Book Details

A Practical Guide To Drafting Marital Deduction Trusts with 2008 Supplement (CD-ROM)

By Sebastian V. Grassi, Jr.

  • ONLINE: 2008
  • Online
  • 687 pp.
  • $19.00

The 2008 Cumulative Supplement to A Practical Guide To Drafting Marital Deduction Trusts (With Sample Forms and Checklists) updates the text of the main volume (www.ali-aba.org/BK36K/) and includes the two complete updated marital deduction trust forms. Among the many new and updated issues covered in the 2008 Cumulative Supplement are: • Disclaimers by beneficiary-trustees. • When a governing instrument’s presumption of survival is ineffective for marital deduction purposes. • Disclaimers by beneficiary-trustees. • Funding the credit shelter trust through the use of disclaimers. • Drafting the marital deduction trust in multiple marital situations. • The tax consequences of a QTIP trust investing in a family limited partnership/family limited liability company, and whether a trustee has a duty to invest in such an entity in order to minimize transfer taxes upon the death of the surviving spouse. • A discussion of the transfer tax consequences if a surviving spouse, as the sole executor of the estate, makes a Clayton contingent QTIP election. • “Supercharging” an inter-vivos QTIP trust (with contributions by Jonathan G. Blattmachr, Mitchell M. Gans and Diana S. C. Zeydel). • How to maximize income from a QDOT in order to minimize the payment of estate taxes on QDOT distributions. • How a general power of appointment trust and a QTIP trust can hold non-income producing assets and still qualify for the marital deduction. • Five new ways to draft flexibility into marital deduction trusts and credit shelter trusts. • Predeceased parent rule and GST tax generation assignments. • The final (and the recently proposed) GST tax qualified severance regulations. • IRAs payable to trusts, and the IRS’s recent ruling concerning the definition of “income” regarding retirement benefits payable to a marital deduction trust. • New IRA distribution flowcharts (contributed by Robert S. Keebler, CPA, MST). • And much more. The 2008 Cumulative Supplement is contained on a CD-ROM as a .pdf document that matches the chapter and section layout of the main volume. Users of the book can quickly determine which sections of the book have been updated, and can view or print the updated sections. And the two complete marital deduction trust forms (including a “Inter-Vivos QTIP Trust with Supercharged Credit Shelter Trust provisions ), as updated, are also available on this CD-ROM.

 

Overview

The uncertainty surrounding the repeal of federal estate taxes under the 2001 Tax Act underscores the need for married couples with combined estates greater than $1 million to consider the use of marital deduction and credit shelter trusts to shelter their applicable exclusion amount from further transfer taxation and to defer estate taxation on the balance of their estate through the use of the estate tax marital deduction.
There is also a need to draft marital deduction trusts and credit shelter trusts with sufficient flexibility to deal with the possibility of a permanent increase in the applicable exclusion amount (in lieu of permanent estate tax repeal) or the possibility of a permanent repeal of the estate tax.
The one-year period of estate and generation-skipping transfer (“GST”) tax repeal during calendar year 2010 provides opportunities for shifting wealth to different family members. This book discuses how to draft the marital deduction and credit shelter trusts that can take advantage of this one-year window period of opportunity, and provides sample language for the attorney’s consideration.
Two types of marital deduction trusts that provide flexibility during this period of uncertaintyare discussed in detail--the Clayton contingent QTIP trust, and the marital deduction disclaimer trust. Both forms of trust are included on the accompanying CD-ROM. A sample form of inter-vivos QTIP trust with an optional unitrust income provision is also included. CD-ROM.

The book also discusses:
• The seven essential requirements for the marital deduction.
• The four requirements of a QTIP trust.
• The four requirements of a general power of appointment trust.
• The six requirements of a qualified domestic trust for a non-U.S. citizen spouse.
• The “all income” requirement for the marital deduction, and its 2 exceptions.
• The IRS’s revised definition of trust “income,” and its impact on marital deduction trusts.

