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ESTATE PLANNING.   Term Paper ID:28976 Click to get this paper

Essay Subject: Discusses how estate planning is taxed.... More...

5 Pages / 1125 Words 4 sources, 10 Citations, TURABIAN Format $20.00 Return to List of Papers

Paper Abstract: Discusses how estate planning is taxed. Wills. Trusts. Revocable v. irrovocable Trusts. Asset disposition & distribution. Tax benefits. Federal tax law. Differing State tax laws. How property is transferred. Trustee. Paper Introduction: Introduction Estate planning is an activity which is often delayed or ignored entirely by individuals. For some, the very concept is itself morbid, reminding the individual of their own mortality. Others assume that they do not have sufficient assets, or they lack heirs, to make estate planning worthwhile. Still others who could benefit significantly from estate planning simply do not understand the tax benefits that can result. Changes in tax law made in recent years offer increased benefit to those estates which implement trusts as part of their structure, and trusts can also help heirs avoid costly probate proceedings. This research considers the basics of estate planning and the tax consequences that follow. Estate Planning Everyone has an estate Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. Community propertyis allocated on a 5 percent basis to both parties, with the deceasedperson's estate (will or trust) receiving half of the total propertyvalue.[8] Estates are allowed an income tax deduction under Internal RevenueCode (IRC) section 642(c) for all amounts permanently set aside for charity(thus the deduction extends to payments that will occur in the future).Revocable trusts are allowed charitable deductions only for amountsactually paid to charities. All 5 states have intestacy laws, which can vary significantly from stateto state, and which contain provisions about the way in which estates aredistributed. However, individuals can make a formal plan to control how(and to whom) their property is distributed.[1] Ways By Which Property is Transferred There are four methods by which property can be transferred after adeath: wills, living trusts, joint tenancy and community property.[2] Awill is a written document that takes effect upon the death of the personwriting it and which covers all property owned at the time of death. Living trusts must be funded (meaning that all assetsmust be transferred to the ownership of the trust) in order to avoidprobate.[4] Joint tenancy is a way to hold title so that the survivingowner automatically receives the interest of the deceased person withoutprobate. Careful tax planning includes considering whether awill or living trust is the most appropriate vehicle for assets (typicallya combination is used) and weighing the tax considerations against otherfactors (such as providing for survivors). This is in specific reference to a $25, deduction thatcan be taken for income from rental real estate. Internet address: http://www. BibliographyChristensen, Burke. Irrevocable trusts are not subject to estate tax, and beneficiaries aretypically taxed at regular income tax rates rather than being subject to aninheritance tax. IRC section 469(I)(4) also waives the activeparticipation requirement of passive loss rules for estates which end lessthan two years after the date of death, but revocable trusts receive nosuch benefit. The deceasedspouse's share becomes part of that estate.[6] Revocable v. "Estate Planning." The Tax Prophet's Tax Publications, 2 . Recent changes in tax law maketrusts a more attractive option in terms of taxes, which can make them themost attractive of all disposition choices in many cases. Such a trust may have beneficiaries added ordeleted, assets added or removed, and the trust can be dissolved at anytime. This research considersthe basics of estate planning and the tax consequences that follow. The estate of a joint tenant is assessed based on thefair market value of the property at the time of death. In addition, inheritance taxescan also be applied to the heirs of property transferred as part of a will. [7]"What is an Irrevocable Trust What Are Its Tax Advantages?"Insurancelocal.com, 2 . Introduction Estate planning is an activity which is often delayed or ignoredentirely by individuals. Internet address: http://www.taxprophet.com/pubs/estat_nl.html."What is an Irrevocable Trust What Are Its Tax Advantages?" Insurancelocal.com, 2 . While a revocable trust offers greater flexibility to the personcreating the trust, an irrevocable trust offers greater tax benefits.Living trusts, which are increasingly popular, are revocable trusts.