It is unclear when, if or how Congress will act with regard to repeal of the estate and GST tax in 2010 and return to earlier tax rates, unified credits
, and exemptions in 2011.
While naming a trust as beneficiary provides for efficient use of a couple's unified credits
, it generally results in three income tax disadvantages.
The above charts demonstrate that either Jim's 401(k) or Sally's 403(b) must be used to shelter both unified credits
. If Jim died first, then the following assets totaling $1,175,000 would be included in his federal gross estate: 1) 401(k) $750,000; 2) stock portfolio $175,000; 3) bank account $100,000 and one-half interest in house $150,000.
The marital and prorated unified credits
discussed above may also be used to minimize or eliminate the U.S.
A married couple could each establish GRATs and GRUTs (or split gifts--see Chapter 22) so as to utilize both spouse's unified credits
and marginal gift and estate tax brackets.
The above charts demonstrate that either Jim's 401k or Sally's 403b must be used to shelter both unified credits
. If Jim died first, then the following assets totaling $1,175,000 would be included in his federal gross estate' 1) 401k $750,000; 2) stock portfolio $175,000; 3) bank account $100,000 and one-half interest in house $150,000.
However, gifts of life insurance or cash to purchase or maintain insurance can pass tax free through the next generation if the donors make the gifts utilizing their unified credits
(or make the gifts subject to gift tax if their unified credits
have been used up), and allocate some of their generation-skipping exemptions to the gifts.
The taxpayers also tendered as evidence a fax informing their accountant that they had funded SFLP II and requesting advice as to the percentage of partnership interests they should transfer to the children to maximize use of the gift tax annual exclusion and applicable unified credits
. The Tax Court said the fax did not show what the partnership ownership interests were immediately before funding or how the stock was allocated among the partners' capital accounts at the time of the funding; thus, they did not clearly establish that the capital accounts were credited before the transfers.
(17) The donees must reflect the deemed gift of the lapsed withdrawal right on a gift tax return, reducing their unified credits
. They may also be required to include part of the mast in their estates at death as retained interests under Sec.
Taxpayers often sought to capitalize on their use of unified credits
, through varied means.
Today, in assisting these same clients with estate planning, practitioners are confronted with some rather intriguing dilemmas when trying to achieve various tax objectives:  Fully utilizing unified credits
The fact that qualified disclaimers are now possible for joint tenancies with right of survivorship and some tenancies by the entirety is good news for clients who may otherwise find themselves taking unused unified credits
to their graves.