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Table of Contents
-
List of Forms by Chapter - Chapter 1 — Establishing and Maintaining the Attorney-Client Relationship
- I. [1.1] Introduction
-
II. [1.2] Advance Preparation - III. [1.6] Conducting the First Meeting
- [1.7] Appearance
- [1.8] Avoiding Overwhelming the Client
- [1.9] Instructing the Client
- [1.10] Intended Beneficiaries
- [1.11] Matters To Be Discussed
- [1.12] Citizenship
- [1.13] Conflict of Interest and Attorney-Client Privilege
- [1.14] The Client’s Goals
- [1.15] Special Circumstances
- [1.16] Spouse’s Access to Marital Funds
- [1.17] Nontaxable Estate Issues
- [1.18] Personal Property
- [1.19] Selection of Trustee
- [1.20] Estate Tax Decoupling Issues
- [1.21] Other Necessary Information
- [1.22] Irresponsible Beneficiary
- [1.23] Creditor Problems
- [1.24] Disabled Beneficiary
- [1.25] Client Meeting Checklist
- IV. After the Initial Meeting
- [1.26] Analysis of the Estate
- [1.27] Engagement Letters
- [1.28] Planning Issues
- [1.29] Revocable Trust vs. Will
- [1.30] Locality
- [1.31] Use of Forms
- [1.32] Problems with Joint Documents
- [1.33] Ancillary Documents
- [1.34] Order of Execution
- [1.35] Witnesses
- [1.36] Possession and Storage of Documents
- [1.37] Funding Revocable Trusts
- [1.38] Real Estate
- [1.39] Bank Accounts
- [1.40] Securities
- [1.41] Personal Property
- V. [1.42] Execution of Documents
- VI. [1.43] Terminating the Engagement
- VII. Appendix — Sample Forms
- Chapter 2 — Professional Responsibility Issues Confronting Estate Planners
- I. [2.1] Introduction
- II. [2.2] Multiple Representation — Families
- [2.3] Scope of Representation: What Are Each Client’s Goals and Objectives?
- [2.4] Joint vs. Separate Representation: Implications for Preserving Client Confidences
- [2.5] Resolving Conflicts After the Representation Has Commenced
- [2.6] Exit Strategy: Terminating Representation
- [2.7] Sample Joint Representation Letters
- III. [2.8] When a Child Represents an Interest in an Aged Parent or a Beneficiary Introduces the Lawyer to the Testator
- IV. Multiple Representation — Business
- V. Representing Fiduciaries — When the Lawyer Represents an Executor, Administrator, or Trustee
- VI. Other Issues
- [2.15] Representing a Client with Diminished Capacity
- [2.16] Bequest to Scrivener
- [2.17] Representing a Colleague’s Spouse
- [2.18] Writing a Will for the Client’s Child or Parent
- [2.19] Lawyer’s Involvement with Nonlawyers in the Delivery of Estate Planning Services
- [2.20] Handling Trust Property, Attorney Retainers, and Advances for Fees
- Chapter 3 — Professional Malpractice Issues Confronting Estate Planners
- I. Introduction: Preliminary Concerns
- [3.1] Who Is the Plaintiff in Your Malpractice Suit?
- [3.2] The Creditor-Afflicted Child
- [3.3] The Retirement Account with No Beneficiary
- [3.4] The Exercised Power of Appointment
- [3.4] The Exercised Power of Appointment
- [3.5] The Specific Bequest Wrongly Identified
- [3.6] Essential Lessons
- [3.7] Malpractice Cases on the Increase
- [3.8] Two-Year Statute of Limitations
- [3.9] Trustee Selection: Professional Responsibility (and Practical) Issues
- [3.10] Ethical and Malpractice Checklist
- [3.11] Rules of Professional Conduct and the Importance of a Conclusion of Representation Letter
- II. EGTRRA and the 2010 Tax Relief Act; Final §401(a)(9) Regulations; Illinois Estate Tax
- [3.12] Possible Defects in Older Plans
- [3.13] Pecuniary Formulas
- [3.14] Overfunding of the Family Trust
- [3.15] Inappropriate Tax Clauses; Failure To Use State QTIP Election
- [3.16] Planning for Retirement Accounts
- [3.17] Updated and Expanded Property Power of Attorney
- [3.18] Final Regulations Notice: Restricting the Scope of Responsibility
- [3.19] Summary for Closed Files
- III. Engagement Letters
- [3.20] Ethical and Conflict Issues
- [3.21] Joint Spousal Representation
- [3.22] Promises of Mutual and Shared Communications
- [3.23] Multigenerational Representation
- [3.24] New Client
- [3.25] Existing Client
- [3.26] Multiparty and Business Entity Representation
- [3.27] Trust and Estate Administration; Concurrent Beneficiary Representation
- [3.28] Attorney as Fiduciary
- [3.29] ACTEC Engagement Letters
- Malpractice Issues
- [3.30] Coverage of Pre-Engagement Letter
- [3.31] Client Information To Be Obtained
- [3.32] Discussion of Planning Options
- [3.33] Standard Planning Options
- [3.34] Defining the Scope of Representation
- [3.35] Exclusion of Retirement Planning Issues
- [3.36] Fees for Services
- [3.37] Acceptable Source Information for Real Estate Transfers and Beneficiary Designations
- [3.38] Privacy Act Notice
- [3.39] No Engagement Without Client Response
- IV. [3.40] Post-Engagement/Pre-Execution Letters and Other Malpractice Issues
- V. Delayed Executions
- VI. Post-Execution Concerns
- VII. Miscellaneous Other Malpractice Issues
- [3.46] Drafting and Execution Checklists
- [3.47] Secondary Review Process
- [3.48] Graphic Aids
- [3.49] Funding Tracking System
- [3.50] Dangers Regarding Beneficiary Designations
- [3.51] Real Estate Funding Dangers
- [3.52] Confidentiality: Fax and E-Mail Communications
- [3.53] Other Considerations
- [3.54] Joint Tax Basis Revocable Declarations of Trust: A Warning
- VIII. Appendix
- [3.55] Sample Forms
- [3.56] Long-Form Engagement Letter
- [3.57] Limited Engagement Letter (Updates for Existing Client)
- [3.58] Letter with Drafts of Documents (Excerpts)
- [3.59] Final Warning Letter to Client Regarding Unsigned Documents
- [3.60] Post-Execution Funding Status Letter
- [3.61] Critical Information List
- [3.62] ACTEC Client Guide: What It Means To Be a Trustee
- [3.63] Client Guide to Selecting a Trustee
- [3.64] ACTEC Checklists and Engagement Letters
- [3.65] Tracking Sheet
- [3.66] IRA Layered Beneficiary Designation
- [3.67] List of Selected Malpractice Cases with Summary
- Chapter 4 — Property Ownership Aspects of Estate Planning
- I. [4.1] Introduction
- II. [4.2] Forms of Holding Title
- [4.3] Sole Ownership
- [4.4] Joint Tenancy
- [4.5] Tenancy by the Entirety
- [4.6] Tenancy in Common
- [4.7] Land Title Trusts
- [4.8] Totten Trusts
- [4.9] Payable-on-Death Accounts
- [4.10] Transfer-on-Death Registrations
- [4.11] Custodianships
- [4.12] Guardianships
- [4.13] Revocable Trusts
- [4.14] Irrevocable Trusts
- [4.15] Legal Life Estates
- [4.16] United States Savings Bonds
- [4.17] Community Property
- III. [4.18] Red Flags Indicating the Need for Special Attention
- [4.19] Second Marriages and Childless Couples
- [4.20] Disabled Adult Client
- [4.21] Real Estate in a State Other than the Owner’s State of Residence
- [4.22] Nonmarketable Assets
- [4.23] Aging Parents of Client
- [4.24] Existing Trusts
- [4.25] Property Not Passing Under the Testator’s Will or Revocable Trust
- [4.26] Gifts to Skip Persons
- [4.27] Non-U.S. Citizen Spouse
- IV. [4.28] Probate vs. Avoidance of Probate
- V. Powers of Attorney and Ancillary Documents
- VI. [4.33] Civil Unions
- VII. [4.34] Glossary of Estate Planning Terms
- VIII. [4.35] Tables for Applicable Credit, Applicable Exclusion Amount, and Rates
- Chapter 5 — Handling Closely Held Business Interests and Other Special Assets
- I. [5.1] Introduction
- II. [5.2] Estate, Gift, and Generation-Skipping Transfer Tax Background
- III. Minimization of Transfer Taxes
- [5.3] Valuation
- [5.4] Reducing Estate Tax by Electing Special-Use Valuation and the Qualified Family-Owned Business Interest Deduction
