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Unit 8, part 3 Special Tax Issues in Estate Planning

Theodore A. Feitshans Department of Agricultural & Resource Economics North Carolina State University. Unit 8, part 3 Special Tax Issues in Estate Planning. Benefits of a will: Unified Credit.

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Unit 8, part 3 Special Tax Issues in Estate Planning

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  1. Theodore A. Feitshans Department of Agricultural & Resource Economics North Carolina State University Unit 8, part 3Special Tax Issues in Estate Planning

  2. Benefits of a will: Unified Credit • Fully use credit of first spouse to die by placing credit amount in a testamentary trust, income to spouse, remainder to children • Second spouse also fully uses credit amount • Unified credit times two passes to children without any federal estate tax due

  3. Estate Tax Applicable Exclusion Amount

  4. Year Estate 2001 60%* 2002 50% 2003 49% 2004 48% 2005 47% 2006 46% 2007-09 45% 2010 Repealed 2011+ 60%* *10,000,000 - 17,184,000, 55% on excess Gift 60%* 50% 49% 48% 47% 46% 45% 35% 60%* (5% surtax) Maximum Estate & Gift Tax Rates

  5. Complex Issues • Forms of business organization • Minority/alienation discounts • Special use valuation • Qualified Family Owned Business Interest (repealed) • Installment payment of federal estate taxes • Qualified conservation easement exclusion

  6. Special Use Valuation (Code Sec. 2032A) • Reduce valuation of qualifying real property by up to $850,000 for deaths occurring in 2004 (indexed) • Recapture if property ceases to qualify • Reduces stepped up basis

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