Taxation in Estate Planning - Assignment Example

The shares may be gifted to some family members in order to benefit from annual tax exception. It is important to note that any property owned in a Family limited partnership impact positively on estate tax exemptions. Applicable distribution period Under retirement plans, the applicable distribution period is pegged on the age of the retiree or that of the beneficiary and allows for the calculations of benefits accruing to each beneficiary. The internal revenue code provides for three tables which assist in finding the applicable distribution period.

The first table is used only by the beneficiaries while the second table is used by account holders whose beneficiaries are spouses, who are 10 years junior in each, the last table deals with situations where there are no beneficiaries. Life expectancy is used in the calculations of applicable distribution tables. A special use valuation This is a design used in evaluating all assets in a successor’s gross estate where specific real property such as those used for farming or business is valued.

Before benefiting on this design, one must demonstrate that 25 per cent of the adjusted value of the decedents gross estate consists of the adjusted value of real estate property used in the business and that 50% of the adjusted value of the decedent’s gross estate consist of real or personal property used in business. A Special Use Valuation has the following benefits; it saves couple of hours of research on specific tax planning topics from this area, access to important practice documents such as tables, charts and lists.

It saves time used in accessing relevant sections of tax laws, regulations, court cases, IRS documents and more and offers alternative approaches valuable tax scenarios. Historically, one needed to prove that the decedent had substantially took part in the business for five of the eight years before death. Alternate valuation date Alternate valuation dates facilitates the determination of the value of the gross estate. Property distributed, sold exchanged or which is disposed of within 6 months of the death of the decedent shall be valued as at the date of distribution, sale exchange or other disposition.

Those not dealt with as above shall be valued 6 months after the death of the decedent. Estate affected by mere lapse of time is included as of the time of death. However adjustments are made for any difference in its value as of the later date and not to mere lapse of time. Special rules provide that deductions shall not be allowed if allowance is given by the alternate valuation. Any bequest, legacy devise transfer and marital deductions shall be valued as of the date of the death of the decedent.

Charitable lead trust A charitable lead trust is intended to reduce the amount of taxable income for deceased estate beneficiaries. This is done by donating a portion of the income to charities and after a specified time transferring the remaining trust to the beneficiaries. Taxable termination This is the termination of an interest in property held in a trust. The termination can be by way of death, lapse of time or release of power provided that immediately before the termination non-skip person has no interest in such property and that at no time after such termination, a distribution is made to a skip person including distribution on such trust.

Certain partial terminations may