- Special-Use Valuation — Internal Revenue Code §2032A
- [5.5] Overview
- [5.6] Qualification for Special-Use Valuation
- [5.7] Adjusted Value
- [5.8] Qualified Use
- [5.9] Member of the Decedent’s Family
- [5.10] Qualified Heirs
- [5.11] Acquired from the Decedent
- [5.12] Ownership and Use
- [5.13] Indirect Ownership
- [5.14] Material Participation
- [5.15] Valuation Methods
- [5.16] Discounts and Special-Use Valuation
- [5.17] Election
- [5.18] Cure Period
- [5.19] Recapture upon Disposition or Cessation of Qualified Use
- [5.20] Planning
- Qualified Family-Owned Business Interest Deduction — Internal Revenue Code §2057
- [5.21] Overview
- [5.22] Qualification
- [5.23] Qualified Family-Owned Business (Numerator of 50-Percent Test)
- [5.24] Ownership
- [5.25] Corporation
- [5.26] Partnership
- [5.27] Tiered entities
- [5.28] Valuation of QFOBI
- [5.29] Effect of special-use valuation election
- [5.30] Discounts
- [5.31] Trade or business
- [5.32] Adjusted Gross Estate (Denominator of 50-Percent Test)
- [5.33] Member of the Decedent’s Family
- [5.34] Qualified Heir
- [5.35] Acquired from the Decedent
- [5.36] Material Participation
- [5.37] Value of Deduction
- [5.38] Election and Written Agreements
- [5.39] Recapture
- [5.40] Planning
- Providing for Liquidity and Planning for Payment of Estate Tax
- [5.41] In General
- [5.42] Extension for Reasonable Cause — Internal Revenue Code §6161
- [5.43] Twelve-Month Reasonable Cause Extension
- [5.44] Ten-Year Reasonable Cause Extension
- [5.45] Mechanics of Internal Revenue Code §6161 Extension Request
- [5.46] Financing and Deferral — Internal Revenue Code §6166
- [5.47] Qualification
- [5.48] Citizenship
- [5.49] Ownership
- [5.50] Adjusted gross estate
- [5.51] Closely held business
- [5.52] Active involvement
- [5.53] Passive assets and holding company stock
- [5.54] Attribution
- [5.55] Gifts within three years of death
- [5.56] Amount of Estate Tax That May Be Deferred
- [5.57] Interest Rate
- [5.58] Payment Due Dates
- [5.59] Acceleration of Payments
- [5.60] Failure to pay principal or interest when due
- [5.61] Disposition of business interests
- [5.62] Mechanics of the Extension Request
- [5.63] Planning for an Internal Revenue Code §6166 Election
- [5.64] Bond Requirement for Internal Revenue Code §§6161 and 6166 Elections
- [5.65] Other Financing
- Redemption of Corporate Stock — Internal Revenue Code §303
- [5.66] In General
- [5.67] Qualification
- [5.68] The 35-percent test
- [5.69] Modified gross estate
- [5.70] Aggregation (20-percent test)
- [5.71] Includability
- [5.72] Person from whom redeemed
- [5.73] Maximum redemption proceeds
- [5.74] Timing
- [5.75] Planning
- IV. Planning for Disposition of Closely Held Business or Real Estate Held for Production of Income
- [5.76] In General
- [5.77] Business Forms — Transfer Characteristics at Death
- [5.78] Sole Proprietorship
- [5.79] Partnership
- [5.80] General Partnership
- [5.81] Limited Partnership
- [5.82] Corporation
- [5.83] Limited Liability Company
- [5.84] Use of a Closely Held Business To Provide Continuing Income for Family Members
- [5.85] Redemption of Shares Owned by Non-Active Family Members
- [5.86] Salary for a Spouse or Other Family Members Active in the Business
- [5.87] Dividend Income
- [5.88] Deferred Compensation Plans and Salary Continuation Programs for a Decedent’s Spouse or Other Family Members
- [5.89] Sale of Business to Nonfamily Members
- V. Nonbusiness Real Estate and Other Special Assets
- VI. Appendix
- Chapter 6 — Income Tax Aspects of Estate Planning
- I. [6.1] Introduction
- II. [6.2] Grantor Trusts
- [6.3] Situations in Which a Grantor Trust Is Desirable
- [6.4] Definitions and Concepts Affecting the Grantor Trust Rules
- [6.5] Adverse Party and Non-Adverse Party
- [6.6] Related or Subordinate Party
- [6.7] Powers Subject to Notice and Waiting Requirements
- [6.8] Interests Held by Grantor’s Spouse
- [6.9] Grantor Trust Rules and Foreign Entities
- [6.10] When Grantor Is Treated as Owner
- [6.11] Code §673: Reversionary Interests
- [6.12] Code §674: Power To Control Beneficial Enjoyment
- Powers That May Be Held by Anyone
- [6.13] Power to apply income to support a dependent
- [6.14] Powers exercisable only after the occurrence of an event
- [6.15] Powers exercisable only by will
- [6.16] Powers to distribute principal for charitable contribution or to ESOP in qualified gratuitous transfer
- [6.17] Powers to distribute principal subject to a “reasonably definite standard” or to a current income beneficiary
- [6.18] Power to temporarily withhold income that ultimately must be payable
- [6.19] Power to withhold and accumulate income while beneficiary is disabled or under age 21
- [6.20] Power to allocate receipts and disbursements
- [6.21] Powers Held by Independent Trustees
- [6.22] Powers Held by Non-Grantor Trustees
- [6.23] Powers To Remove Trustees and To Add Beneficiaries
- [6.24] Code §675: Administrative Powers
- [6.25] Code §676: Revocation
- [6.26] Code §677: Powers To Distribute Income for Benefit of Grantor
- [6.27] When Person Other than Grantor Is Treated as Owner
- III. Non-Grantor Trusts
- Specific Characteristics
- [6.28] Tax Rates
- [6.29] Taxable Income
- [6.30] Distributable Net Income
- [6.31] Character of Distributions
- [6.32] In-Kind Treatment of Distributions
- [6.33] The 65-Day Rule
- [6.34] Distributions from Simple Trusts
- [6.35] Tax Treatment of the Simple Trust
- [6.36] Tax Treatment of Beneficiaries
- [6.37] Distributions from Complex Trusts
- [6.38] Separate Share Rule
- [6.39] Code §663 Exclusions
- [6.40] Tax Treatment of the Complex Trust
- [6.41] Tax Treatment of Beneficiaries
- [6.42] Throwback Rule
- Definitions and Concepts Affecting the Throwback Rule
- [6.43] Undistributed net income
- [6.44] Accumulation distribution
- [6.45] Taxes imposed on the trust
- [6.46] Deemed distribution of taxes
- [6.47] Tax treatment of various deemed distributions
- [6.48] Operation
- [6.49] Allocation to earlier taxable years
- [6.50] Example
- [6.51] Trapping Distributions
- [6.52] Taxable Year
- [6.53] Distributions from Charitable Remainder Trusts
- [6.54] Types of CRTs and Applicable Rules
- [6.55] Tax Treatment of the CRT
- [6.56] Tax Treatment of Beneficiaries
- IV. [6.57] Estates
- V. [6.61] Income-Shifting Strategies
- VI. Miscellaneous Provisions Affecting Income Tax Planning
- VII. Investment and Tax Deferral Techniques
- Chapter 7 — Federal Estate, Gift, and Generation-Skipping Transfer Taxes
- I. [7.1] Introduction
- II. Estate Tax
- [7.2] Imposition of the Federal Estate Tax
- [7.3] Gross Estate
- [7.4] Property in Which the Decedent Had an Interest
- Adjustments of Certain Gifts Made Within Three Years of the Decedent’s Death
- [7.5] Transfers Under Code §2036, §2037, §2038, or §2042
- [7.6] Gross of Federal Gift Taxes Paid
- Transfers with Retained Life Estate
- [7.7] General Rules Under Code §2036
- [7.8] Bona Fide Sale Exception
- [7.9] Retained Voting Rights
- [7.10] Transfers Taking Effect at Death
- [7.11] Revocable Transfers
- [7.12] Annuities (Including IRAs and Retirement Plans)
- [7.13] Joint Interests
- [7.14] Unmarried Joint Tenants
- [7.15] Married Joint Tenants
- [7.16] Powers of Appointment
- [7.17] Proceeds of Life Insurance
- [7.18] Transfers for Insufficient Consideration
- [7.19] Certain Property for Which Marital Deduction Was Previously Allowed
- [7.20] Deductions
