Agenda - Council - 08/24/1982 - Laserfiche WebLink

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-I~; "," ~ t: IN REVIEW - 82-31 - ~ :?:::2 I I I ,I I I deduction it you established a trust for the lifetime benefit of aspouse but did not give that spouse sole power to dispose of the trust principal. This is no longer applicable if the estate's executor irre- vocably elects a Q-TIP. The term "qualified terminable interest property" means property,: · That passes from the decedent · From which the surviving spouse is entitled to all income, payable at least annually, for life · Which cannot be given to anyone except the surviving spouse during the spouse's lifetime. The Q-TIP property will be taxed at the earlier of the spouse's death or the date on which the qualifying income interest is disposed of by the spouse by gift, sale, or otherwise. The tax law also contains apportionment provisions under which the additional estate and/or gift taxes attribut- able to the taxation of the Q-TIP are borne by the persons ultimately receiving the property, rather than the donee-spouse. I I I I I Ultimate disposition of the Q-TIP will occur after your surviving spouse's death, as directed in your will or the trust prior to your death. When setting-up a Q-TIP trust, you should consider the taxes that your surviving spouse's estate might have to pay. Utilize only the amount of marital deduc- tion that will reduce overall estate taxes through efficient use of each spo.use's unified credit (equivalent to a $225,000 exemption in 1982, and a $600,000 exemption in 1'987 and thereafter). Example. Mr. Mann has 2 basic estate planning objectives: to provide for his wife during he~ lifetime if she should survive him, and to ensure ultimate disposition of his entire estate to his 3 children. Mr. Mann dies in 1987. His will disposes of his $1.2 million estate 'by leaving $600,000 in a residual trust (income to the wife for life, remainder to the children), and the balance to his wife in a Q-TIP trust, with remainder to his children. The result of this is that his wife is provided for during her lifetime by income from the trusts. When she dies, the property in the Q-TIP trust (as well as the residual trust) passes to the 3 children as Mr. Mann had instructed prior to his death. Thus, both of Mr. Mann's objectives have been reached. I I I I These are just some thoughts to consider. Your tax advisor and attorney can provide more detailed information and should be consulted before any action is taken. Experience is a wonderful thing. It e. nables you to recognize a mistake when you make it again, I I I The Week in Review is published as a service to clie)lnts atf~lSn Deloitte Has ,s+Sells Beyond the bottom line' others in the business, pro~essional and academic communities by Deloitte Haskins & Sells, 1114 Avenue of the Americas, New York, N.Y. 10036. Editor: Joseph E. Eimllnger. Telephone: {21-2) 790-0626 .. Reproduction Ir) whole or In part is permitted when credit Is given to Deloitte Haskins & Sells.