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Estate Planning
St. Johns University School of Law
Scheiner, Barbara J.

Credits and Exclusions

Personal exemption equivalent amount or unified credit or credit equivalent amount=$1 million

Annual Gift Tax Exclusion=$11,000 per year per person

Jurisdictional Issues


Must establish domicile to prevent double taxation

Can have full-time or part-time residence; does not determine domicile – determined by IRS Filings 10 years prior, primary residence, where you move tangibles, file certificate of domicile, voting, licenses, counting days, bank accounts, credit card addresses

Domicile triggers all laws of probate in that state

Also determines where will probated, spousal election, disclaimer law

Reasons for Estate Planning:

To save estate taxes.

To avoid intestacy

Figure out if extensions are available

establish guardians for children

pick the executors and trustees.

Nominate 1 or 2 successors for any fiduciary.

Avoid family disputes.

Ensure liquidity at death

Determine charity donations

Waive bonds


Corporate law with closely held business and dissolution, Rights of refusal and the next generation.

Ensure your will is valid

Avoid administration expense by waiving posting bond.

Account for awful contingencies.

Client Interview:

What to ask: Citizenship, first marriage, children, children from prior marriage, who gets the estate, prior wills, bring old wills, trust agreements, divorce decrees, prenuptial, postnuptial, 3 years of tax returns, dates of birth, dates of death, liabilities, small business information,Occupation, important homes (severance issues)

Must also get: family history and personal data, determine fiduciaries, distributees, need for financial planner & accountant, Explain unlimited marital deduction, right of election

Determine the following: Pension, insurance, Options for job, if decedent is key person in closely held business, Kids going to college, retirement, major inheritance expected, major litigation involvement, employment bonuses, copyright interests, Ancillary probate proceeding over property in another state, power of attorney, living will, health care proxy

Estate Taxes

Imposed on the transfer of wealth

Taxable estate inlcudes probate and non-probate assets.

Probate vs. Non-Probate

Probate is everything named in the will

Non-Probate assets pass by operation of law. Includes jointly-owned property, totten trusts, POD accounts, life insurance, pensions (usually), revocable trusts

The proceeds and premiums of life insurance are in your estate.

There is no inheritance tax in NY because of the SOP Tax Credit

Form 706: federal Estate tax form filed at time of death; due with payment 9 months from DOD

Alternate valuation date (AVD)

6 months exactly after date of death.

Everything transferred is valued according to its value at date of disposition (rather than DOD)

Executor has choice to elect either DOD or AVD

Must be uniform throughout the entire tax return.

Can use AVD only if it reduces both the gross estate and estate tax.

Whatever you use, that is your distributees’ step-up in basis.

Irrevocable and applies to everything you transfer

Flower bonds: anticipating death, reduces federal estate tax without income tax. Bond is at significant discount and can be redeemed for face value if used to pay estate tax

Unified Credit

The unified credit is triggered on the date of death.

This $1 Million is the maximum to keep in your estate at time of death – free and clear of tax liability

$1,000,000 is also the filing threshold, so under that, you don’t need to file.

Unified credit can be used during your life or at death or any combination thereof.

Form 706

Due 9 months from DOD with payment.

6-month extension to file usually available, but extension to pay NOT available.

schedule of assets calculates your gross estate LESS reasonable funeral expenses, estate administration expenses, claims against the estate, unpaid mortgage.

Then deduct unlimited deductions — Marital and charitable = net taxable estate.

Make adjustments to Unified Credit for taxable gifts made during life that exceed the annual gift amount = adjusted net taxable estate.

Take out rates of estate tax determined by bracket

Consider your credits.

Unified Credit exemption amount – 1 million.

State tax credit – estate pays nothing extra –NY gets its share of Federal.

Foreign death taxes.

Gifts made under old tax law – prior to 1976.

Prior transfer credit (§2013) – when 2 decedents die within short time, children don’t pay estate taxes twice on same money

within 2 years you get 100% credit,

8-10 years 20% credit

more than 10 years 0% credit.


Executor: manages estate, collects assets, paying taxes, and distributes and follows the instructions left by Testator; fiduciary limited function—once all assets are distributed, duties terminate.

Trustee: Collects, Collects, supervises, monitors assets in the trust.

Testamentary Trust: Trust under a will/incorporated into will. It is set up after death. The executor funds the trust. This trust can be a life- time trust. Have no effect until death. You can rip up the will 2 minutes before you die.

Inter vivos: Trust established during life-time. An irrevocable trust avoids estate taxes but the testator parts with the money during life. Inter vivos trusts can be both revocable and irrevocable. Typically, they are irrevocable and if drafted correctly will typically avoid tax consequences.

Life time trust:

Guardian: Person responsible for minor children.

Will Drafting and Practice


Keep separate burial instructions even if you put it in will

Don’t be overly creative or overly generous (ie: debt forgiveness)

Will can say who pays estate taxes;—usually don’t want people who inherit to pay. EPTL 2-1.8—who pays estate tax


$11,000 Gift tax exemption is for a present interest. Future interests are all subject to gift tax.

Gift splitting–§2513

husband and wife can split a gift to a 3rdparty.

One can write the check from a single held account.

File 709(a) form that both made a gift of $11,000, $22,000 total

Gifts must be irrevocable

both spouses must sign the gift tax return.

Every gift that year is split or none are split.

Must both be US citizens to do this.

Does not reduce your $ Million unified credit; every dollar above reduces your FCEA

Must use it during the year because doesn’t carry over.

Fantastic tool to get money out of your gross estate. .

Unlimited between US Citizen spouses and $110,000 annually for non-citizen spouses,.

If person dies during the same year of the gift, file 709 no later than when 706 is due.

If the gift is made to a qualifying charity there is no need to file gift tax.


Separate tax imposed on transfer to someone more than one generation below decedent

gift is subject to the highest estate tax rate—50%

GST exemption–$.1.1 million

If grandfather sets up trust for son, and grandson only gets when son dies, still subject to tax

If son dies, grandson moves in his spot but the great-grandson will be taxed if money left to him

Types of Generation Skips

direct skip: making transfers to 2ndgeneration; taxed at time of transfer

taxable termination: when trust terminates, tax imposed at death of child

taxable distribution: from trust to skipped person that is not #1 or #2 (catch-all provision)

Calculating Generations

If within 12 ½ years of grandfather–>grandfather’s generation

Within 37 ½ years–> son’s generation

More than 37 ½ years–>grandchild generation

If recipient is married to transferor, considered in same generation despite age differences

Advanced investing

Keep appreciable assets out of your gross estate

Give an appreciable asset above the annual gift exclusion, use up your unified credit for the value THEN. The proceeds thereafter are excluded from your gross estate

Step up in basis §1014

If you die and own the asset, the inheritor gets a step up in basis to the FMV at the DOD.

If given away or sold before death, no step up