- [7.21] Expenses, Indebtedness, and Taxes of Decedent
- [7.22] Funeral Expenses
- [7.23] Administration Expenses
- [7.24] Claims Against the Estate
- [7.25] Unpaid Mortgages
- [7.26] Other Administration Expenses
- [7.27] Losses During Administration
- [7.28] Transfers for Public, Charitable, and Religious Uses
- [7.29] Bequests, Etc., to Surviving Spouse
- [7.30] Family-Owned Business Interests
- [7.31] State Death Taxes
- [7.32] Taxable Estate
- [7.33] Adjusted Taxable Gifts
- [7.34] Calculating the Gross Estate Tax
- [7.35] Credits Against Gross Estate Tax
- [7.36] Unified Credit Equal to Applicable Credit Amount
- [7.37] Portability
- [7.38] No IRS Form 706 Required Unless Portability To Be Preserved
- [7.39] Credit for State Death Taxes
- [7.40] Credit for Gift Taxes Related to Pre-1977 Gifts
- [7.41] Credit for Tax on Prior Transfers
- [7.42] Credit for Foreign Death Taxes
- [7.43] Federal Estate Tax Return
- [7.44] Filing Requirements
- [7.45] Filing and Payment Due Dates
- [7.46] Person Responsible for Filing and Paying the Federal Estate Tax
- [7.47] Transferee Liability and Tax Liens
- [7.48] Questions and Elections on the Federal Estate Tax Return
- [7.49] Items To Be Attached to the Federal Estate Tax Return
- [7.50] Interest and Penalties
- [7.51] Tax Inclusive
- [7.52] Stepped-Up Basis
- [7.53] EGTRRA Issues Only Applicable to 2010
- III. Federal Gift Tax
- [7.54] Imposition of the Federal Gift Tax
- [7.55] Federal Gift Tax Law Definition
- Definition of Gifts
- [7.56] Common Examples of Gifts
- [7.57] State Law Property Definition
- [7.58] Transfers Must Be Complete
- [7.59] Indirect Gifts
- [7.60] Gift Splitting with Spouses
- [7.61] Excluded Gifts
- [7.62] Annual Exclusion Gifts
- [7.63] Exclusion for Certain Transfers of Educational Expenses
- [7.64] Exclusion for Certain Transfers of Medical Expenses
- [7.65] Waiver of Certain Pension Rights
- [7.66] Deductions
- [7.67] Charitable and Similar Gifts
- [7.68] Gifts to Spouse
- [7.69] Tentative Tax
- [7.70] Unified Credit Equal to Applicable Credit Amount
- [7.71] Net Gifts
- [7.72] Taxable Gifts Receive Carryover Basis
- [7.73] Federal Gift Tax Return
- [7.74] Filing Requirements
- [7.75] Filing and Payment Due Dates
- [7.76] Person Responsible for Filing and Payment
- [7.77] Items To Be Attached to the Federal Gift Return
- [7.78] Interest and Penalties
- [7.79] Tax Exclusive
- IV. Federal Generation-Skipping Transfer Tax
- [7.80] Imposition of the Federal GST Tax
- [7.81] Computing the Federal GST Tax
- [7.82] Credit for State GST Taxes
- [7.83] GST Tax Repealed and Reinstated in 2010
- [7.84] Generation Assignments
- [7.85] Definitions
- [7.86] Transferor
- [7.87] Skip Person
- [7.88] Nonskip Person
- [7.89] Interest
- [7.90] Trust
- [7.91] GSTs
- [7.92] Direct-Skip Transfers
- [7.93] Taxable Distributions
- [7.94] Taxable Terminations
- [7.95] Excluded GSTs
- [7.96] Annual Exclusion Gifts
- [7.97] Exclusion for Certain Transfers of Educational Expenses
- [7.98] Exclusion for Certain Transfers of Medical Expenses
- [7.99] GST Exemption
- [7.100] GST Exemption Amount
- [7.101] Allocation of Transferor’s GST Exemption
- Allocation of GST Exemption to Lifetime Transfers
- [7.102] Automatic allocations to lifetime transfers
- [7.103] Specific allocations of GST exemption to lifetime transfers
- [7.104] Retroactive allocations to lifetime transfers
- [7.105] Estate tax inclusion period
- Allocation of GST Exemption at Death
- [7.106] Automatic allocations at death
- [7.107] Specific allocations to GSTs at death
- [7.108] Creating Trusts with Inclusion Ratios of Zero or One
- [7.109] Using a Spouse’s GST Exemption
- [7.110] Splitting Lifetime Gifts
- [7.111] Reverse QTIP Election Related to Marital Trust
- Reporting Federal GSTs
- [7.112] Filing and Paying the Federal GST Tax
- [7.113] Interest and Penalties
- [7.114] Effective Date
- V. Valuation Issues
- [7.115] Importance of Valuation in Transfer Taxation
- [7.116] Definition of Value
- [7.117] Burden of Proving Value
- Timing of Valuation
- [7.118] Federal Estate Tax Transfers
- [7.119] Federal Gift Tax Transfers
- [7.120] Federal GST Tax Transfers
- [7.121] What Is Valued
- [7.122] Three General Approaches to Value
- [7.123] Discounts and Premiums
- [7.124] Determining Value of Specific Types of Assets
- [7.125] Cash, Checking Accounts, and Savings Accounts
- [7.126] Savings Bonds
- [7.127] Marketable Stocks and Bonds
- [7.128] Insurance Proceeds
- [7.129] Notes
- [7.130] Antiques, Artwork, Collectibles, and Other Valuables
- [7.131] Automobiles
- [7.132] Annuities and Retained Life Estates
- Real Estate
- [7.133] General Rules of Valuation
- [7.134] Special-Use Valuation
- [7.135] Private Business Interests
- [7.136] Valuation Must Consider Code §2031 or §2512
- [7.137] Valuation Must Consider Treas.Reg. §20.2031-3 or §25.2512-3
- [7.138] Valuation Must Consider Rev.Rul. 59-60
- [7.139] Valuation Must Consider Certain Agreements
- [7.140] Chapter 14 Special Valuation Rules
- [7.141] Special Valuation Rules in Case of Transfers of Certain Business Interests in Freeze Transactions
- [7.142] Special Valuation Rules in Case of Transfers of Interests in Trusts
- [7.143] Certain Agreement Rights and Restrictions Disregarded in Valuations
- [7.144] Treatment of Certain Lapsing Rights and Restrictions in Valuations
- VI. [7.145] Disclaimers
- VII. State Transfer Taxes
- VIII. [7.152] Conclusion
- IX. [7.153] Bibliography
- Chapter 8 — Drafting Considerations
- I. [8.1] Introduction
- II. Duty To Pay Expenses
- III. Tax Apportionment Clauses
- IV. Personal Property Clauses
- V. Specific Bequests
- VI. Describing the Beneficiaries
- VII. Drafting Approaches To Achieve Client Purposes with Individual Trustees
- [8.28] Reasons for Selecting Individual Trustee
- [8.29] Concerns over Individual’s Level of Expertise
- [8.30] Delegation of Investment Authority
- [8.31] Compensation
- [8.32] Successor Trustees and Cotrustees
- [8.33] Individual and Corporate Fiduciary as Cotrustees
- [8.34] Special Trustee To Make Discretionary Distributions
- VIII. Drafting Approaches To Ensure Flexibility and Achieve Client Purposes When Anticipating a Corporate Trustee
- Investment Approach
- [8.35] Types of Assets and Asset Mix
- [8.36] Family Business
- [8.37] Diversification
- [8.38] Directions in Trust Instrument
- Delegation of Investment Authority
- [8.39] Residences or Closely Held Businesses
- [8.40] Exoneration of Corporate Trustee
- [8.41] Fees
- [8.42] Preapproval of Drafts by Corporate Fiduciary
- [8.43] Removal
- [8.44] Receipt and Approval of Accountings
- [8.45] Application of Illinois Law to Out-of-State Successor Corporate Trustee
- [8.46] Trustee’s Refusal To Accept Amendment
- IX. Drafting Flexibility into Irrevocable Trusts in Anticipation of Changes in Circumstances
- [8.47] Trustee Discretion To Distribute Principal
- Inter Vivos Special Power of Appointment
- [8.48] Spouse
- [8.49] Other Persons
- [8.50] Possible Changes in Family Situation
- [8.51] Testamentary Power of Appointment
- [8.52] Power To Modify Crummey Withdrawal Rights
- [8.53] Limitation of Corporate Trustee’s Duties During Grantor’s Life
- X. [8.54] Anticipating Change When the Trust May Last a Long Time
- [8.55] Three Basic Approaches
- [8.56] One Big Trust
- [8.57] Separate Spray Trusts
- [8.58] Double Loop Holdback
- [8.59] Trustee Succession
- Trustee Amendments to Irrevocable Trust
- [8.60] Allowing Trustee To Grant General Powers to Beneficiaries
