[WSBAPT] 2519 and termination of QTIP

Fri Nov 21 15:25:24 PST 2014

:)

On Fri, Nov 21, 2014 at 3:21 PM, Glenn Price <glenn at pricefarrington.com>
wrote:

> It seems to me, Sam (and you know I love you), that your recommendation of
> “a tax attorney or respected estate planning attorney, from one of the
> larger firms” unnecessarily (and probably inadvertently) derogates hundreds
> of capable, experienced practitioners throughout WA who aren’t, and have no
> desire to be, “from one of the larger firms”.
>
>
>
> Repent.
>
>
>
> GDP
>
>
>
> Glenn D. Price, J.D.
> Price & Farrington, PLLC
> *Attorneys and Counselors at Law*
>
> *[image: GlennPrice227_small]   [image: WC-Member-Logo-Founding]*
>
> Parkwood Office Center
> *2370 130th Avenue N.E., Suite 103*
> Bellevue, Washington 98005
> Phone: 425.451.3583  Fax: 425.522.4818
>
> Email: *glenn at pricefarrington.com <glenn at pricefarrington.com>*
> Home page:   www.pricefarrington.com
>
> Estate, Tax, Retirement and Asset Protection Planning
>
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>
>
> *From:* wsbapt-bounces at lists.wsbarppt.com [mailto:
> wsbapt-bounces at lists.wsbarppt.com] *On Behalf Of *Sam Furgason
> *Sent:* Friday, November 21, 2014 2:29 PM
>
> *To:* 'WSBA Probate & Trust Listserv'
> *Subject:* Re: [WSBAPT] 2519 and termination of QTIP
>
>
>
> If I were in your shoes, I’d consider bringing in consulting counsel,
> either a tax attorney or respected estate planning attorney, from one of
> the larger firms. The cost is justified, and two minds could generate
> different solutions. I think there is more than one way to approach the
> goal.
>
> I’m still not clear on what you mean by “terminating” the QTIP. Has an
> election already been made? If so, it may be too late to change that
> because an election, once made, cannot be revoked (if I remember
> correctly). However, if you are still within  the period for filing a
> return you might be able to file a “revised” return to reduce or eliminate
> the election. Again, something to discuss with one of the people who
> regularly handle large estates.
>
> S
>
>
>
> *From:* wsbapt-bounces at lists.wsbarppt.com [
> mailto:wsbapt-bounces at lists.wsbarppt.com
> <wsbapt-bounces at lists.wsbarppt.com>] *On Behalf Of *Katharine P. Bauer
> *Sent:* Friday, November 21, 2014 11:42 AM
> *To:* WSBA Probate & Trust Listserv
> *Subject:* Re: [WSBAPT] 2519 and termination of QTIP
>
>
>
> Thanks, Sam.  That is about what I was thinking.  Joint estate of $30m
> sorry I wasn't clear.  We were wondering about terminating the QTIP and
> passing the income interest to her and balance to kids, not through
> disclaimer (would incur fed and state estate taxes) but by TEDRA.
> Interesting situation where the family wants to avoid Washington State tax
> to the greatest extent, since there is no gift tax here (yet). She is
> definitely disposing of her half of the estate (yes $15 million).  If
> *she* has both their exemptions and uses them individually, he is not
> incurring Washington estate tax by transferring to her and she is taxed
> upon the gift at termination for federal purposes.  Just trying to figure
> out how to get it all to her and she makes all the taxable gifts during her
> lifetime.....Now, the coffee has worn off and I need more! :)
>
> Have a good weekend.
>
>
>
> On Fri, Nov 21, 2014 at 11:10 AM, Sam Furgason <sam at furgasons.com> wrote:
>
> Katherine,
>
>
>
> If you have sufficient funds to merit a federal QTIP, his estate should
> have no DSUE because you will have used all of his exclusion amount. That
> should apply unless the first spouse was impecunious, in which case DSUE
> would apply (but your post refers to her “half”). ($30m/2 = $15m, which is
> >$5,340k.) The same logic would apply if the first decedent’s estate is
> $30m (your question does not make it clear in my mind whether the first
> spouse’s estate is $30m or the entire community estate is $30m, but implies
> the latter.)
>
> As for terminating the QTIP (which I believe gifting of any income
> interest would do, per 2519), see if the QTIP language permits liberal
> distributions to the surviving spouse. If so, you could make large
> distributions to the spouse and she could make gifts, without terminating
> the entire QTIP. Since we are near a year end, she could make multiple
> annual exclusion gifts and reduce her taxable estate somewhat. Those gifts
> would be tax free, and could be spread among children, grandchildren, and
> spouses.
>
> Also, if she gives away her own estate entirely, then withdrawals from the
> QTIP are more reasonable, if there is some sort of HEMS type restriction in
> place.
>
> Is a QTIP “termination” even necessary?
>
> Don’t forget, the executor makes the QTIP election; it’s not automatic.
> His executor can make a partial QTIP election rather than a full one, or no
> election at all, so that the portion of the decedent’s trust which is QTIP
> eligible can be defined as part of the overall plan. You can time this
> also, since the federal and state exclusion/exemption amounts rise on
