Gift And Estate Planning Case

An estate freeze with respect to Phyllis and Freddie’s family business corporation allows them to fix the value of their shares in the business at a particular date and create an opportunity for Phyllis and Freddie to transfer the future growth of a business, investments, or other assets to other taxpayers, children or other designated beneficiaries. By freezing a beneficiary’s estate, they will have to pay tax on the growth which results in a tax deferral until the beneficiary passes away or they will have to dispose of his/her shares.

What potential tax problems might result if an individual pursues his plan to transfer 40% of the corporate stock to his two children as gifts? Would it make any difference if an individual received all voting stock and had the new corporation transfer nonvoting stock to his children?

While grantor trusts are commonly created as part of an estate plan, estate planners may inadvertently be creating income tax issues that trustees and tax preparers must deal with during the administration. When the grantor of a grantor trust dies, or the grantor trust status terminates during the life of the grantor, for the most part the tax consequences are well established. What is unclear is what happens if the grantor trust had an outstanding liability to the grantor at the death of the grantor. This paper addresses the issue and how it may be treated. Part I of this paper will briefly address the history of

3) Molly sells her car, valued at $30,000, to her nephew Todd for $18,000. Molly has made a taxable gift.

Because the policy was worth $100,000 but the child only paid $50,000, it is not a sale for an adequate and full consideration in money or money’s worth. Under section 2043(a), there shall be included in the gross estate only the excess of the fair market value at the time of death of the property otherwise to be included on account of such transaction, over the value of the consideration received therefor by the decedent. So $750,000 – 50,000 = $70,000 is included in gross estate.

Sadly, this isn't the case, as every estate goes through the process, as it must be determined who gets his or her assets. Debts must be paid, assets distributed and the final wishes of the deceased respected, when possible. There are laws governing the process, and they tend to be complex.

New York Law grants the family of a decedent the right to exempt certain property from the decedent 's estate.

During the calculation of taxable income for a non-grantor foreign trust, the trust will obtain a deduction for allocation to beneficiaries. These distributions are conducted to the degree that they consist of the deductible net income of the trust for the taxable period or year. The allocated deductible net income maintains its character before the recipient beneficiaries and will be taxable to them in addition to having the capital gain and ordinary income items. Reporting Obligations of Beneficiaries of Foreign Trusts:

I direct that all legally enforceable debts as well as funeral expenses, be paid from the assets within my estate at the most practicable time after my death. I direct any and all other death taxes, or any property of all kinds tangible and intangible as a part of my gross estate, shall be paid by my residuary estate.

The Tax Court, however, now found that its holding in McCord was wrongly decided. It observed that determining the amount of an estate tax that may be in effect when the taxpayer dies is no more speculative than determining the amount of capital gains tax that should be applied to reduce the value of stock in an estate and that the Tax Court and many other courts had held that the value of stock for gift or estate tax purposes should be reduced by capital gains tax. Thus, as a matter of law, the assumption of the Sec. 2035(b) estate tax liability could be consideration in money or money 's worth that could reduce the gift 's value.

The first option will treat the surviving spouse the same as any other beneficiary and require

In Massachusetts estate law, before the applying the abatement process, the surviving spouse may elect to take a share of the assets. So, if the surviving spouse takes an elective share, the bequests for beneficiaries would be further abated. Regardless, if the estate assets is insufficient to cover the expenses and claims on the estate in full, Massachusetts estate law established the following order of payment:

Mimi’s continued involvement in the business is simple as she can maintain ownership and freely transfer assets; however, it is imperative that Mimi derives a Last and Will and Testament or a Shareholder’s Agreement to explicitly detail Mimi’s transferability of shares in Mimi’s Cupcakes Inc. Other concerns to discuss is the dissolution and liquidation of the corporation and the tax implication on the shareholders; for example, the dissolution of the corporation requires to file a notice of dissolution with the state. The assets of the corporation are liquidated by selling all its assets to the shareholders based upon liquid their shares of stock. Shareholders are required to recognize a gain or loss according to Section 336 on property

When assessing the actions taken by Sally before her death, it is clear the main issue is whether her shares in Megabucks Ltd form part of the estate, or if they belong to her son Hector. In determining ownership of the shares, it will be prudent to start by determining what Sally intended. From the facts, it seems Sally as the settlor wanted to save tax by creating an inter vivos gift rather than a testamentary one with Hector as the beneficiary. In Milroy v Lord , LJ Turner illustrated that there are three ways to transfer ownership of property away from yourself; as an outright gift, by the settlor declaring themselves a trustee or by transferring property to trustees to hold on trust. In this instance, it is evident the first method is

Sadly, they don't stop to take into consideration the fact that doing so makes the asset a part of the recipient's estate, thus the child's partner may be entitled to a share of it. For this reason, it is best to place these assets in a trust, naming the desired recipient as the sole beneficiary of the trust. This ensures the spouse will not receive any portion of it, and it is best to consult an attorney together with the person providing the asset to ensure all steps are carried out properly.