- [8.61] Allowing Trustee To Add Beneficiaries
- [8.62] Splitting Trusts for GST Tax Purposes
- [8.63] Creation of a Qualified Subchapter S Trust
- [8.64] Future Spouses and After-Born Children
- [8.65] Mandating Use of Current Law
- [8.66] Trustee Authority To Accelerate or Delay Distributions
- [8.67] Merging Two Trusts
- [8.68] Repeal or Major Change in Tax Laws
- Xl. Changes Under the 2010 Tax Relief Act
- XII. Asset Protection
- [8.73] Importance of Asset Protection
- Drafting Approaches To Protect Client Assets
- [8.74] Insurance
- [8.75] Tenancy by the Entireties
- [8.76] Gifts
- [8.77] Other Methods
- Drafting Approaches To Protect Assets of Family and Other Beneficiaries
- [8.78] Premarital Agreements
- [8.79] Revocable Trusts
- [8.80] Protective Trusts
- [8.81] Final Considerations
- Chapter 9 — Planning Techniques
- I. [9.1] Introduction
- II. [9.2] Estate Tax Considerations for the Small Estate (Less than $1 Million Estate Tax Value)
- For the Unmarried Client
- Making Gifts
- [9.3] Annual Exclusion Gifts
- [9.4] Lifetime Credit Gifts
- [9.5] Will and Trust Dispositive Provisions
- Beneficiary Designations
- [9.6] IRAs, Keoghs, and Qualified Plans
- [9.7] Life Insurance
- [9.8] Joint Tenancy
- For Married Clients
- [9.9] To Effectively Use Unified Credits of Both Spouses
- [9.10] Joint Tenancy and TOD Plans
- III. Saving Taxes for the Median Estate ($1 Million – $5 Million Estate Tax Value)
- For the Unmarried Client
- Making Gifts
- [9.11] Annual Exclusion Gifts
- [9.12] Lifetime Credit Gifts
- [9.13] Life Insurance Gifts
- [9.14] Charitable Gifts
- [9.15] GST Exemption Gifts
- Will and Trust Dispositive Provisions
- [9.16] Charitable Gifts
- [9.17] Using GST Exemption To Save Estate Taxes at Deaths of Children (or Other Next-Generation-Level Beneficiaries)
- [9.18] Payment of Taxes, Debts, and Administration Expenses
- [9.19] Power of Trustee To Divide Trust Based on Differences in Tax Characteristics
- Beneficiary Designations
- [9.20] IRAs, Keoghs, and Qualified Plans
- [9.21] Life Insurance
- [9.22] Joint Tenancy
- For Married Clients
- Restructuring Asset Ownership
- [9.23] To Effectively Use Unified Credits of Both Spouses
- [9.24] To Effectively Use GST Exemptions
- [9.25] To Fund Living Trusts
- [9.26] To Fund an Inter Vivos QTIP Trust
- Making Gifts
- [9.27] Using Annual Exclusion Gifts of Both Spouses
- [9.28] Lifetime Credit Gifts
- [9.29] Life Insurance Gifts
- [9.30] Charitable Gifts
- [9.31] GST Exemption Gifts
- Will and Trust Dispositive Provisions
- [9.32] Importance of Effectively Using Unified Credit of First Spouse To Die
- [9.33] Dispositions That Qualify for Marital Deduction
- [9.34] Using a Tax Formula To Ensure Optimal Use of First Spouse’s Unified Credit
- [9.35] Selecting the Appropriate Marital Deduction Tax Formula
- [9.36] Use of Disclaimers
- [9.37] Charitable Gifts
- [9.38] Payment of Debts, Administration Expenses, Estate Taxes, and GST Taxes
- [9.39] Power of Trustee To Divide Trusts Based on Differences in Tax Characteristics
- Beneficiary Designations
- [9.40] IRAs, Keoghs, and Qualified Plans
- [9.41] Life Insurance
- [9.42] Joint Tenancy
- IV. Saving Taxes for the Large Estate (Over $5 Million Estate Tax Value)
- For the Unmarried Client
- Making Gifts
- [9.43] Annual Exclusion Gifts
- [9.44] Lifetime Credit Gifts
- [9.45] Life Insurance Gifts
- [9.46] Charitable Gifts
- [9.47] GST Exemption Gifts
- Will and Trust Dispositive Provisions
- [9.48] Charitable Gifts
- [9.49] Using GST Exemption To Save Estate Taxes at Deaths of Children (or Other Next-Generation-Level Beneficiaries)
- [9.50] Payment of Taxes, Debts, and Administration Expenses
- [9.51] Power of Trustee To Divide Trusts Based on Differences in Tax Characteristics
- [9.52] Beneficiary Designations
- For Married Clients
- Restructuring Asset Ownership
- [9.53] To Effectively Use Unified Credits of Both Spouses
- [9.54] To Effectively Use GST Exemptions of Both Spouses
- [9.55] To Effectively Use One Spouse’s Lower Estate Tax Rate Bracket
- [9.56] To Fund Living Trusts
- [9.57] To Fund an Inter Vivos QTIP Trust
- [9.58] To Effectively Use the Illinois Estate Tax Exemption
- [9.59] Making Gifts
- [9.60] Will and Trust Dispositive Provisions
- [9.61] Beneficiary Designations
- [9.62] Comprehensive Reviews
- Chapter 10 — Powers of Appointment
- I. [10.1] Introduction
- II. Federal Gift and Estate Tax Treatment
- [10.4] Retained Interests Distinguished
- [10.5] An Analytical Approach
- [10.6] “General Power” Defined
- [10.7] Exceptions to the Rule
- [10.8] The Ascertainable Standard
- [10.9] Joint Powers
- [10.10] Pre-1942 Powers
- [10.11] Post-1942 powers
- [10.12] Allocation
- [10.13] Intermediate Summary
- [10.14] Impact and Consequences
- [10.15] Exercise
- [10.16] Release
- [10.17] Disclaimer Distinguished
- [10.18] Lapse and the “Five and Five” Exception
- [10.19] Possession at Death
- [10.20] Exceptions Highlighted
- III. Problems and Focus
- IV. [10.26] Planning and Drafting
- Chapter 11 — Asset Freeze and Valuation Reduction Techniques
- I. [11.1] Introduction
- II. Transfers to Trusts — Code §2702
- [11.2] Background: Impetus for §2702
- [11.3] Scope of §2702
- [11.4] Qualified Interests
- [11.5] Grantor Retained Annuity Trusts (GRATs)
- [11.6] The Annuity
- [11.7] Gift and Estate Tax Consequences
- [11.8] Factors Affecting GRAT Valuation
- [11.9] Analysis of Benefits of a GRAT
- [11.10] Economically Zeroed-Out GRATs
- [11.11] “Re-GRATs” or “Laddered GRATs”
- [11.12] GST and GRATs
- [11.13] Grantor Retained Unitrusts (GRUTs)
- [11.14] Personal Residence Trusts and Qualified Personal Residence Trusts (QPRTs)
- [11.15] Types of Personal Residence Trusts
- [11.16] Personal Residence Trusts
- [11.17] Personal residence
- [11.18] Qualified proceeds
- [11.19] Trust requirements
- [11.20] Qualified Personal Residence Trusts
- [11.21] Interests of spouses in same residence
- [11.22] Income of trust
- [11.23] Distributions from trust
- [11.24] Trust assets
- [11.25] Commutation
- [11.26] Cessation of use as personal residence
- [11.27] Disposition of trust assets upon cessation
- [11.28] Mortality Risk
- [11.29] Use of Residence After Term Period
- [11.30] Analysis of Benefits of Personal Residence Trusts
- [11.31] GST and Residence Trusts
- [11.32] Personal Property GRITs
- III. [11.33] Family Limited Partnerships and Family Limited Liability Companies
- [11.34] Estate Planning Benefits
- [11.35] Code §§2703, 2704, and 2036
- [11.36] Section 2703
- [11.37] Bona Fide Business Arrangement
- [11.38] Device To Transfer Property — Similar Arm’s-Length Arrangements
- [11.39] Other §2703-Related Requirements
- [11.40] Non-Family Control Exception
- [11.41] Application of §2703 to FLPs and LLCs
- [11.42] Section 2704
- [11.43] Lapsing Voting or Liquidation Rights — Section 2704(a)
- [11.44] Restrictions on Liquidation — Section 2704(b)
- [11.45] Section 2036
- Estate of Strangi v. Commissioner
- [11.46] Court Decision and Rationale
- [11.47] Implications
- [11.48] Post-Strangi Strategies for FLPs
- [11.49] Section 2036(a)(1)
- [11.50] Section 2036(a)(2)
- Circuit Court Definitions of “Bona Fide Sale for an Adequate and Full Consideration” Under §2036
- [11.51] Estate of Thompson v. Commissioner
- [11.52] Kimbell v. United States
- [11.53] Estate of Murphy v. United States
- [11.54] Post-Death Events
- [11.55] Implications
- [11.56] Formation
- [11.57] Recognition of Income or Gain