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About the Author

Sebastian V. Grassi, Jr., is a founding partner in Grassi & Toering, PLC, a law firm located in Troy, Michigan, a suburb of Detroit. He is a graduate of Lehigh University in Bethlehem, Pennsylvania and the University of the Detroit-Mercy School of Law in Detroit, Michigan. His practice emphasizes business law, business succession planning, estate planning and probate (including estate planning for special needs families), special tax counsel to trustees and executors concerning complex tax issues, and related real estate matters. He is a member of the State Bar of Michigan, the American Bar Association, and the Christian Legal Society, where he served on its national Board of Directors.

Listed in The Best Lawyers in America, and in Michigan Super Lawyers, Sebastian is a Fellow of the American College of Trust and Estate Counsel (“ACTEC”), and has served as a member of the Michigan Probate and Estate Planning Council. The Council advises the Michigan legislature on changes in probate and trust law.

Sebastian has written several chapters in books published by CCH, and Matthew Bender. Sebastian has also published over 105 articles on business law, estate planning, estate planning for special needs families, and tax matters in Probate & Property; ACTEC Journal; Estate Planning; Journal of Practical Estate Planning; The Journal of Taxation; The Journal of Taxation of Estates and Trusts; Michigan Bar Journal; Michigan Probate & Estate Planning Journal; Michigan Tax Lawyer; Probate Practice Reporter; Tax Management Estates, Gifts and Trusts Journal; Wealth Strategies Journal; Practical Tax Strategies; The Practical Lawyer; The Practical Tax Lawyer; and Tax Ideas. Sebastian is also a winner of the American Bar Association’s Probate & Property “Probate & Trust Excellence in Writing Award for Best Practical Use Article.”

For more information about Sebastian's article on Understanding Your Eternal Estate Plan, please go to http://www.probateandtrusts.com/eternal.

Sebastian is a frequent lecturer for the State Bar of Michigan's Institute of Continuing Legal Education. He also serves on the Institute's Estate Planning Advisory Board, and has served on the Estate Planning Advisory Board of the American Law Institute - American Bar Association (“ALI-ABA”). Sebastian has lived in China, and lectured at the Electronics Industry Management College, Beijing, Peoples Republic of China. Elsewhere, Sebastian has lectured at various ACTEC meetings, various Financial and Estate Planning Councils, various Probate and Estate Planning Bar Associations, The Washington, D.C. Estate Planning Council, The Michigan Probate Registers Annual Conference, The Annual Great Plains Federal Tax Institute, The Annual Minnesota Probate and Trust Law Section Conference, The Annual Notre Dame Tax and Estate Planning Institute, The National College of Probate Judges, the ALI-ABA, the Heckerling Estate Planning Institute as well as at the University of Michigan Law School.

 

Sebastian is also the father of an adult special needs child.

Mr. Grassi also has three books published by ALI-ABA:

A Practical Guide To Estate Planning For a Family With a Special Needs Child

A Practical Guide To Drafting Marital Deduction Trusts

A Practical Guide to Drafting Irrevocable Life Insurance Trusts

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Among the many new and updated issues covered in the 2008 Cumulative Supplement are:

• Disclaimers by beneficiary-trustees.
• When a governing instrument’s presumption of survival is ineffective for marital

deduction purposes.
• Disclaimers by beneficiary-trustees.
• Funding the credit shelter trust through the use of disclaimers.
• Drafting the marital deduction trust in multiple marital situations.
• The tax consequences of a QTIP trust investing in a family limited

partnership/family limited liability company, and whether a trustee has a duty to invest in such

an entity in order to minimize transfer taxes upon the death of the surviving spouse.
• A discussion of the transfer tax consequences if a surviving spouse, as the sole

executor of the estate, makes a Clayton contingent QTIP election.
• “Supercharging” an inter-vivos QTIP trust (with contributions by Jonathan G.

Blattmachr, Mitchell M. Gans and Diana S. C. Zeydel).
• How to maximize income from a QDOT in order to minimize the payment of

estate taxes on QDOT distributions.
• How a general power of appointment trust and a QTIP trust can hold

non-income producing assets and still qualify for the marital deduction.
• Five new ways to draft flexibility into marital deduction trusts and credit shelter

trusts.
• Predeceased parent rule and GST tax generation assignments.
• The final (and the recently proposed) GST tax qualified severance regulations.
• IRAs payable to trusts, and the IRS’s recent ruling concerning the definition of

“income” regarding retirement benefits payable to a marital deduction trust.
• New IRA distribution flowcharts (contributed by Robert S. Keebler, CPA,

MST).
• And much more.

