1. Law T 510 - Estate & Gift - Instructor: Dwight Drake Sam/Lucy Annual Exclusions- 2009 Sam Lucy Sam’s Kids 5 5 Exclusion Per Person $13,000. $13,000. Total $65,000. $65,000.

2. Law T 510 - Estate & Gift - Instructor: Dwight Drake Fact Changes Four of Sam’s kids are married. Lucy has 3 children, all married. Sam has 4 grandchildren Lucy has 3 grandchildren

3. Law T 510 - Estate & Gift - Instructor: Dwight Drake Still 2009. Now… Sam Lucy Sam’s Kids 5 5 Sam’s In-laws 4 4 Sam’s GC 4 4 Lucy Kids 3 3 Lucy In-laws 3 3 Lucy GC 3 3 Total Bodies 22 22 Max Ann. Exc. $ 286,000 $ 286,000.

4. Law T 510 - Estate & Gift - Instructor: Dwight Drake Supplemental Problem B - 2 Sam gifts $ 3.5 million to spouse Lucy 2523 gift tax marital deduction eliminates any tax exposure.

5. Law T 510 - Estate & Gift - Instructor: Dwight Drake Sam’s 2009 Trusts Sam Trust ATrust B Kids, Descendants $1.8 mill Investments $500,000 Income

6. Law T 510 - Estate & Gift - Instructor: Dwight Drake Sam’s 2009 Gift Tax Liability Value of 2005 Gifts $2,300,000. Prior gifts (Mar. Ded.) 0 Taxable Gifts 2,300,000

7. Law T 510 - Estate & Gift - Instructor: Dwight Drake Sam’s 2009 Gift Tax Liability Value of 2005 Gifts $2,300,000. Prior gifts 0. Taxable Gifts 2,300,000. Tax Computation: 780,800 + (300,000 x.45) = 915,800.

8. Law T 510 - Estate & Gift - Instructor: Dwight Drake Sam’s 2009 Gift Tax Liability Value of 2009 Gifts $2,300,000. Prior gifts 0. Taxable Gifts 2,300,000 Tax Computation: 780,800 + (300,000 x.45) = 915,800 Unified Credit (345,800) Gift Tax 570,000

9. Law T 510 - Estate & Gift - Instructor: Dwight Drake Lucy Consents to Split 2009 Gift Lucy Sam Taxable Gift 1,150,000 1,150,000 Tax Calculation: 345,800 + (150,000 x.41) = 407,300 407,300 Unified Credits (345,800) (345,800) Gift Tax 61,500 61,500 Tax savings: $447,000 (77%)

10. Law T 510 - Estate & Gift - Instructor: Dwight Drake Lucy’s Credit Trust Lucy Estate 2009 Death Sam Credit Trust for Sam $3.5 million $.5 million Children Remainder Residuary

11. Law T 510 - Estate & Gift - Instructor: Dwight Drake Sam’s Estate Tax – 2011 Death No Credit Trust Credit Trust Estate Value $9,500,000. $6,000,000. 2005 Gift Taxes 570,000. 570,000. Post 76 Gifts 2,300,000. 2,300,000. Taxable Estate 12,370,000. 8,870,000.

12. Law T 510 - Estate & Gift - Instructor: Dwight Drake Sam’s Estate Tax – 2011 Death No Credit Trust Credit Trust Taxable Estate 12,370,000. 8,870,000. Tentative Tax 5,447,300. 3,872,300 Tax on Prior Gifts of $2.3 million, net unified credit (570,000) (570,000) Unified Credit (1,455,800) (1,455,800) Estate Tax 3,421,500. 1,846,500.

13. Law T 510 - Estate & Gift - Instructor: Dwight Drake Dead or Endangered Credits Section 2012: Credit for Gift Tax – Applies only to pre-’77 gifts. Obsolete. Section 2011: Credit for State Death Taxes: Applicable Percentage: 2002 – 75% 2003 – 50% 2004 - 75% 2005 - 0 - Replaced with 2058 deduction

14. Law T 510 - Estate & Gift - Instructor: Dwight Drake 2013 Credit for Tax on Prior Transfers Purpose: To ease the burden of multiple tax hits triggered by multiple deaths in short time frame. Credit Formula: Credit = Value of transferred Property x Estate Tax Taxable Estate Phase Out Percentages: 2 yrs before or after 100% 4 yrs before 80% 6 yrs before 60% 8 yrs before 40% 10 yrs before 20% More 10 before, 2 after 0%

15. Law T 510 - Estate & Gift - Instructor: Dwight Drake Problem 15 - (1 ) a. No return required if gross estate less than unified credit applicable exclusion amount. 6018(a). 1.5 mill estate not required to file. b. 1.5 mill estate may have to file if taxable gifts post 1976 reduce unified credit exclusion amount to less than 1.5k. 6018(a)(3). Also, nonresident noncitizen with estate over 60k must file. 6018(a)(2). c. No refund of any excess credit. 2010(d).