> 1/1/2015. I don’t think the annual exclusion is changing for next year, but
> if you have 5 eligible gift recipients, that’s an extra $70k which will not
> be taxed at either the state or federal levels, thereby justifying  a part
> of your fees.
>
>
>
> S
>
>
>
> *From:* wsbapt-bounces at lists.wsbarppt.com [mailto:
> wsbapt-bounces at lists.wsbarppt.com] *On Behalf Of *Katharine P. Bauer
> *Sent:* Friday, November 21, 2014 8:22 AM
> *To:* probate
> *Subject:* [WSBAPT] 2519 and termination of QTIP
>
>
>
> Query:
>
> I have a large probate ($30 million) where the first spouse died and his
> Will funds a QTIP for his surviving spouse.  We are contemplating using
> portability to transfer his unused amount to his spouse. Surviving spouse
> is incompetent and unlikely to live a long time.  Her POA has extremely
> broad powers - of gifting, disclaiming and ability to transfer to other
> trusts and family. Her AIF is in the process of gifting away her half of
> the estate, utilizing her fed applicable exemption amounts (no Washington
> gift tax) and paying any gift tax incurred.
>
>
>
> First, We are curious as to when she may use her spouse's amount in
> gifting.  Is it after the IRS accepts his 706?  She likely won't live that
> long.
>
>
>
> Second, we are curious about terminating the QTIP and either giving her
> the life income interest or all of the trust.  The thought is to again gift
> it to children if she takes it all.  Does 2019 cause any further damage by
> pulling it into her "estate" and incurring gift tax?  She will have used
> all of her fed exemption anyway and will definitely incur further incur
> gift tax.  The purpose here would be to avoid the Washington state estate
> tax on the extra $15 million  by disposing of it now.
>
>
>
> Finally, and third, by paying gift tax now, does 2035 pull it back into
> her estate if she dies prior to 3 years, which she will?  I am having
> trouble interpreting the statute when we are contemplating terminating the
> QTIP and gifting her the income interest or all of it....
>
>
>
> We could simply disclaim QTIP assets under husband's estate but then it
> would incur the Washington tax.
>
>
>
> I have reviewed 2511, 2519 and 2035.  Since this is a 3:00 a.m. thought, I
> would appreciate any and all comments as to whether this is a good idea.
> After I have my coffee, I may regret my stupidity in sending this out!
>
>
>
>
>
> --
>
> Katharine P. Bauer
>
> Bauer Pitman Lifetime Legal, PLLC
> 1235 Fourth Ave. East, Suite 200
> Olympia, Washington 98501
> tel. 360.754.1976
> fax. 360.943.4427
>
> e-mail: kpb at bpblegal.com
>
> This message is confidential and may be protected by the attorney-client
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>
>
> --
>
> Katharine P. Bauer
>
> Bauer Pitman Lifetime Legal, PLLC
> 1235 Fourth Ave. East, Suite 200
> Olympia, Washington 98501
> tel. 360.754.1976
> fax. 360.943.4427
>
> e-mail: kpb at bpblegal.com
>
> This message is confidential and may be protected by the attorney-client
> privilege; it is intended solely for the use of the individual named above.
> If you are not the intended recipient, you are hereby advised that any
> dissemination, distribution, or copying of this communication is strictly
> prohibited. If you have received this e-mail in error, please immediately
> notify the sender by telephone or e-mail, delete this message from your
> files, and return any printed copies to the sender by U.S. mail. Circular
> 230 Disclosure: Any tax advice contained in this communication (including
> any attachments) is not intended or written to be used, and cannot be used,
> for the purpose of (i) avoiding penalties that may be imposed under the
> Internal Revenue Code or (ii) promoting, marketing or recommending to
> another party any transaction, arrangement, or other matter
>
> _______________________________________________
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-- 
Katharine P. Bauer
Bauer Pitman Lifetime Legal, PLLC
1235 Fourth Ave. East, Suite 200
Olympia, Washington 98501
tel. 360.754.1976
fax. 360.943.4427

 e-mail: kpb at bpblegal.com

 This message is confidential and may be protected by the attorney-client
privilege; it is intended solely for the use of the individual named above.
If you are not the intended recipient, you are hereby advised that any
dissemination, distribution, or copying of this communication is strictly
prohibited. If you have received this e-mail in error, please immediately
notify the sender by telephone or e-mail, delete this message from your
files, and return any printed copies to the sender by U.S. mail. Circular
230 Disclosure: Any tax advice contained in this communication (including
any attachments) is not intended or written to be used, and cannot be used,
for the purpose of (i) avoiding penalties that may be imposed under the
Internal Revenue Code or (ii) promoting, marketing or recommending to
another party any transaction, arrangement, or other matter
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