[7] Tax Considerations Estates are subject to federal estate tax based no the fair marketvalue of the property at the time of death. [9]Ellen Gordon, "Election to Treat a Revocable Trust as Part of anEstate," The CPA Journal, December 1998, 62. In order for a trust to beconsidered part of an estate, the executor of the estate and the trustee ofthe qualified revocable trust must elect this option and file appropriatepaperwork. Astate court proceeding (probate) is instituted and the provisions of thewill are implemented under the supervision of the probate court. [3]Ibid. The election is irrevocable and is effective for two years fromthe date of death. [5]Ibid., 2. "Election to Treat a Revocable Trust as Part of an Estate." The CPA Journal, December 1998, 62-64.Sommers, Robert. [2]Robert Sommers, "Estate Planning," The Tax Prophet's TaxPublications, 2 , 1. insurancelocal.com/estateplanningarticle 3.htm.----------------------- [1]Burke Christensen, "Back to the Basics," Trusts & Estates, June1997, 61. [4]Ibid. "Back to the Basics." Trusts & Estates, June 1997, 61- 62.Gordon, Ellen. [8]Ibid, 2. Wills and trusts have no effect on the transfer of joint propertyupon the death of one of the tenants.[5] Community property is allowed only in those states with communityproperty laws (including California). [6]Ibid. Similarly, estimated taxpayments are not required from an estate for any tax year ending two yearsafter death, but revocable trusts are not entitled to this exception unlessthe estate is moved into the trust per the will.[9] The Taxpayer Relief Act of 1997 introduced changes which permitsqualified revocable trusts to be treated as part of an estate for incometax purposes. There are different interests whichmust be taken into account when planning asset disposition, and the ways inwhich assets are distributed have tax ramifications both for the estate aswell as the heirs. Internet address: http://www.taxprophet.com/pubs/estat_nl.html. Theadministrator of the will (the executor) is typically a trusted familyfriend, attorney or surviving spouse.[3] A living trust allows an estate to avoid probate, and is a documentwhich lists assets that belong to the trust and which will pass to thebeneficiaries of the trust upon the death of the grantor (the person whocreates the trust). This makes it possible for such trusts to enjoy the sameincome tax benefit as estates in many cases. At death, the community property is split equally and thesurviving spouse receives a half-share of the property. Once anirrevocable trust is created, its assets must remain in the trust, andbeneficiaries cannot be added or deleted. Others assume that theydo not have sufficient assets, or they lack heirs, to make estate planningworthwhile. A revocable trust, as its name implies,can be changed at any time. The trustee of an irrevocabletrust can only be changed if the trustee agrees to resign or if the trusteedies. Individuals who die without a formal plan (awill or trust) are said to have died "intestate" and their estates areoverseen by the individual state in which they reside at the time of death. Irrevocable Trusts When a trust is created, the first consideration is whether the trustwill be revocable or irrevocable. For some, the very concept is itself morbid,reminding the individual of their own mortality. In order to qualify, the trust must have been revocableon the part of the decedent without applying a spousal attribution rule(meaning that the decedent was the sole owner of the trust).[1 ] Conclusion The way in which an estate is taxed depends largely on the provisionsmade during the individual's lifetime. An irrevocable trust, on the other hand, cannot be changed. Still others who could benefit significantly from estateplanning simply do not understand the tax benefits that can result.Changes in tax law made in recent years offer increased benefit to thoseestates which implement trusts as part of their structure, and trusts canalso help heirs avoid costly probate proceedings. Estate Planning Everyone has an estate plan regardless of whether they have formallyprepared a will or trust. [1 ]Ibid., 63. Under community property laws, allearnings and assets acquired during a marriage are considered to belongequally to both partners regardless of who actually generated the income.Property held before the marriage, or gifts and inheritances received byone spouse during the marriage, are considered the separate property ofthat spouse. Internet address: http://www.insurancelocal.com/estateplanningarticle 3.htm, 1. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.