1

Federal Wealth Transfer Taxation

2

FWT Components

Estate Tax – Ch. 11 Gift Tax – Ch. 12 Generation Skipping Transfer Tax –

Ch. 13 Economic Growth and Tax Relief

Reconciliation Act of 2001 Sunset provision

3

Generation Skipping Transfer Tax

AssetsGrandparent

Income for life

Children

•Discretion•Ascertainable standard•5 & 5 power•Limited power

Corpus

Grandchildren

Great Grandchildren

4

FWT Components (cont.)

Not in a vacuum1014/1015

Stock A 5,000 10,000

ABFMV

Stock B 9,500 10,000

Stock C 10,000 8,000

5

FWT Components (cont.)

1014 Repealed for decedents dying after Dec. 31, 2009

No “fresh start” basis rulesCarryover basis lesser of AB or FMV

dod

6

FWT Components (cont.)

Executor election to increase:general basis increase $1,300,000qualified spousal property increase $3,000,000combinedInflation adjustment after 2010

121 exclusion of $250,000 available to estate or beneficiary

7

FWT Components (cont.)

Not in a vacuum (cont.)Distributions from estates and trustsIRC 691 / IRDGains, losses, recapture, etc.

8

Tax Returns

Estate Tax9 months plus extensionsExecutor (personal representative)Transferee

9

Tax Returns (cont.)

Gift TaxApril 15DonorDonee

GSTT(later)

10

Integration of Estate and Gift Tax

Rate Structure2502 (a)2001 (c)EGTRRA 2001

11

Integration of Estate and Gift Tax (cont.)

Unified Credit/Exclusion Amount25052010EGTRRA 2001

12

Integration of Estate and Gift Tax (cont.)

Progressive Tax Base2502 (a)2001 (b)Inclusive estate tax base2033, 2035 - 2044

13

Tax Rates

Maximum Unified Transfer Tax Rate

Calendar Year 2002 2003 2004 2005 2006 2007 2008

Tax Rate 50% 49% 48% 47% 46% 45% 45%

14

Tax Rates (cont.)

Maximum Unified Transfer Tax Rate

Calendar Year 2009 2010 and later

Tax Rate 45% Estate tax repealed. Highest individual rate (35%) applies to gift tax.

The 5% surcharge has also been repealed starting in 2002.Effective date: Decedents dying after Dec. 31, 2001.

15

Exclusion Amount

Unified Transfer Tax and GST Transfer Exemptions

Calendar Year 2002 2003 2004 2005 2006 2007

GT Exemption $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000

GST & Est.Tax Exemption $1,000,000 $1,000,000 $1,500,000 $1,500,000 $2,000,000 $2,000,000

16

Exclusion Amount (cont.)

Unified Transfer Tax and GST Transfer Exemptions

Calendar Year 2008 2009

GT Exemption $1,000,000 $1,000,000

GST & Est.Tax Exemption $2,000,000 $3,500,000

Effective date: Decedents dying after Dec. 31, 2001.