Abbreviated Table of Contents

Chapter 1: Brief History Of The Estate Tax And The Marital Deduction

Historical Background Of The Federal Estate Tax And The Marital Deduction • Seven Types Of Federal Estate Tax Marital Deduction Currently Available • Checklist Of Advantages And Disadvantages Of The Different Types Of Federal Estate Tax Marital Deduction • 2001 Tax Act – Tentative Repeal Of The Federal Estate Tax And Generation-Skipping Transfer Tax (And How To Plan For It) • Key Changes Affecting Transfer Taxes Under The 2001 Tax Act

 

Chapter 2: Requirements For The Federal Estate Tax Marital Deduction

Seven Essential Requirements For The Federal Estate Tax Marital Deduction

 

Chapter 3: The Qualified Terminable Interest Property Marital Deduction Trust

Four Basic QTIP Trust Requirements • Income For Life Requirement • Power Of Appointment Over QTIP Trust • Sole Beneficiary Requirement • Annuities And The QTIP Election • Partial QTIP Election • Clayton Contingent QTIP Election • Using Disclaimers To Qualify For QTIP Treatment • Payment Of Estate Tax On QTIP Trust • The Inter-Vivos QTIP Trust • QTIP Election Requirement • Summary Of QTIP Trust Election

 

Chapter 4: The General Power Of Appointment Marital Deduction Trust

Four Basic Requirements • Payment Of Estate Tax On GPOA Trust • Sample General Power Of Appointment Marital Deduction Trust

 

Chapter 5: Qualified Domestic Trusts For The Non U.S. Citizen Spouse

Non U.S. Citizen Surviving Spouse And The Marital Deduction • Six Basic QDOT Requirements • Reforming A Non-Compliant Trust Into A QDOT • Transfer Of Property By Surviving Spouse To A QDOT • QDOT Treatment For Retirement Benefits • QDOT Property Is Subject To Special Estate Taxation • QDOT And Tentative Repeal Of The Federal Estate Tax • QDOT Security Arrangements • Determining The Amount Subject To QDOT Security Arrangement • QDOT Security Arrangements For Estates Less Than $2 Million • Safe Harbor QDOT Security Arrangements • Sample QDOT Provisions

 

Chapter 6: Spousal Income Requirement And The Marital Deduction Trust

All Income To Surviving Spouse • IRS Regulations Concerning Income • Contingent Income Interest • The Marital Deduction Estate Trust – An Exception To The All-Income Requirement • Sample Marital Deduction Estate Trust

 

Chapter 7: Trustee Powers That May Affect The Marital Deduction Trust

Allocation Of Income And Expenses • Payment Of Estate Administration Expenses And Claims – The Hubert Regulations • Unproductive Marital Trust Property • Accumulation, Withholding, Or Termination Of Marital Trust Income • Facility-Of-Payment Provision • Spendthrift Provision • Power To Appoint Marital Trust Property During Surviving Spouse’s Lifetime • Power To Pay Death Taxes • Underfunding The Marital Trust

 

Chapter 8: Limiting The Trustee’s Power In Order To Ensure The Availability Of The Marital Deduction

 

Chapter 9: Tax-Sensitive Powers Regarding The Beneficiary-Trustee

Estate Tax Issues And The Beneficiary-Trustee • Gift Tax Issues And The Beneficiary-Trustee • Income Tax Issues And The Beneficiary-Trustee • Power To Amdend OrTerminate Trust • Disclaimer By Beneficiary • Trustee And Discretionary Distributions • Limiting A Trustee's Power To Avoid Adverse Estate Gift And Income Tax Treatment

 

Chapter 10: Limiting Trustee Selection And The Surviving Spouse As Beneficiary-Trustee

Selection Of Trustee • Trustee Duties • Trustee Liabilities • Trustee Attributes • Surviving Spouse As Beneficiary-Trustee Of The Marital Deduction Trust • Surviving Spouse As Beneficiary-Trustee Of The Credit Shelter Trust

 

Chapter 11: Drafting Flexibility Into Marital Deduction Trusts And Credit Shelter Trusts

