[WSBAPT] Gift from State QTIP Trust and impact

[Thomas M. Culbertson]

If the Surviving Spouse gifts the entire income interest, then I can’t see
that you’re anything other than home free with regard to the WA estate
tax.  As you say, WA doesn’t have a gift tax.  

 

If the SS gifts only part of the income interest, it’s more complicated.
Then the retained income interest brings the corpus to which it is
attributable into the taxable estate under sec. 2036.  I haven’t had to
deal with a partial gift like that, but I understand there is a provision
of the IRC that avoids any double taxation in such a situation.  But a
literal reading of the WA statute, which starts with the federal taxable
estate, would lead to inclusion of the retained portion of the QTIP trust
in the WA taxable estate. Maybe the 2036 problem (but not the 2519
problem) can be avoided if the SS sells rather than gifts his/her income
interest.

 

  


THOMAS M. CULBERTSON  I  Lukins & Annis, PS

717 W. Sprague Ave, Suite 1600, Spokane, WA 99201

(509) 455-9555  I  fax (509) 363-2500  I   <mailto:tculbertson at lukins.com>
tculbertson at lukins.com 

 

 

From: wsbapt-owner at lists.wsbarppt.com
[mailto:wsbapt-owner at lists.wsbarppt.com] On Behalf Of Marcus Fry
Sent: Monday, March 24, 2014 9:57 AM
To: 'wsbapt at lists.wsbarppt.com'
Subject: [WSBAPT] Gift from State QTIP Trust and impact

 

Anyone familiar with Treasury Regulation Sec. 25.2519-1 and gifting from a
QTIP?  My question deals with a State QTIP only (i.e., Decedent’s estate
was less than federal level, but more than State estate tax level).
Regulation 25.2519-1 states that a gift of a portion of the spouse’s
interest in a QTIP trust, results in a gift of the entire value of the
entire QTIP trust (except in certain circumstances, which include having
an estate smaller than the federal filing threshold).  However, when a
State doesn’t have any gift tax, and you are dealing with only a State
qualifying QTIP trust, is there any actual consequence from gifting from a
State QTIP trust?

 

 

Marcus J. Fry

Lyon, Weigand & Gustafson, P.S. 

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