Simple Estate Tax Question


A

April Mullery

Suppose a man with an estate of ten million dollars leaves one hundred
thousand dollars to his son and the remainder to his wife, who is a
U.S. Citizen. Assuming he has made no prior gifts, would an estate tax
be due upon his death? If so, how much?
 
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S

Stuart A. Bronstein

April Mullery said:
Suppose a man with an estate of ten million dollars leaves one
hundred thousand dollars to his son and the remainder to his
wife, who is a U.S. Citizen. Assuming he has made no prior
gifts, would an estate tax be due upon his death? If so, how
much?
There are too many facts left out to educate you on the various
options in this situations. For example, is the man a US citizen
or resident? Is it still alive or did he die? If he died, when
and where?

In this specific instance, though, none of those issues makes a
difference. If the wife is a US citizen, the gift to her is fully
deductible. So even if the man is a US citizen or resident, only
the gift to the son will be part of his taxable estate (assuming
there are no other assets).

Whether the person has died or is still alive, there will be an
exemption of at least $1,000,000, and the gift to the son is below
that amount.

This answer does not take into consideration that there may have
been taxable gifts in the past that would reduce the exemption
amount, however.

___
Stu
http://DownToEarthLawyer.com
 
A

Alan

There are too many facts left out to educate you on the various
options in this situations. For example, is the man a US citizen
or resident? Is it still alive or did he die? If he died, when
and where?

In this specific instance, though, none of those issues makes a
difference. If the wife is a US citizen, the gift to her is fully
deductible. So even if the man is a US citizen or resident, only
the gift to the son will be part of his taxable estate (assuming
there are no other assets).

Whether the person has died or is still alive, there will be an
exemption of at least $1,000,000, and the gift to the son is below
that amount.
Not a gift. It is a bequest. Therefore, the full unified credit of
$1,772,800 is available for the taxable estate. As that credit is based
on the tax on an estate valued at $5.12M in 2012, there would not be any
tax.
 
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R

removeps-groups

Suppose a man with an estate of ten million dollars leaves one hundred
thousand dollars to his son and the remainder to his wife, who is a
U.S. Citizen. Assuming he has made no prior gifts, would an estate tax
be due upon his death? If so, how much?
During his lifetime did the man use up lifetime gift exemption, which is $5,120,000 in 2012? If yes, then the 100k is subject to estate tax, which is almost a flat 35%.

There is a provision of the law that any unused estate exemption gets transferred to the spouse. See 2010(c) at http://www.law.cornell.edu/uscode/text/26/2010. So even if no estate tax is due, perhaps a return should be filed to transfer $5,025,000 of the exemption to the spouse. This portability of estate exemption expires end of this year, so wait to see if Congress extends this law before spending time and money to file a form 706.

If the father is not a US citizen, then all of the above may not apply. US based assets are still subject to the inheritance tax. Foreign assets are not. Not sure -- need to check this. But if the father renounced his citizenship in the last few years, then all of his assets may be subject to the US estate tax -- but once again, need to check this.
 

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