Form 706 ESTATE Tax Return Presented by: LEVI M. DILLON, Attorney/cpa Amy E. Ott, attorney/CPA Bourland, Wall & Wenzel, P.C. The Blum Firm, P.C. Attorneys at Law Attorneys at Law

The Unified Tax System Federal Transfer Taxes Gift Tax Estate Tax Generation-Skipping Transfer (“GST”) Tax Who is “Skip Person” Family and Unrelated Persons Unified Transfer Tax Credit (Applicable Amount) Generation-Skipping Transfer Tax Exemption (“GSTTE”)

Filing Basics Filing/Tax Payment Deadlines Extension of Time to File Extension of Time to Pay? Which Estates Must File Gross Estate Adjusted Taxable Gifts Elective Filing - Portability Who Must File on behalf of Estate Who Must Pay

Exemption Amounts Estate Tax and GST Tax Exemptions 2017 $5,490,000 2018 – 2025 $11,200,000 (subject to inflation adjustment) 2026 $5,490,000 (exemption reverts back to pre-2017 Jobs Act exemption amounts) 4/4/2019

Executor Elections Alternative Valuation Date Date of Death  6 months later Special Use Valuations Purpose Qualifying Property 6166 Deferral Qualifying Estate Postponement of Tax on Reversionary or Remainder Interest Qualified Terminable Interest Property

Valuation Part I – The Big Picture Importance of Valuation Standard – Fair Market Value “The amount at which the property would change hands between a willing buyer and willing seller, when the former is not under any compulsion to buy, and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts” Valuation Date Planning Opportunity Estate Tax vs. Income Tax

Valuation Part I – The Big Picture Continued… Consideration of Buy-Sell Agreement IRC § 2703 Discounts Applicable based on Agreement are IGNORED UNLESS > 50% ownership by unrelated parties OR Bona-Fide Business Agreement; Not a testamentary device to transfer property to family for less that full and adequate consideration; AND Terms are comparable to similar agreements entered into in an arms-length transaction (e.g., industry norms) Decedent must be restricted in during life

Valuation Part II – Method by Asset Class Real Estate (Schedule A) Stocks and Bonds (Schedule B) Mortgages and Notes (Schedule C) Insurance on Decedent’s Life (Schedule D) Form 712 Miscellaneous Property (Schedule F) Business Interests Artwork Oil and Gas Royalties Automobiles Household Goods and Personal Effects Other

Relating Back to the Form 709 Appropriate disclosure during life reduces risk at death Questions on Form 706 that relate back to Forms 709 filed during life Questions 8(a), (b) and (c) Copies of all Gift Tax Returns filed Questions 9(a) and (b) Disclosure of life insurance owned on Decedent’s life and life insurance owned by Decedent on another’s life not included in gross estate Importance of compliance—e.g., Crummey withdrawal letters, gift and sale documents related to Irrevocable Life Insurance Trust transfers

Relating Back to the Form 709 Continued… Questions on Form 706 that relate back to Forms 709 filed during life continued… Questions 11(a) and (b) Closely held business interests that are discounted Formalities of Company and Partnership Agreements Payments for personal expenses Non-pro rata distributions Assets owned outside of entity Questions 13(a) – (e) Trusts created during lifetime Transfers (by gift or sale) of closely held interests to Intentionally Defective Grantor Trusts Question 16

Formulas & Flexibility Savings Clauses on Form 706 Bequests and Devises Marital bequests QTIP election and funding DSUE

Post-Mortem Planning Differences in Rates – Income Tax vs. Estate Tax Considerations Bypass Trust Planning Partition and Exchange Agreement Appreciating Assets

Case Studies