Tax Considerations in the Administration of Estates Chapter 11

Tax Concerns Income Tax Death Tax Gift Tax Levy of tax on income Levy of tax on property transferred at death Gift Tax Levy of tax on property transferred during life

Applicable Credit Amount A credit against the federal unified transfer tax on gifts and estates The credit is subtracted from the tentative tax due

Marital Deduction A testator’s estate is entitled to the marital deduction for transfer of property between spouses if there is a surviving spouse and if the decedent leaves all or a portion of his/her estate to the surviving spouse

Uniform Transfers to Minors Act Allows any kind of real or personal property to be transferred to a custodianship as a gift to a minor Any gift transferred under this act is irrevocable

Generation-Skipping Transfer A transfer of assets to a person two or more generations below the transferor, e.g., from grandparent to grandchild Is subject to federal tax when its value exceeds a person’s lifetime exemption

Generation-Skipping Transfer Trust A trust that partially avoids the federal gift and estate tax on large sums of money or other valuable assets transferred to a beneficiary two or more generations below the transferor Is subject to federal tax when its value exceeds a person’s lifetime exemption

Tax Returns The Personal Representative’s Responsibilities Federal Income State Income Federal Fiduciary Income State Fiduciary Income Federal Gift (and Generation-Skipping Transfer)

Tax Returns The Personal Representative’s Responsibilities State Gift Federal Estate (and Generation-Skipping Transfer) State Estate State Inheritance

Gross Estate All assets owned by the decedent at the time of death and the value of any interest held in property

Gross Estate For tax purposes, valuation of assets can be made on the basis of their fair market value on the date of the decedent's death on the basis of an alternate valuation date for determining the fair market value, if this date decreases both the value of the gross estate and the federal estate tax liability

Taxable Estate After a determination of the gross estate, deductions and exemptions are applied to determine the taxable estate

Taxable Estate Deductions, claims, and credits allowed by statute Expenses, liens, debts, taxes Losses during administration of the estate Marital deduction Charitable deductions State death tax deduction Applicable credit amount and other allowable credits