1. Except as modified with other adjectives, the words “property”, “assets”, and “estate” are used interchangeably.
  2. Interested parties” does not refer to someone having an “interest” in the sense of “curiosity”. The term refers to those persons or entities that have an ownership interest in or claim against the property involved.
  3. The personal representative is “court appointed” because the official appointment is made by the probate court. The designation of the personal representative in a decedent’s will be honored by the court unless that personal representative declines to act, is unable to act, or is disqualified by a felony conviction.
  4. In legal terminology, the words “property” and “assets” are used interchangeably.
  5. In this memo, the phrase “A/B Trust” refers to a trust that divides into a Survivor’s Trust and an Exemption (Credit-Shelter or Bypass Trust). In that scenario, Trust B is the Exemption Trust, which receives the maximum amount of the deceased spouse’s property that can pass free of estate tax because of available deductions and credits, and Trust A is the Survivor’s Trust, to which all other assets of the deceased spouse and of the survivor are allocated. The phrase “A/B/QTIP Trust” refers to a trust that divides into a Survivor’s Trust, an Exemption (Credit-Shelter or Bypass) Trust, and a QTIP Marital Deduction Trust upon the death of the first spouse to die. Trust A is the Survivor’s Trust (consisting of the surviving spouse’s assets), Trust B is the Bypass Trust (consisting of the maximum amount of the deceased spouse’s assets that can pass tax free because of available deductions and credits), and the QTIP Trust is the trust that qualifies for the marital deduction, to which the balance of the deceased spouse’s property interests are allocated.
  6. The federal generation-skipping transfer tax (GSTT) is imposed on transfers to grandchildren and lower generations (“skip persons”). Each transferor has a “GST Exemption”, which is currently $1,010,000 and which can be applied to generation-skipping transfers. For transfers into trusts, whether made during life or at death, the GST exemption is most efficiently allocated to an entire trust (or to a portion of a trust called a “subtrust”) so that the entire trust (or subtrust) will be GSTT-exempt.
  7. The QTIP trust is recognized in the code under IRC § 2056(b)(7). There are other trusts that can qualify for the marital deduction, including a income/general power of appointment trust that is recognized under IRC § 2056(b)(5). These materials focus on the QTIP trust because that type of marital-deduction trust has become most common.
  8. IRC § 2056(b)(7).
  9. IRC § 2032A.
  10. IRC § 6166.
  11. IRC §§ 754 and 743(b).
  12. IRC § 2032.
  13. IRC § 303.
  14. Reg § 1.441-1T(b)(2) does not restrict estates to the calendar year.
  15. IRC § 645
  16. IRC §§ 2518 and 2046.
  17. Internal Revenue Code § 2010(c) provides for an “applicable exclusion”, which is the cumulative amount that can pass free of gift and/or estate tax. For ESTATE TAX purposes, the applicable exclusion has been, is and will be: $600,000 in 1997, $625,000 in 1998; $650,000 in 1999; $675,000 in 2000 and 2001; $1,000,000 in 2002 and 2003; $1,500,000 in 2004 and 2005; $2,000,000 in 2006, 2007, and 2008, $3,500,000 in 2009; unlimited in 2010; $5,000,000 in 2011; $5,120,000 in 2012; and $1,000,000 in 2013 and beyond. The applicable exclusion for GIFT TAX purposes is the same as that for estate tax purposes from 1997 to 2004 and for 2011 and 2012. For 2005 through 2010 and for 2013 and beyond, the applicable exclusion for GIFT TAX purposes is fixed at $1,000,000.
  18. A “settlor” is a creator of a trust. Trustor and grantor are frequently used as synonyms.
  19. IRC § 2514(c).
  20. IRC § 2514(c)(1).
  21. If this problem were discovered early, H’s resignation or a renunciation of the power to distribute for “comfort and welfare” might suffice.