- [11.58] Gift upon Formation
- [11.59] Step Transactions
- [11.60] Certain Federal Income Tax Considerations
- Allocations of Profit and Loss
- [11.61] Section 704(b)
- [11.62] Section 704(c)
- [11.63] Section 704(e)
- [11.64] Disguised Sale Rules
- IV. [11.65] Business Freezes
- V. [11.74] Conclusion
- Chapter 12 — What Every Estate Planner Needs To Know About Retirement Plans
- I. [12.1] Introduction
- II. Client’s Goals and Tax Factors
- [12.2] Client’s Goals in Planning for IRAs
- Tax Factors Affecting IRAs
- [12.3] Minimum Distribution Rules
- [12.4] Living Client
- [12.5] Year of Client’s Death
- [12.6] After Client’s Death
- [12.7] Designated Beneficiary
- [12.8] Trust “Look-Through” Rule
- [12.9] September 30 Date
- [12.10] Multiple Beneficiaries
- [12.11] Income in Respect of a Decedent
- III. Beneficiary Designations for IRAs
- [12.12] Beneficiary Designations for Married Client
- [12.13] Relinquishing Control of IRA to Surviving Spouse After Death: Spouse Is Outright Beneficiary of IRA
- [12.14] Retaining Control of IRA After Death: QTIP Trust Is Beneficiary of IRA
- “All Income” Requirement
- [12.15] In general
- [12.16] Approaches to satisfying “all income” requirement
- [12.17] Simple approach: pay all income out of IRA to surviving spouse
- [12.18] More complicated approach: spouse may withdraw income from IRA
- [12.19] Evaluation of two “QTIPing” approaches
- [12.20] Naming a QTIP Trust as Beneficiary of an IRA
- [12.21] Income Tax Problem
- [12.22] Conduit Trust
- [12.23] IRA Itself Is a QTIP Trust
- [12.24] Alternative To QTIPing the IRA: Give the IRA in Shares to Spouse and Children
- [12.25] Funding Credit Shelter Bypass Trust with IRA
- [12.26] Disclaimer Approach
- [12.27] Client’s Revocable Trust or Testamentary Trust
- [12.28] General rule of thumb
- [12.29] Pitfalls of revocable trust as beneficiary of IRA
- [12.30] Joint Trust Approach
- [12.31] Portability
- [12.32] Dealing with Noncitizen Spouse
- [12.33] Designating a Secondary Beneficiary
- [12.34] Beneficiary Designations for Unmarried Client
- [12.35] Charitable Giving with IRAs
- [12.36] Outright Gift to Charity at Death
- [12.37] Split-Interest Trusts
- [12.38] Regular Trust
- [12.39] Charitable Remainder Trust Under Code §664
- [12.40] Use of Beneficiary Designation Forms
- IV. [12.41] Other Lifetime IRA Decisions
- V. [12.45] Beneficiary Designations for Qualified Plans
- VI. Handling IRAs After Owner Is Deceased
- [12.49] Consolidating Multiple IRAs into a Single IRA
- [12.50] Surviving Spouse Is the Beneficiary
- [12.51] All Other Cases
- [12.52] After-Tax Money in IRA
- [12.53] Moving IRA Between Financial Institutions After Client Is Deceased
- [12.54] IRA’s RMD for Year of Death Was Not Withdrawn — Request IRS To Waive 50-Percent Penalty Tax
- [12.55] Disclaimer To Fund Credit Shelter Bypass Trust
- Revocable Trust as Beneficiary of Decedent’s IRA
- [12.56] Avoiding Recognition of Taxable Income upon Funding a Pecuniary Amount Trust
- [12.57] Postmortem IRA Planning To Obtain a Designated Beneficiary
- [12.58] Cash-Out Technique
- [12.59] Release and Disclaimer as a Backup Technique
- [12.60] Reformation
- [12.61] Spousal Rollover of IRA When Revocable Trust or Estate Is Beneficiary
- [12.62] Multiple Owners of IRA After Client’s Death
- [12.63] Special-Needs Beneficiary
- [12.64] Creditor Protection
- IRA as Asset of Irrevocable Trust
- [12.65] Educating IRA Custodians That a Decedent’s IRA May Be Owned by a Series of Trusts, Individuals, and Estates
- [12.66] Trust Accounting for Principal and Income
- VII. [12.67] Roth IRAs
- Chapter 13 — What Every Estate Planner Needs To Know About Life Insurance
- I. [13.1] Introductory Note
- II. Key Features of Various Policy Types and Provisions
- [13.2] Term Life Insurance
- [13.3] Whole Life Policies
- [13.4] Participating Policies
- [13.5] Use of Dividends
- [13.6] Dividend Rates
- [13.7] Nonparticipating, Interest-Sensitive, Accumulation-Type Policies
- [13.8] Universal Life Insurance
- [13.9] Adjustable Life Insurance
- [13.10] Variable Life and Variable Universal Life Insurance
- [13.11] Term Riders
- [13.12] Tax Benefits of Life Insurance
- [13.13] Modified Endowment Contracts
- [13.14] Taxation of Modified Endowment Contracts
- [13.15] Code §7702
- Borrowing Against or Taking Withdrawals from Cash Value
- [13.16] Loans
- [13.17] Withdrawals from Universal Life Policies
- [13.18] Funding Policies Internally Without Cash Premium Payments
- [13.19] Policy Surrender
- [13.20] Hypothetical Illustrations and In-Force Ledgers
- [13.21] No-Lapse Guarantee Universal Life
- [13.22] Asset Protection Considerations
- III. [13.23] Income Tax Issues Associated with Policy Surrender, Lapse, Sale, Exchange, or Replacement
- [13.24] Taxable Gain (Ordinary Income) on Policy Surrender or Lapse and General Income Taxation Rules
- [13.25] Taxable Gain (Ordinary Income) on Policy Gift
- [13.26] Taxable Gain (Ordinary Income) on Policy Sale, Qualified Plan Distribution, or Compensatory Transfer
- [13.27] Taxable Gain (Ordinary Income) on Policy Exchange or Replacement
- [13.28] Transfers for Value
- [13.29] Examples of Transfers for Value
- [13.30] Exempt Transferees
- [13.31] Transfer to Partner of Insured
- [13.32] Transfer to Partnership in Which Insured Is Partner
- [13.33] Transfer to Corporation of Which Insured Is Shareholder or Officer
- [13.34] Transferor’s Basis Exception; Gifts
- [13.35] Tax-Free Corporate Reorganizations
- [13.36] Transfer to Insured’s Spouse or Ex-Spouse Pursuant to Divorce
- [13.37] References
- [13.38] Life Settlements and Investor-Owned or Stranger-Owned Life Insurance
- IV. [13.39] Effective Ways To Alter Policy Funding Plans and Transfer Ownership To Meet Changing Circumstances
- [13.40] Changing Policy Funding Plans
- [13.41] Terminating or Reducing Ongoing Cash Gifts to an Irrevocable Trust
- [13.42] Terminating Corporate Split-Dollar Premium Payments
- Changing Policy Ownership
- [13.43] Transferring Ownership of Policy from Co-Shareholder
- [13.44] Transferring Ownership of Policy from Corporation
- [13.45] Transferring Ownership of Policy from Irrevocable Trust
- V. Possibilities To Consider in Policy Ownership Besides Irrevocable Trusts
- [13.46] Advantages and Disadvantages of Irrevocable Trusts
- [13.47] Family Partnerships
- [13.48] Advantages
- [13.49] Disadvantages
- [13.50] References
- [13.51] Credit Shelter (Family) Trusts
- [13.52] Qualified Pension or Profit-Sharing Plans
- [13.53] Other Possible Alternatives; Revocable Life Insurance Trusts
- [13.54] Survivor Life Standby Trust
- [13.55] Outright Ownership by Children
- [13.56] Coownership Between Equity and Residual Owners
- VI. How Life Insurance Is Used for Tax-Deferred Cash Accumulation as Well as for Death Benefits
- VII. [13.60] Key Differences in Taxation Between Life Insurance and Annuities as They Relate to Estate Planning
- [13.61] Basic Characteristics of Annuities
- [13.62] Types of Accumulation Annuities
- [13.63] Annuity Payment Options
- [13.64] Value of Tax Deferral
- [13.65] Withdrawals from Tax-Deferred Annuity
- Gift and Estate Taxation of Annuities and Life Insurance
- [13.66] Annuities: Estate Tax
- [13.67] Annuities: Gift Tax
- [13.68] Contrast to Life Insurance Rules
- Income Taxation of Annuities and Life Insurance
- [13.69] Withdrawals Before Annuitization
- [13.70] Withdrawals After Annuitization
- [13.71] Contrast to Life Insurance Rules
