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I. Introduction
II. Qualifying for the Marital Deduction
A. The Surviving/Donee Spouse Must Be a United
States Citizen
B. Survival and Marital Status Must Be
Established
C. A Property Interest Must “Pass” to the
Surviving Spouse
D. The Interest Passing to the Surviving Spouse
Must be “Deductible”
E. Understanding Terminable Interests and
Nondeductible Terminable Interests
F. Examples of Nondeductible Terminable Interests
G. Examples of Terminable Interests That Are
Deductible
H. Exceptions to the Nondeductible Terminable
Interest Rule
III. Forms of Transfer that Qualify for the Marital Deduction
A. Outright Transfers
B. The Estate Trusts
C. The Power of Appointment Trust
D. Life Insurance or Annuity Payments with Power
of Appointment in Surviving Spouse
E. “QTIP” Provisions: Qualified Terminable
Interest Property
F. Making the QTIP Election
G. Payment of Estate Taxes Allocable to the QTIP
Trust
H. Transfers Involving Marital Shares and
Charitable Remainder Trusts
J. The Spousal Right to “Income” Encompasses
Modern Trust Theories
K. Valuation Discounts and QTIP Property
IV. Planning for Non-Citizen Spouses: The Qualified Domestic Trust Rules
A. General Rules-Marital Deduction Limited for
Non-Citizen Spouses
B. Exception for Persons Who Become United States
Citizens
C. Exception for Transfers to Qualified Domestic
Trusts
D. Required Elements of a QDOT
E. Taxation of a Qualified Domestic Trust
F. Effect of the 2001 Act on the QDOT Rules
V. Integrating the QTIP Trust and the Generation-Skipping Transfer Tax
Exemption
A. The QTIP Trust and the GST Rules
B. The Reverse QTIP Election
C. Future Use of the Reverse QTIP Election
VI. The Marital Deduction in Estate Planning
A. Basic Planning Considerations
B. The Taxable Estate – When to Pay the Tax
C. Flexible Planning: Using Disclaimers in
Post-Mortem Estate Planning
D. Flexible Planning: Using Partial QTIP Election
Planning as an Alternative to Disclaimer Planning
E. Other Flexible Planning Techniques
F. Planning for and Using the Credit for Tax on
Prior Transfers
G. Gifts of Interest in QTIP Trusts/Purchases of
Remainder Interests in QTIP Trusts
VII. Choosing Between the Power of Appointment Trust and the QTIP Trust
A. General Considerations
B. Choosing the Power of Appointment Trust
C. Choosing the QTIP Trust
D. Other Trust Selection Issues
VIII. Estate Administration Expenses and the Marital Deduction: The Hubert
Rules
A. Nature of the Problem
B. The Hubert Regulations
IX. Dealing with Dinosaurs: Planning for Pre-ERTA Wills
X. Drafting Requirements: Marital Deduction Formula Clauses
A. Introduction: Choices to Be Made
B. Factors to Be Considered in Making the Formula
Clause Choice
C. Pecuniary Formulas – Generally
D. The “True Worth” Pecuniary Formula
E. The “Minimum Worth” Pecuniary Formula
F. The “Fairly Representative” Pecuniary Formula
G. The Reverse Pecuniary Marital Formula
H. Fractional Share Formulas - Generally
I. The Pick and Choose Fractional Share Formula
J. The Pro Rata Fractional Formula
K. Selecting the Appropriate Formula Clause
XI. Drafting Requirements: Boilerplate Clauses and Avoiding Mistakes
A. Avoid “Creativity” in Marital Deduction
Drafting
B. Spendthrift Clauses
C. Inclusion of Various Powers in QTIP and Power
of Appointment Trusts
D. QTIP Election Clause
E. Unproductive Property Clause
F. Qualified Property Clause
G. Effects of Repeal of the Credit for State
Death Taxes
FORM ONE: Outright Marital Deduction Clause
FORM TWO: Power of Appointment Trust
FORM THREE: QTIP Trust
FORM FOUR: Sample Tax Clause to be Used with a QTIP Trust
FORM FIVE: Sample Form of Disclaimer Clause
FORM SIX: Pecuniary Formula Clauses
FORM SEVEN: Fractional Share Formula Clauses
FORM EIGHT: Pecuniary Marital Deduction Formula For Use in a Will
FORM NINE: Pecuniary Credit Shelter for Use in a Will
FORM TEN: Pick and Choose Fractional Share Marital Deduction Formula for
Use in a Revocable Trust
FORM ELEVEN: Administrative Provisions Used to Determine Pecuniary Marital
Shares
FORM TWELVE: Sample Form of Preamble
FORM THIRTEEN: Sample Language Addressing Possible Full Repeal of Estate
Taxes
FORM FOURTEEN: Sample Form of Allocation of Basis Clause: (To Address
Carryover Basis) |
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