Bryan Cave  Life Death and Taxes

Trust Bryan Cave

Federal Tax Law

Main Content

Intentionally Defective Irrevocable Trusts: A Great Way to Transfer Wealth, Especially In Low Interest Rate Environments

The current low interest rate environment provides excellent opportunities to transfer wealth to family members.   One approach commonly used to accomplish this goal is to sell assets to an intentionally defective irrevocable trust (“IDIT”).  An IDIT is an irrevocable trust for the benefit of someone other than the creator of the trust (the “Settlor”), perhaps Settlor’s descendants.  However, the “intentionally defective” component of the IDIT means that, for income tax purposes, the assets in the trust will continue to be treated as owned by Settlor.  Thus, Settlor’s sale of assets to the IDIT will not result in income tax consequences.   Additionally, Settlor’s payment of income taxes on the income earned by the IDIT provides an additional means of reducing Settlor’s taxable estate, while allowing the benefits of the income earned by the IDIT to benefit Settlor’s descendants.

Typically, Settlor will take back a promissory note for the assets

Lessons from 9/11

Lessons from 9/11

September 1, 2011

Authored by: Stacie J. Rottenstreich and Karin Barkhorn

We are rapidly approaching the tenth anniversary of the September 11th tragedy. There is much to be learned from an estate planning perspective in the aftermath.  

Many of those who perished died without having executed a Last Will and Testament. If you die without a Will, the state in which you are domiciled at the time of your death will determine under the laws of intestacy where the property you held in your own name will pass. It takes many people by surprise, but the list of intestate takers or heirs may not be the people you want to inherit and they might not take in the percentages or shares you would want.

Draft Form 706 for 2010 Decedents Reflects Law and Other Changes

August 8, 2011

Categories

The IRS has released drafts of Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return for estates of decedents dying after Dec. 31, 2009 and before Jan. 1, 2011, and its instructions. They reflect law changes made by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (2010 Tax Relief Act), as well as indexing and other changes. Form 706 must be filed by the executor of any estate of a decedent dying in 2010 whose gross estate, plus adjusted taxable gifts and specific exemption is more than $5,000,000. Alternatively, for decedents dying in 2010, the estate may elect not have the estate tax apply, but rather to apply modified carryover basis treatment to property acquired or passing from the decedent. If such election is made, the executor would not file a Form 706, but rather the IRS has indicated that such election will be made

IRS Extends Form 8939 Deadline

August 5, 2011

Categories

IRS Extends Form 8939 Deadline

August 5, 2011

Authored by: Stephanie Moll

The Internal Revenue Service issued guidance today on the treatment of basis for certain estates of decedents who died in 2010. The guidance assists executors who are making the choice to opt out of the estate tax and have the carryover basis rules apply. Form 8939, the basis allocation form required to be filed by executors opting out of the estate tax, is due Nov. 15, 2011.

No Good Deed Goes Unpunished?

When Christian Lopez caught Derek Jeter’s historic 3,000th hit on July 9, he most likely thought that he was just being a nice guy by giving it back to the Yankee shortstop. In that moment, Lopez probably didn’t realize that his incredibly selfless gesture could lead to potentially negative tax consequences.

Did Lopez give the ball to Jeter as a gift? That could mean that Lopez made a taxable gift equal to the fair market value of the ball. How much is that ball actually worth? Fair market value is defined as the price a willing buyer would pay a willing seller for the ball. You can buy an official Rawlings MLB baseball on amazon.com for $17.30. Chump change. However, some people are estimating that Lopez could have sold Jeter’s ball for up to $250,000. Now we’re talking

Portability: the Good, the Bad, and the Ugly

For years, estate planning practitioners have encouraged Congress to pass a bill authorizing portability of a married couple’s estate tax exemption (allowing a surviving spouse’s estate to add her deceased spouse’s unused estate tax exemption to her own). Now, with the passage of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (the “2010 Act”), estate planning practitioners are now wondering if, instead of being grateful that Congress finally listened, they should be thinking “be careful what you wish for.” Here is our take on the good, the bad and the ugly of portability.

The Good:

Prior to the passage of the 2010 Act,

The attorneys of Bryan Cave LLP make this site available to you only for the educational purposes of imparting general information and a general understanding of the law. This site does not offer specific legal advice. Your use of this site does not create an attorney-client relationship between you and Bryan Cave LLP or any of its attorneys. Do not use this site as a substitute for specific legal advice from a licensed attorney. Much of the information on this site is based upon preliminary discussions in the absence of definitive advice or policy statements and therefore may change as soon as more definitive advice is available. Please review our full disclaimer.