- [13.72] Effect of Entity Ownership or Beneficiary Designation
- [13.73] Tax-Free Code §1035 Exchanges
- VIII. [13.74] Split-Dollar Arrangements
- [13.75] Advantages of Split-Dollar Funding
- [13.76] Split-Dollar Documentation
- [13.77] Interim Guidance on the Value of Life Insurance Protection
- [13.78] Pre-January 28, 2002, Arrangements — Deciding What To Do
- [13.79] Safe Harbor 1: Continuing Economic Benefit
- [13.80] Safe Harbor 2: Switch to Loan Treatment
- [13.81] Terminating the Split-Dollar Agreement During Insured’s Life
- [13.82] Pre-January 28, 2002, Endorsement Split-Dollar Agreements
- [13.83] Non-Equity Endorsement Split-Dollar Agreements Entered into or Materially Modified After September 17, 2003
- [13.84] Pre-January 28, 2002, Collateral Assignment Split-Dollar Agreements
- [13.85] Equity Collateral Assignment Split-Dollar Entered into or Materially Modified After September 17, 2003
- [13.86] Split-Dollar Arrangements in Public Companies
- [13.87] Reverse Split-Dollar
- [13.88] Private Split-Dollar/Private Premium Financing
- [13.89] Charitable Split-Dollar
- IX. [13.90] Split-Dollar, Code §409A, and FASB EITF Abstract Issue No. 06-10
- X. [13.91] Conclusion
- Chapter 14 — Advising Elderly Persons
- I. [14.1] Introduction
- II. [14.2] Overview of Programs
- III. [14.8] Source of Medicaid Law
- IV. [14.9] Medicaid Eligibility
- V. [14.10] Medicaid Financial Eligibility Requirements
- [14.11] Exempt Resources and Resource Disregard
- [14.12] Homestead Property
- [14.13] Personal Effects and Household Goods
- [14.14] Motor Vehicle
- [14.15] Life Insurance
- [14.16] Burial Spaces and Funds
- [14.17] Resources Needed for Self-Support
- [14.18] Resource Disregard
- [14.19] Spend-Down
- Available but Not Counted Assets
- [14.20] Jointly Owned Real Property
- [14.21] Life Estates
- VI. [14.22] Property Transfers
- VII. [14.29] Planning Strategies
- [14.30] Exempt Purchases
- [14.31] Fair Market Value Purchases
- [14.32] Transfers to Special-Needs Trusts
- [14.33] Transfers to Spouse
- [14.34] Transfer of Exempt Resources to Community Spouse
- [14.35] Transfer of Available Resources to Community Spouse
- [14.36] Refusal To Disclose Assets
- [14.37] Transfer of Income to Community Spouse
- [14.38] Transfers to Children
- [14.39] Transfer of Homestead to Siblings with an Equity Interest
- [14.40] Outright Transfers of Assets
- VIII. Dealing with Property in Trust
- IX. [14.47] Estate Recovery and Liens
- X. [14.48] Medicaid Planning by Guardians
- Chapter 15 — Advance Directives
- I. [15.1] Introduction
- II. Brief History
- III. [15.6] Illinois Power of Attorney Act
- [15.7] Purpose
- [15.8] Definitions
- [15.9] Applicability
- [15.10] Durable vs. Springing Powers
- [15.11] Springing Powers
- [15.12] Potential Conflict with HIPAA
- [15.13] Revocation
- [15.14] Duty of the Agent
- [15.15] Excluded Agency Designations
- [15.16] Conflicts of Interest
- [15.17] Good-Faith Reliance and Third-Party Liability
- [15.18] Successor Agents
- [15.19] Co-Agents
- [15.20] Court Involvement
- [15.21] Preservation of Estate Plan and Trusts
- [15.22] Statutory Form
- [15.23] Substantial Compliance
- [15.24] Portability
- IV. [15.25] Property Power of Attorney
- [15.26] Statutory Form
- [15.27] Naming the Agent
- [15.28] Revocation of Prior Powers of Attorney
- [15.29] Powers
- [15.30] Powers That Must Be Added
- [15.31] Power To Make Gifts
- [15.32] Power To Transfer Assets to a Trust
- [15.33] Power To Change Beneficiary Designations
- [15.34] Power To Sell Specific Real Estate
- [15.35] Power Over Certain Financial Transactions
- [15.36] Other Powers
- [15.37] Delegation of Powers
- [15.38] Compensation
- [15.39] Springing Powers
- [15.40] Successor Agents
- [15.41] Designation of Guardian
- [15.42] Execution and Revocation
- [15.43] Ethical Considerations for the Attorney
- V. [15.44] Power of Attorney for Healthcare
- [15.45] Purpose
- [15.46] Substantial Compliance with Statutory Form
- [15.47] Broad Powers
- [15.48] Statutory Form
- [15.49] Naming the Agent
- [15.50] Anatomical Gifts
- [15.51] Disposition of Remains
- [15.52] Accessibility to Medical Records and Compliance with HIPAA
- [15.53] Decisions for a Minor Child
- [15.54] Limitations
- [15.55] Specific Treatments
- [15.56] Authority To Admit Principal To Healthcare Institutions
- [15.57] Religious Preferences
- [15.58] Life-Sustaining Treatment
- [15.59] Definitions
- [15.60] Durable vs. Springing Powers
- [15.61] Successor Agents
- [15.62] Nomination of Guardian
- [15.63] Execution and Revocation
- [15.64] Portability
- [15.65] Duties and Responsibilities of the Agent
- [15.66] Immunities
- [15.67] Conscience Rights
- [15.68] Coordination with Other Advance Directives
- VI. [15.69] The Living Will
- VII. [15.79] Mental Health Treatment Preference Declaration
- [15.80] Mental Health Treatment
- [15.81] Mental Illness
- [15.82] Electroconvulsive Treatment
- [15.83] Psychotropic Medication
- [15.84] Admission To a Mental Health Facility
- [15.85] Statement of Preference and/or Appointment of Attorney-in-Fact
- [15.86] Duties and Rights of the Attorney-in-Fact
- [15.87] Responsibility of the Healthcare Provider
- [15.88] Execution and Revocation
- [15.89] Declaration Not Effective in Certain Circumstances
- [15.90] Interaction with Other Directives
- VIII. [15.91] Health Care Surrogate Act
- [15.92] The Process
- [15.93] The Surrogates
- [15.94] Decision-Making Standards
- [15.95] Decisions To Forgo Life-Sustaining Treatment
- [15.96] Qualifying Conditions
- [15.97] Documentation of Qualifying Condition
- [15.98] Finalizing the Decision
- [15.99] Compliance with Rights of Conscience
- [15.100] Immunities
- [15.101] Compliance with HIPAA
- [15.102] Coordination with Other Acts
- IX. [15.103] Do-Not-Resuscitate Order
- X. [15.104] Disposition of Remains Act
- XI. Appendix
- [15.110] References
- Sample Forms
- [15.111] Statutory Short Form Power of Attorney for Property
- [15.112] Statutory Short Form Power of Attorney for Health Care
- [15.113] Statutory Form of Declaration of Living Will
- [15.114] Statutory Form of Declaration of Mental Health Treatment Preference
- [15.115] Uniform Do-Not-Resuscitate Order
- [15.116] Consent Request for Office of State Guardian Ward — DNR/Withholding/Withdrawal of Treatment
- [15.117] Statutory Form of Appointment of Agent To Control Disposition of Remains
- Chapter 16 — Postmortem Estate Planning
- I. [16.1] Introduction
- II. Disclaimers and Elections
- [16.4] Disclaimers
- [16.5] Reasons for Using Disclaimers
- [16.6] Pre-1977 Disclaimers
- [16.7] Requirements of Qualified Disclaimers
- [16.8] Qualified Disclaimer Must Be Irrevocable and Unconditional
- [16.9] Qualified Disclaimer Must Be Written and Signed
- [16.10] Qualified Disclaimer Must Be Delivered Within Nine Months
- [16.11] Disclaimant Must Not Have Accepted Benefits of Disclaimed Property
- [16.12] Disclaimed Property Must Pass Without Direction from Disclaimant
- Disclaimers of Specific Property Interests
- [16.13] Successive Disclaimers
- [16.14] Joint Tenancy Property
- [16.15] Powers of Appointment
- [16.16] Remainder Interests
- [16.17] Disclaimer After Attaining Age 21
- [16.18] QTIP Election
- [16.19] Disclaimer by Spouse
- [16.20] Disclaimers by Persons Other than the Surviving Spouse
- [16.21] Partial Disclaimers
- [16.22] Disclaimers Under the Illinois Probate Act of 1975
- [16.23] QTIP Elections
- [16.24] Protective QTIP Elections
- [16.25] Partial QTIP Elections
