I have a couple of questions about funding an exemption trust:
1. What date is used for determining the value of securities placed in the
exemption trust. Is it the date of death of the deceased, the date when the
exemption trust is funded, or some other date?
2. What are the implications if the total value of the exemption trust is
slightly over ($180,000) the $2,000,000 limit when funded.
3. Can securities be removed from the exemption trust to reduce the value to
less then the $2,000,000 limit?
Assets can be valued on date of death or 6 months later, it's ALL or
nome, you cannot pick and choose.
Well, that simply shouldn't happen. If it does, that $180K is subject to
estate taxes. The point of the trust is to protect the exemption amount
in effect at the time of death, so my trust is worded accordingly, to
avoid having to re-create a new trust every time the law changes. For
those who feel like they came in to the middle of a movie - One use of a
trust is so, upon the death of the first spouse, the exemption amount
(now $2M) is not lost by leaving it via unlimited marital exemption to
the surviving spouse upon whose death, that original sum would otherwise
be taxed. Say an estate is worth $4M. A couple can die and leave $2 each
to the kids, or whomever. But if one dies, leaving it all to the
surviving spouse, there's now a $4M estate with only a $2M exemption.
The trust helps preserve that first $2M.
If the trust is set up properly, the exact exemption amount will go to
the trust, not a penny more, not a penny less.
Normally the date of death. You can elect to have all assets valued
as of the "alternate valuation date," which is six months later. As
Joe said, all or none.
By exemption trust I assume you mean the marital deduction (bypass)
trust. The law allows an unlimited marital deduction. So it doesn't
matter how much is in there - whatever it is will be exempt from tax
on the death of the first spouse to die.
But putting all property in there is notmally not the best idea.
Most exemption trusts allow an election to apply the marital
deduction to some but not all of the property in the trust.
Depending on the size of the estate and other factors, a larger or a
smaller amount may be more beneficial. Check with your tax
professional to determine the amount that should be included in the
Depends on what the trust says. But normally the trust will provide
a process (either by calculation or by election or both) for reducing
the amount that applies to the marital deduction.
Remember, though, that if this is a marital deduction "Q-TIP"
election, it has to be exercised when the estate tax return is