviving spouse’s death. Reverse QTIP Election Cannot Be Partial The Trustee can split the QTIP trust. 2016-49, the IRS has indicated that it will not treat an unnecessary QTIP election as void if the executor made a portability election. This allows the use of the first-to-die spouse's GSTT exemption for the trust property, while also allowing the surviving spouse's GSTT exemption to be used for her own property.

�3i��P7K� �^Ƃ�tT�D� The reverse QTIP election is treated as applying only to the trust with the zero inclusion ratio. An intervivos reverse QTIP Marital Trust is a timely tool to use now in light of potential estate tax reform. In such cases, an estate may make a valid Federal QTIP election to obtain both portability and a marital deduction for state estate tax purposes. Typically, a reverse QTIP election is made to allow the first spouse to die to utilize a portion of the GST exemption that otherwise might not be used. The content of this site is general and should not be relied upon without review of your specific circumstances by competent legal counsel. (Choosing just some of them is called a “partial QTIP election.”) Once the election is made and the estate tax return is filed (nine months after the death, plus … Allows QTIP election and allows use of both spouses GST exemption if a reverse QTIP election is made. stream Solely for purposes of chapter 13, if a transferor of qualified terminable interest property (QTIP) elects under § 26.2652-2(a) to treat the property as if the QTIP election had not been made (reverse QTIP election), the identity of the transferor of the property is determined without regard to the application of sections 2044, 2207A, and 2519. © 2016 Joseph C Kempe Professional Association :: Terms, Jupiter, FL: 561-747-7300 Stuart, FL: 772-223-0700 Toll Free: 800-747-3113, Jupiter :: Palm Beach Gardens :: Stuart :: Tequesta :: Hobe Sound :: Vero Beach. Clayton properly structured between husband and wife can create discounts – i.e. However, a QTIP election can have estate, gift, and generation-skipping transfer (GST) tax consequences for the surviving spouse. This result is the case even though the surviving spouse's estate (and not the decedent's estate) will be subject to the estate tax with respect … “reverse QTIP election,” and provide a greater degree of creditor protection than would be afforded by an outright bequest to a surviving spouse. Portability Provides Some Optionality When Making QTIP Elections. Presently, the amount of the GST exemption is equal to the applicable exclusion amount. Practitioners, however, have been wondering whether a QTIP election in an example such as this where the election is not needed to bring the estate tax to $0 on the first spouse’s death (since the decedent’s total estate is less than the decedent’s federal estate tax exemption) was valid. �h �f.�& �Q�dh1Fb�� 3�E� ��S��b)bO $�8 �a8��Bؠ�)� ‘���Hi����qJ0�*���)�L�㩔@S2�j����P1��Eҡ* �¡����+��cc��". Prior to portability, the decedent’s executor would generally not make a QTIP election but utilize $3,000,000 of the decedent’s federal estate tax exemption with the trust arrangement because the decedent’s federal estate tax exemption amount, if any, must have been used at his death or would simply be lost (and, if a marital deduction were made, the surviving spouse’s estate would risk a federal estate tax since her assets plus the QTIP trust’s assets would exceed her single $5,490,000 exemption). Proc. This allows the use of the first-to-die spouse's GSTT exemption for the trust property, while also allowing the surviving spouse's GSTT exemption to be used for her own property.