- [16.26] Contingent (Clayton) QTIP Elections
- [16.27] Illinois QTIP Elections
- [16.28] Making the QTIP Election
- [16.29] QDOT Election
- [16.30] QDOT Requirements
- [16.31] QDOT Bond and Security Requirements
- [16.32] QDOT Election
- [16.33] Exception for Spouse Who Becomes United States Citizen
- [16.34] Deferred Estate Tax on QDOT Distributions
- [16.35] Ability of Noncitizen Spouse To Create QDOT with Outright Bequest
- Reverse QTIP Elections
- [16.36] GST Tax Problems with QTIP Trusts
- [16.37] Reverse QTIP Election and the Three-Trust Structure
- [16.38] How the Reverse QTIP Election Is Made
- III. [16.39] Paying the Estate Tax
- [16.40] Selling Assets To Raise Cash
- [16.41] Private Financing of Estate Tax
- [16.42] Graegin Loans
- [16.43] Code §6166
- [16.44] General Terms
- [16.45] Eligibility
- [16.46] Making the Election and IRS Review
- [16.47] Bond or Lien Requirement
- [16.48] Percentage Test
- [16.49] Definition of a Closely Held Business Interest
- [16.50] Application of Family Attribution Rules
- [16.51] Closely Held Business Interest Must Be Active Business
- [16.52] Issues with Agricultural Property
- [16.53] Acceleration of Deferred Estate Tax
- [16.54] Penalties for Failure To Pay Installments
- [16.55] State Death Tax Deferral
- [16.56] Other Estate Tax Extensions (Code §§6161 and 6163)
- [16.57] Code §303
- [16.58] Background
- [16.59] Requirements
- [16.60] Timing Rules
- IV. Other Postmortem Planning Techniques and Issues
- [16.61] Use of the Alternate Valuation Method
- [16.62] Renunciation of Will by Surviving Spouse
- [16.63] Special-Use Valuation for Real Estate
- [16.64] Requirements for Special-Use Valuation
- [16.65] Real Estate Used in Farming or in a Trade or Business
- [16.66] Qualified Use
- [16.67] Qualified Heirs
- [16.68] Percentage Test
- [16.69] Material Participation
- [16.70] Recapture of Estate Tax
- [16.71] Fees of the Fiduciary
- [16.72] Whether Fees Should Be Taken
- [16.73] Paying Expenses and Claims Before Due Date of Estate Tax Return To Ensure Deductions
- [16.74] When Fees Should Be Taken
- Income in Respect of a Decedent and the Deduction
- [16.75] IRD Basics
- [16.76] IRD Deductions
- [16.77] Income Tax Deduction for Estate Tax Paid on IRD Items
- [16.78] Income Tax Planning
- [16.79] Final Income Tax Return of Decedent
- [16.80] Joint Returns with Surviving Spouse
- [16.81] Decedent Has Failed To File Income Tax Returns
- [16.82] Fiduciary Income Tax Returns
- [16.83] Choosing a Tax Year
- [16.84] Income Tax Treatment of Distributions (DNI)
- [16.85] Distributions In Kind and the In-Kind Election
- [16.86] Electing To Take Certain Deductions on the Income Tax Return or the Estate Tax Return
- [16.87] Problem with Expenses at First Death
- [16.88] Transmission vs. Management Expenses
- [16.89] Gift Tax Returns in the Year of Death
- Tax Basis Issues
- [16.90] General Rules
- [16.91] Gallenstein v. United States
- [16.92] Holding Period for Property Acquired from a Decedent
- [16.93] Trust Funding
- [16.94] Type of Funding Formula Determines Tax Consequences of Trust Funding
- [16.95] Which Assets To Which Trust (Estate Planning at the Second Death)
- V. [16.96] Estate Planning for Surviving Spouse, Children, and Other Beneficiaries
- VI. Appendix — Sample Disclaimer Forms
- Chapter 17 — Forms
- I. Introduction
- II. [17.3] A Note on Formula Planning
- [17.4] A Note on Marital Deduction Formula Clauses
- [17.5] Formula Clauses and State Death Taxes
- [17.6] Eliminating State Death Taxes at First Death
- [17.7] State-Only QTIP
- [17.8] Modifying Formula To Reduce Combined Taxes to Zero
- [17.9] Potential Modifications to Formula Clauses To Ensure Minimum Allocation
- [17.10] Pecuniary Credit Shelter Lead Formula (Non-GST)
- [17.11] Pecuniary Marital Gift (Non-GST)
- [17.12] Fractional Formula (Non-GST)
- [17.13] GST Formula Gifts
- [17.14] GST Plans
- III. Plans for Simple Estates
- [17.15] Outright Gifts with No Minor Children
- Married Person
- [17.16] Will
- [17.17] Revocable Trust
- Single Person
- [17.18] Will
- [17.19] Revocable Trust
- [17.20] Contingent Trust Dispositions with Minor Children
- Married Person
- [17.21] Will
- [17.22] Revocable Trust
- Single Person
- [17.23] Will
- [17.24] Revocable Trust
- [17.25] Plans for Borderline Estates — Disclaimer to Family Trust
- [17.26] Will
- [17.27] Revocable Trust
- IV. [17.28] Plans for Taxable Estates
- [17.29] Single-Fund QTIP
- [17.30] Will
- [17.31] Revocable Trust
- [17.32] Family Trust with Outright Marital Deduction Bequest
- [17.33] Will
- [17.34] Revocable Trust
- Two-Trust Plan; Bequest to QTIP Trust
- [17.35] Will
- [17.36] Revocable Trust
- Two-Trust Plan; Bequest to Power-of-Appointment Trust
- [17.37] Will
- [17.38] Revocable Trust
- [17.39] Three-Trust Plan
- [17.40] Will
- [17.41] Revocable Trust
- [17.42] Alternative Marital Deduction Formulae
- Wills
- [17.43] Pecuniary Marital Trust with True-Worth Funding
- [17.44] Pecuniary Family or Marital Trust with 64-19 Funding
- [17.45] Fractional Marital Trust and Family Trust
- Revocable Trusts
- [17.46] Pecuniary Marital Trust with True-Worth Funding
- [17.47] Pecuniary Family or Marital Trust with 64-19 Funding
- [17.48] Fractional Marital Trust and Family Trust
- V. [17.49] Pourover Wills
- VI. [17.52] Generation-Skipping Plans
- VII. [17.57] Irrevocable Life Insurance Trusts
- [17.58] Explanation of Common Provisions
- [17.59] Insurance Policies and Premiums
- [17.60] Lifetime Trust
- [17.61] Special Withdrawal Rights
- [17.62] Disposition of Proceeds
- [17.63] Trustee
- [17.64] Divorce
- [17.65] Limit on Distributions
- Trusts with No Hanging Powers
- Married Person
- [17.66] No GST
- [17.67] GST
- Single Person
- [17.68] No GST
- [17.69] GST
- [17.70] Survivor Trust; No GST
- [17.71] Modifications Required for Trusts with Hanging Powers
- Married Person
- [17.72] No GST
- [17.73] GST
- Single Person
- [17.74] No GST
- [17.75] GST
- [17.76] Survivor Trust; No GST
- VIII. [17.77] Irrevocable Lifetime Gift Trusts
- IX. [17.85] Charitable Trusts
- Charitable Remainder Annuity Trust
- [17.86] Commentary
- [17.87] Form
- [17.88] Alternate Language for Creation of Testamentary CRAT Under Revocable Trust
- [17.89] Alternate Language for Creation of CRAT Under Will
- Charitable Remainder Unitrust
- [17.90] Commentary
- [17.91] Form
- [17.92] Alternate Language for Creation of Testamentary CRUT Under Revocable Trust
- [17.93] Alternate Language for Creation of CRUT Under Will
- X. Ancillary Documents
- Living Will
- [17.94] Commentary
- [17.95] Form
- Illinois Statutory Short Form Power of Attorney for Property
- [17.96] Commentary
- [17.97] Application
- [17.98] Duration, Disability, and Divorce
- [17.99] Standard of Care; Self-Dealing
- [17.100] Agent’s Relationship to Guardian
- [17.101] Agent’s Relationship to Estate Plan
- [17.102] Agent’s Certification and Acceptance of Authority
- [17.103] No Automatic Revocation
- [17.104] Successor and Co-Agents
- [17.105] Foreign and Preexisting Powers of Attorney
- [17.106] Form
- Illinois Statutory Short Form Power of Attorney for Health Care
- [17.107] Commentary
- [17.108] Form
Authors
- Mary F. Andreoni
Mary F. Andreoni
Mary F. Andreoni is Senior Ethics Counsel for the Illinois Attorney Registration and Disciplinary Commission (ARDC) in Chicago, where she focuses on legal ethics. She is a member of the Chicago Bar Association. Andreoni received her J.D. from Loyola University of Chicago.
