Real Estate Planning - Chapter 10

Qualified Terminable Interest Trust (QTIP)

Section 2503(b) Trust

Section 2503(c) Trust

Qualified Domestic Trust (QDOT)

$0

$1,360,800

$5,340,000

The marital deduction is unlimited.

2 only

2 and 3

3 and 4

1,2,and 3

The GPOA Trust only qualifies for the unlimited marital deduction if the trustee agrees to make distributions of principal to Juan's wife.

The unlimited marital deduction cannot be elected over the property transferred to the trust because Juan's wife cannot appoint assets to herself, her creditors, or to anyone on her behalf.

The unlimited marital deduction is not available because Juan's wife does not have the current right to the assets in the trust.

The GPOA Trust automatically qualifies for the unlimited marital deduction because Juan's wife has a general power of appointment over the trust's assets.

If the wife disclaims her interest in the house, the house is not included in the decedent's taxable estate.

If the children disclaim their interest in the house, the house will automatically transfer to the decedent's spouse as the life estate beneficiary.

If the decedent's wife is a resident alien of the U.S., a QTIP election over the property will allow a marital deduction equal to the fair market value of the property.

If the executor makes a QTIP election on the house the house is not included in the decedent's taxable estate.

The estate tax on property can be deferred until the death of the second to die spouse.

The unlimited marital deduction can fund the applicable estate tax credit of the surviving spouse.

The use of the unlimited marital deduction can shelter the future appreciation of an asset from estate taxes at the death of the second to die spouse.

The unlimited marital deduction can ensure the surviving spouse has sufficient assets to support her lifestyle.

$0

$6,500,000

$8,500,000

$7,500,000

Property transferring to a surviving spouse as beneficiary of an irrevocable trust created six years ago. At the time of the trust's creation, the gift was complete, but the decedent did not pay any gift tax as the only beneficiary of the trust was the decedent's spouse.

A bequest of 2,000 shares of Holiday Incorporated stock to a surviving spouse. The surviving spouse is a U.S. citizen.

The bequest of the life estate interest in a home to the surviving spouse. The decedent bequeathed the remainder interest to his children.

A bequest of property with a fair market value of $10,000 to a surviving spouse. The surviving spouse disclaims the interest and the property transfers to the decedent's residual heirs, his children.

$250,000

$704,000

$750,000

$1,350,000

John dies and leaves his vacation home to his wife as trustee of a testamentary trust created for the sole benefit of his two children.

The executor of John's estate made the QTIP election for the bequest of a life estate interest in his personal residence to Deborah, John's wife.

John bequeaths his interest in community property to his wife subject ot his wife surviving him by more than 8 months.

At John's death, his will created a trust for the benefit of his wife. The trust document gives his wife the authority to appoint assets to herself, her creditors, and her heirs with the approval of John's brother, Colin.

No person, other than the surviving spouse, may appoint any part of the trust property to anyone other than the surviving spouse.

The general power of appointment granted to the surviving spouse must be exercisable by the surviving spouse alone.

The surviving spouse's right to the trust property must be limited to an ascertainable standard, such as health, education, maintenance, and support.

The surviving spouse must be entitled to receive all of the income from the trust, at least annually.

An estate is described as overqualified when, due to a failure to make proper use of the marital deduction, too much of the property is subject to estate tax at the death of the first spouse.

An estate is described as underqualified when, due to a failure to make proper use of the marital deduction, not enough property is subject to estate tax at the death of the first spouse.

A bypass trust aids in guaranteeing the full use of an individual's applicable estate tax credit.

An estate that does not take advantage of its available applicable estate tax credit is transferring assets at the lowest possible cost.

A bypass trust can give the surviving spouse the right to distributions of principal for an ascertainable standard without causing inclusion of the trust's assets in the surviving spouse's gross estate.

A surviving spouse can demand the greater of $5,000 or 5% of the trust's principal each year without causing inclusion of the trust's assets in her gross estate.

Distributions of trust income to the surviving spouse will not create an ownership interest in the trust's assets.

The right to appoint the assets of the trust to herself, her creditors, or anyone she desires will not create an interest which will cause inclusion of the trust's assets in the surviving spouse's gross estate.

Jimmy's will directs that all of his property is transferred to Rebecca.

In his will, Jimmy funds a trust with $5,340,000 for the benefit of his two children. Rebecca will receive an annual income distribution from the trust. All other assets will transfer to Rebecca.

At Jimmy's death, specific bequests totaling $550,000 are transferred per the direction of the will to individual's other than Rebecca. The remainder of the assets are transferred to a trust with the income payable to Rebecca for her life and the remainder interest payable to the children at Rebecca's death. Jimmy's executor elected to treat this as a QTIP trust.

Jimmy's will directs the transfer of $1,000,000 to his two children and the remainder of his assets to his wife, Rebecca.

Bypass trust

Exclusionary clause

Disclaimer

Rejection

6 months

9 months

12 months

15 months

$7,650,000

$3,660,000

$3,750,000

$5,340,000

Option 1

Option 2

Option 3

Option 4