estate tax newbie question


S

seannakasone

Hello, how much of your estate is tax exempt when you leave
it for someone other than a spouse? last i heard it was
$1.5M, is this still true?
 
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H

Herb Smith

Hello, how much of your estate is tax exempt when you leave
it for someone other than a spouse? last i heard it was
$1.5M, is this still true?
No, the exemption is $2,000,000 for 2006, 2007 and 2008 The
estate tax exemption applies whether you leave it all to
your spouse or a crowd of strangers.
 
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S

Stuart A. Bronstein

Hello, how much of your estate is tax exempt when you leave
it for someone other than a spouse? last i heard it was
$1.5M, is this still true?
For people who died in 2004 and 2005 the exempt amount is
$1.5 million.

For people who die in 2006, 2007 or 2008 the exempt amount
is $2 million.

For people who die in 2009 the amount is $3.5 million.

And for people who die in 2010 there is no estate tax, but
there is no stepped up basis on property passing to heirs.

Stu
 
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J

joetaxpayer

Hello, how much of your estate is tax exempt when you leave
it for someone other than a spouse? last i heard it was
$1.5M, is this still true?

2006-08 - $2,000,000
2009 - $3,500,000
2010 - No estate tax (As they say on the Klingon homeworld
"this would be a good year to die")
2011 - back to $1,000,000

JOE
 
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A

Arthur Kamlet

Hello, how much of your estate is tax exempt when you leave
No, the exemption is $2,000,000 for 2006, 2007 and 2008 The
estate tax exemption applies whether you leave it all to
your spouse or a crowd of strangers.
What happened to the unlimited exemption for a spouse?

__
Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH
 
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A

Arthur Kamlet

Stuart A. Bronstein said:
(e-mail address removed) wrote:
For people who died in 2004 and 2005 the exempt amount is
$1.5 million.

For people who die in 2006, 2007 or 2008 the exempt amount
is $2 million.

For people who die in 2009 the amount is $3.5 million.

And for people who die in 2010 there is no estate tax, but
there is no stepped up basis on property passing to heirs.
I thought there was still a step up for the first, what,
$1 million or so?

__
Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH
 
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A

Anand Desai

Hello, how much of your estate is tax exempt when you leave
it for someone other than a spouse? last i heard it was
$1.5M, is this still true?
Generally, the "applicable credit amount" listed in IRC
section 2010(c) or p. 3 of IRS Publication 950, reduced by
the amount of taxable gifts (generally, large gifts, since
gifts under $10,000 per year per donee are generally ignored
for tax purposes).

For decedents dying in 2002 or 2003 $1 million
2004 or 2005 $1.5 million
2006, 2007, and 2008 $2 million
2009 $3.5 million

[2010 Estate tax repealed temporarily
2011 and thereafter $2 million]

Most expect that significant estate tax legislation will
change at least some of these numbers soon. *Computing the
estate tax exemption can be quite complicated so a
specialist's advice is highly recommended.*
 
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S

Stuart A. Bronstein

Herb Smith said:
(e-mail address removed) wrote:
No, the exemption is $2,000,000 for 2006, 2007 and 2008 The
estate tax exemption applies whether you leave it all to
your spouse or a crowd of strangers.
Technically that's not true. When you leave property to a
spouse it is subject to the unlimited marital deduction.
The lifetime exemption is left unused.

That's the reason that trusts help save estate taxes.
Normally one spouse dies and leaves what he has to the other
spouse. He doesn't use his lifetime exemption. But when
the spouse dies, she just gets one exemption, even though
she's considered the owner of all the property accumulated
by both spouses. That drives her into a higher marginal
bracket, in addition to losing the savings from one
exemption.

Trusts can help by using the lifetime exemption of the first
spouse that dies. It keeps property in that estate out of
the taxable estate of the second spouse, while allowing her
to manage and have access to it.

Stu
 
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D

Drew Edmundson

Stuart A. Bronstein said:
(e-mail address removed) wrote:
For people who died in 2004 and 2005 the exempt amount is
$1.5 million.

For people who die in 2006, 2007 or 2008 the exempt amount
is $2 million.

For people who die in 2009 the amount is $3.5 million.