- John B. Beery
John B. Beery
No bio available.
- Svetlana V. Bekman
Svetlana V. Bekman
Svetlana V. Bekman is a senior trust attorney at the Legal Department of The Northern Trust Company in Chicago. Prior to joining The Northern Trust Company, Ms. Bekman was a partner in the Private Clients Group of Schiff Hardin LLP. She speaks and publishes articles and chapters on various aspects of IRAs and other retirement plans. Most recently, she wrote an article entitled IRA Administration for High Net Worth Clients and Their Beneficiaries — Unique Challenges and Best Practices for Financial Institutions for the ACTEC Law Journal, and spoke on “Protecting Inherited IRA Assets From Creditors” at the Annual Estate Planning Short Course for the Illinois Institute for Continuing Legal Education. Ms. Bekman received her law degree from the Northwestern University School of Law and served as a clerk to the Honorable Elaine E. Bucklo (U.S. District Court for the Northern District of Illinois).
- William L. Broom III
William L. Broom III
William L. Broom III is a Partner at Barrett, Twomey, Broom, Hughes & Hoke, LLP, in Carbondale, where he concentrates his practice in civil litigation, estate planning, and eminent domain. He has been a Special Assistant Attorney for the Illinois Department of Transportation for eminent domain and land acquisition since 1983. He is active in the Illinois State Bar Association and has served as Chair of its Committees on Professional Responsibility, Healthcare, and Continuing Legal Education. He is also a member of the American Bar Association, the American Association for Justice, and the Illinois Trial Lawyers Association. Mr. Broom received his B.S. from the University of Illinois and his J.D. from the University of Illinois College of Law.
- Mary Dory Cascino
Mary Dory Cascino
No bio available.
- Jane Gorman Ditelberg
Jane Gorman Ditelberg
Jane Gorman Ditelberg is Assistant General Counsel and Senior Vice President at The Northern Trust Company in Chicago. As a member of Northern Trust’s Legal Department, she provides legal counsel to the bank in its role as executor, trustee, and guardian. She is a Fellow of the American College of Trust and Estate Counsel (Committees on Amicus Briefs (Vice Chair), State Laws, Employee Benefits, and Diversity and Inclusivity). She is a member of the Chicago Bar Association, where she served on the Task Force for the Illinois Trust Code and as Chair of the Estate and Gift Tax Subcommittee, and of the Chicago Estate Planning Council. She is a frequent author and lecturer on a wide range of estate and tax planning topics for groups including ACTEC, IICLE®, the Heckerling Estate Planning Institute, and the University of Notre Dame Estate Planning Conference.
- Stephen A. Frost
Stephen A. Frost
Stephen A. Frost is Of Counsel to Huck Bouma PC in Wheaton, where he focuses on business and estate planning. He is a member of the Illinois State, DuPage County, and Chicago Bar Associations. He teaches estate and gift taxation as an adjunct professor at DePaul University Graduate School of Business and trust and partnership law annually as a visiting professor at Vytautas Magnus University Law School in Kaunas, Lithuania. Mr. Frost received his B.S. from Iowa State University and his J.D. from the University of Iowa College of Law.
- Robert K. Garro
Robert K. Garro
No bio available.
- Jonathan Graber
Jonathan Graber
No bio available.
- Robert E. Hamilton
Robert E. Hamilton
Robert E. Hamilton, former Chair of the IICLE® Board of Directors,is a Partner at Hamilton Thies & Lorch LLP, in Chicago, where he concentrates his practice in trusts and estates. He is a Fellow of the American College of Trust and Estate Counsel, a 2006 recipient of the Chicago Estate Planning Council’s Austin Fleming Distinguished Service Award, and a 2008 recipient of IICLE®’s Addis E. Hull Award for Excellence in Continuing Legal Education. Mr. Hamilton received his B.A. cum laude from the College of the Holy Cross and his J.D. from Georgetown University Law Center.
- George W. Howard III
George W. Howard III
No bio available.
- James M. Lestikow
James M. Lestikow
James M. Lestikow is a Partner at Hinshaw & Culbertson LLP, in Springfield, where he concentrates his practice in estate planning, business transactions, and commercial real estate. He is a Fellow of the American College of Trust and Estate Counsel and has served on its Asset Protection Committee. He is the Vice Chair and a member of the Board of Directors of IICLE®. He is also a member of the American, Illinois State, and Sangamon County Bar Associations and the standing Advisory Committee to IICLE® for estate planning programming and publications. Mr. Lestikow received his B.S. from Northern Illinois University and his J.D. from the University of Illinois College of Law.
- Ben A. Neiburger
Ben A. Neiburger
Ben A. Neiburger is a Partner at Generation Law in Elmhurst, where he concentrates his practice on elder law and ERISA. He is a member of U.S. Supreme Court Bar, the U.S. District Court Bar, the Northern District of Illinois Bar, and the Illinois State Bar Association. He has been recognized as an Illinois Super Lawyer in Elder Law (2007, 2009 – present). He is also a C.P.A. Mr. Neiburger received his B.S. at the University of Illinois Urbana-Champaign and his J.D. from Chicago-Kent College of Law.
- Jason S. Ornduff
Jason S. Ornduff
Jason S. Ornduff is a Partner with Harrison LLP in Chicago, where he focuses his practice on estate planning and administration. He is a Fellow in the American College of Trust and Estate Counsel (ACTEC). He is also Past President of the Greater North Shore Estate and Financial Planning Council and a member and Past President of the Greater North Shore Estate and Financial Planning Council. He has been recognized by the Best Lawyers in America in Trusts and Estates (2021 – 2023). Mr. Ornduff received his B.A. from the University of Illinois at Urbana-Champaign and his J.D. from the University’s College of Law, where he was Executive Editor of the Elder Law Journal.
- Sarah Delano Pavlik
Sarah Delano Pavlik
No bio available.
- William A. Peithmann
William A. Peithmann
No bio available.
- Steven C. Perlis
Steven C. Perlis
No bio available.
- Julie Sirlin Pleshivoy
Julie Sirlin Pleshivoy
No bio available.
- William H. Pokorny, Jr.
William H. Pokorny, Jr.
No bio available.
- Gregg M. Simon
Gregg M. Simon
No bio available.
Estate Planning for Illinois Attorneys: The Basics and Beyond (ARCHIVED 2012 EDITION)
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