Designing Flexible Estate Plans Under The 2001 Tax Act • All To Surviving Spouse In A Divisible QTIP Marital Deduction Trust With A Partial QTIP Election • All To Surviving Spouse In A QTIP Marital Deduction Trust With Clayton Contingent QTIP Election • All Outright To Surviving Spouse With Right To Disclaim To Credit Shelter Trust • Permit Trustee To Terminate Trust • Appoint A Special Powerholder

 

Chapter 12: Advanced Planning Opportunities And Techniques

Use Credit Shelter Trust To Hold Life Insurance On Spouse’s Life • Provide Incentives To Beneficiaries • Insulate Credit Shelter Trust from Successive Taxation At Multiple Generations • Fractional Interest Discount Planning With QTIP Trust • Funding Trusts With Fractional (Discounted) Interests • Transfer Of QTIP Interest By Surviving Spouse • Use Of QTIP Trust For Asset Protection • Drafting The Maritial Deduction Trust In Multiple Marriage Situations

 

Chapter 13: Generation-Skipping Transfer Tax Issues And The Marital Deduction Trust

Brief Overview Of The GST Tax • Generation-Skipping Transfer Defined • Taxable Termination Defined • Basis Adjustment For GST Tax Paid • Taxable Distribution Defined • Income Tax Deductions For GST Tax Paid • Direct Skip Defined • Skip Person Defined And Generation Assignments • Predeceased Parent Rule And Generation Assignments • Transferor Defined • Taxation Of Multiple Skips And Transferor Move-Down Rule • Inclusion Ratio Defined • Right To Recover GST Tax Paid • Valuation Of Property For GST Tax Purposes • Appropriate Interest Defined • The GST Tax Exemption • The Reverse QTIP Election • Allocation Of GST Tax Exemption • Overview Of The GST Tax Separate Share, Separate Trust, And Valuation Rules • The GST Tax Separate Share Rule • The GST Tax Separate Trust Rule • The GST Tax Valuation Rules • Automatic Allocation Of GST Tax Exemption Upon Death Of Transferor

 

Chapter 14: 2001 Tax Act And Liberalized GST Tax Rules

Increase In GST Tax Exemption Amount And Lowering Of GST Tax Rate • Qualified Trust Severance Rules • Determining The Value Of Property On A Timely GST Tax-Exemption Allocation

 

Chapter 15: Marital Deduction Funding Formulas And Their Tax Consequences

Two Basic Types Of Marital Deduction Funding Formulas • Selecting a Marital Deduction Funding Formula • Overview Of The Pecuniary Funding Formulas • The True-Worth Marital Deduction Funding Formula • The Fairly Representative Marital Deduction Funding Formula • The Minimum-Worth Marital Deduction Funding Formula • The True-Worth Credit Shelter Funding Formula • The Fairly Representative Credit Shelter Funding Formula • Overview Of The Two Fractional Funding Formulas • The Pro-Rata Fractional Marital Deduction Funding Formula • The Pick And Choose Fractional Marital Deduction Funding Formula

 

Chapter 16: Checklist Of Advantages And Disadvantages Of The Seven Marital Deduction Funding Formulas

Advantages And Disadvantages Of The True-Worth Marital Deduction Funding Formula • Advantages And Disadvantages Of The Fairly Representative Marital Deduction Funding Formula • Advantages And Disadvantages Of The Minimum-Worth Marital Deduction Funding Formula • Advantages And Disadvantages Of The True-Worth Credit Shelter Funding Formula • Advantages And Disadvantages Of The Fairly Representative Credit Shelter Funding Formula • Advantages And Disadvantages Of The Pro-Rata Fractional Marital Deduction Funding Formula

 

Chapter 17: Summary Of Marital Deduction Funding Formulas (With Checklist And Chart)

Summary Of Marital Deduction Pecuniary Funding Formulas • Summary Of Credit Shelter Pecuniary Funding Formulas • Summary Of Fractional Marital Deduction Funding Formulas • Marital Deduction Funding Formula Checklist • Chart Of Pecuniary And Fractional Funding Formulas And Their Consequences

Appendix 1 Sample Marital Deduction Trust Form

Appendix 2 Sample Inter-Vivos QTIP Marital Deduction Trust Form

Table of Cases

Table of Statutes, Rules, and Regulations

Index of Subjects

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