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Timely Estate Planning Tool Facing Tax Reform

An intervivos reverse QTIP Marital Trust is a timely tool to use now in light of potential estate tax reform.  It offers a way of preserving the current $3.5 million generation skpping tax (“GST”) exemption now, without adverse gift tax.   The technique offers substantial flexibilitiy if undertaken at this time, since actual decisions on the planning don’t have to be made until April 15, 2010.  Consider the following:

  • You decide to fund the trust in 2009, but want to avoid a taxable gift?  You would file a QTIP election for the marital deduction on the 2009 gift tax return by the return due date.  You have until 4/15/2010 to decide (or 10/15/2010, if on extension).
  • What if Congress doesn’t extend the $3,500,000 exemption beyond 2009 and you want to allocate the 2009 GST exemption to the trust?  You would include a reverse QTIP election on the 2009 gift tax return.  You have until 4/15/2010 to decide (or 10/15/2010, if on extension).
  • What if Congress extends the $3,500,000 GST exemption before it expires or enacts permanent estate tax reform with a $3,500,000 GST exemption?  Then, you might want to do your GST exemption allocation planning differently, in which case you wouldn’t make a reverse QTIP election.  You have until the gift tax return due date to monitor legislative developments and decide (4/15/2010, or 10/15/2010 if on extension).
  • What if Congress re-unifies the estate and gift tax, resulting in an increased gift tax exemption?  If Congress increases the gift tax exemption (e.g., to $3,500,000) so that the gift no longer results in gift tax payable, then you would likely not make the QTIP election to use the marital deduction.  Advantage: the value of the gifted asset and future growth avoids estate tax at both spouses’ deaths.  You have until the gift tax return due date to monitor legislative developments and decide (4/15/2010, or 10/15/2010 if on extension).

An intervivos QTIP trust is drafted to benefit both spouses during their lives, with the result that wealth is removed from the wealth transfer tax system while remaining an available means of cash flow and financial security for you for life.

All Rights Retained as to formats, processes, and content. The content of this site is general and should not be relied upon without review of your specific circumstances by competent legal counsel. Reliance on the information herein is at your own risk, as it expresses no opinion by the firm on your specific circumstances or legal needs. An attorney client relationship is not created through the information provided herein. This site and its content is meant to alert you to legal services, issues, and planning measures that may be appropriate for you, and is not a substitute for an attorney client relationship where specific advice is provided. Calculations and exemption amounts illustrated are changing and should be considered inaccurate and only examples of results that may be achieved.