And for people who die in 2010 there is no estate tax, but
there is no stepped up basis on property passing to heirs.
There is still a step up in 2010. There is just a limit.
See Section 1022.
 
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H

HW \Skip\ Weldon

Stuart A. Bronstein said:
Trusts can help by using the lifetime exemption of the first
spouse that dies. It keeps property in that estate out of
the taxable estate of the second spouse, while allowing her
to manage and have access to it.
I believe you mean "limited access".

-HW "Skip" Weldon
Columbia, SC
 
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S

Stuart A. Bronstein

I believe you mean "limited access".
Limited access if the survivng spouse is the trustee,
unlimited access (subject to the trustee's discretion) if
she's not the trustee.

Stu
 
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H

HW \Skip\ Weldon

Trusts can help by using the lifetime exemption of the first
Limited access if the survivng spouse is the trustee,
unlimited access (subject to the trustee's discretion) if
she's not the trustee.
I obviously need education.

Are you saying that a credit shelter (or bypass) trust - one
that preserves the exemption of the first spouse to die -
lets the surviving spouse have unlimited access to principal
providing the independent trustee with complete discretion
agrees? For example, if the trustee agreed, the surviving
spouse could take all of the money out of the trust, marry
Julio (or Carmelita), move to Cancun and the children
(ultimate beneficiaries) would be left holding the bag?

(Agree that this may be considered a far-out example, but it
nevertheless is an example of unlimited access with
trustee's OK.)

-HW "Skip" Weldon
Columbia, SC
 
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D

D. Stussy

Hello, how much of your estate is tax exempt when you leave
What happened to the unlimited exemption for a spouse?
Spousal transfers are not exempt. They are a DEDUCTION.
That means that a return still has to be filed.
 
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S

Stuart A. Bronstein

I believe you mean "limited access".
I obviously need education.

Are you saying that a credit shelter (or bypass) trust - one
that preserves the exemption of the first spouse to die -
lets the surviving spouse have unlimited access to principal
providing the independent trustee with complete discretion
agrees? For example, if the trustee agreed, the surviving
spouse could take all of the money out of the trust, marry
Julio (or Carmelita), move to Cancun and the children
(ultimate beneficiaries) would be left holding the bag?
The trust can certainly be drafted that way. Section
2056(b)(5), which mandates that all property over which the
surviving spouse has too much control is considered as
having passed to her, concludes,

"This paragraph shall apply only if such power in the
surviving spouse to appoint the entire interest, or such
specific portion thereof, whether exercisable by will or
during life, is exercisable by such spouse alone and in all
events."

Stu
 
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R

Rich Carreiro

HW \"Skip\" Weldon said:
I obviously need education.

Are you saying that a credit shelter (or bypass) trust - one
that preserves the exemption of the first spouse to die -
lets the surviving spouse have unlimited access to principal
providing the independent trustee with complete discretion
agrees? For example, if the trustee agreed, the surviving
spouse could take all of the money out of the trust, marry
Julio (or Carmelita), move to Cancun and the children
(ultimate beneficiaries) would be left holding the bag?
I would expect they could. Heck, I don't believe there's
any requirement that anyone other than the surviving spouse
be the beneficiary. The point of a credit shelter trust
isn't to save the money for the kids, it's to save the
exemption of the first spouse to die. The ideal credit
shelter trust places as little interference in the way of
the surviving spouse's desires as is legally possible to
preserve the exemption.

Of course, pulling all the money out of the trust like that
would defeat the purpose of preserving the first spouse's
exemption.
 
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S

Stuart A. Bronstein

I would expect they could. Heck, I don't believe there's
any requirement that anyone other than the surviving spouse
be the beneficiary. The point of a credit shelter trust
isn't to save the money for the kids, it's to save the
exemption of the first spouse to die. The ideal credit
shelter trust places as little interference in the way of
the surviving spouse's desires as is legally possible to
preserve the exemption.

Of course, pulling all the money out of the trust like that
would defeat the purpose of preserving the first spouse's
exemption.
Right. If property goes up in value it's best to use up the
surviving spouse's property first, to minimixr that chance
it eill go over the lifetime exemption amount. If the
portion in the bypass trust goes over the exemption amount,
well, it's already been excused from estate tax so it's home
free on that score.

Stu
 
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