Organizing Your Estate : How to Purge and

This book contains information, diagrams, and true-life examples not found in IRS publications, its website, or in tax software programs. Organizing Your Estate (T/G 303) covers the procedural aspects of IRS Form 706 (Estate Tax) and Form 709 (Gift Tax), the increasing million dollar exemption amounts, the "carryover basis" rules for years 2010 and beyond, and the tectonic shift in tax policy from a 45% death tax to a 15% capital gains tax. Also covered: How "Gross Estate" is tax defined, The 9 asset schedules on Form 706, The $12,000 annual gift exclusion per donee, Reconstruction of tax basis in property, Building pre-senility liquidity & cash, Initiating your own Form 706 while alive.

Holmes F. Crouch has been an IRS-licensed tax practitioner and consultant for more than 25 years. He is the author of more than 25 books, including Living Wills & Trusts, Rental Real Estate, Small C & S Corporations, and Your Trustee Duties. He lives in Saratoga, California.

1. PRECAUTIONS WITH ATTORNEYS

1-1

(1)

Janitor With Two Daughters

1-2

(1)

The "Scenario" of a Trust

1-3

(1)

Trust Format Simplified

1-5

(1)

Deceased Pilot, Disabled Wife

1-7

(1)

Why the Bypass Trust Rush?

1-9

(1)

Widow with Alcoholic Daughter

1-10

(1)

Church Attorney Switcheroo

1-13

(1)

Engineer with Attorney Brother

1-14

(1)

2. YOUR "GROSS ESTATE"

2-1

(1)

Transfer Tax Imposed

2-2

(1)

Exemption Amounts & Unified Credits

2-4

(1)

Gross Estate Defined

2-6

(1)

Schedule A — Real Estate

2-7

(1)

Schedule B — Stocks, Bonds, Etc.

2-9

(1)

Schedule C — Mortgages, Notes, & Cash

2-10

(1)

Schedule D — Life Insurance

2-11

(1)

Schedules E & F — Other Property Items

2-13

(1)

Schedule G — Transfers During Life

2-14

(1)

Schedules H & I — Powers & Annuities

2-16

(1)

Other Items on Form 706

2-17

(1)

3. VALUATION TECHNIQUES, ETC.

3-1

(1)

Statutory Overview

3-2

(1)

"Fair Market Value" Defined

3-4

(1)

The Problem with Real Estate

3-6

(1)

Website Search for Comparables

3-8

(1)

Stocks, Bonds, & Mutual Funds

3-10

(1)

Valuation of Business Interests

3-12

(1)

Valuation of Notes & Foreign Accounts

3-13

(1)

Valuation of Household & Personal Effects

3-14

(1)

Life Insurance, Annuity Contracts, Etc.

3-15

(1)

Tailored Asset Categories

3-17

(1)

4. INHERITABLE PROPERTY

4-1

(1)

Page 2 of IRS Form 706

4-2

(1)

From Gross Estate to Inheritors

4-3

(1)

The Essence of Section 1014

4-6

(1)

Modified Stepped-Up Basis

4-7

(1)

Section 1022 "Roll Out"

4-9

(1)

Historical Commentary

4-10

(1)

Executor Workload Increased

4-13

(1)

5. CARRYOVER BASIS RULES

5-1

(1)

Origin of "Carryover Basis"

5-2

(1)

Meaning of "Adjusted Basis"

5-4

(1)

A $1,300,000 Step-Up Allowed

5-6

(1)

Loss Property Basis Increase

5-9

(1)

Spousal Property Basis Increase

5-11

(1)

Fair Market Value Limitation

5-12

(1)

New Law Section 6018

5-14

(1)

Gift Tax Repeal in 2010

5-15

(1)

6. POST 2009 THINKING

6-1

(1)

Like a "Pass-Through" Entity

6-3

(1)

Comparing Maximum Tax Rates

6-5

(1)

What About Cash Transfers?

6-6

(1)

"Small Transfer" Interpreted

6-7

(1)

If No Basis Records

6-9

(1)

Property Owned by Decedent

6-11

(1)

Insufficient Consideration Transfers

6-12

(1)

Property Acquired from Decedent

6-14

(1)

Still, Questions Remain

6-17

(1)

7. GOALS TO PURSUE

7-1

(1)

Get Forms 706, 709, & 1041 Now

7-2

(1)

Prepare Your Executor

7-3

(1)

706 Directed at Executor

7-5

(1)

Coordinate with Spouse

7-6

(1)

Discuss the Marital Deduction

7-8

(1)

A Word About Form 709

7-10

(1)

Example: Reconstruction of Basis

7-11

(1)

Read the "Yes-No" Questions

7-13

(1)

A Word About Form 1041

7-15

(1)

Percentile Your Distributable Estate

7-18

(1)

Establish a Liquidity Ratio

7-19

(1)

Organize Your Records

7-20

(1)

8. CULLING REAL ESTATE

8-1

(1)

Canvass Your Children's Wants

8-2

(1)

Offer to Sell to Children

8-4

(1)

Example of Culling Need

8-5

(1)

The "Never Sell" Plan

8-8

(1)

Do Culling in 5 Phases

8-10

(1)

Phase 1: Undeveloped Land

8-12

(1)

Phase 2: Low Income Rentals

8-13

(1)

Phase 3: Single Unit Rentals

8-14

(1)

Phase 4: Multiple Property Exchanges

8-15

(1)

Phase 5: Trust Designated Property

8-17

(1)

9. SLIMMING PORTFOLIO ASSETS

9-1

(1)

The "Unit Value" Problem

9-2

(1)

What If No Market

9-4

(1)

How Many Is Too Many?

9-5

(1)

Descriptive Details Required

9-8

(1)

The "Accrued Dividend" Problem

9-10

(1)

Dispositions Before Alternate Date

9-12

(1)

Anticipate Via Form 1040

9-13

(1)

Tax Now (15%), or Tax Later (45%)

9-15

(1)

10. BUILDING NEEDED LIQUIDITY

10-1

(1)

What are the Uncertainties?

10-2

(1)

How Much Liquidity Needed?

10-4

(1)

Assign Liquidity Ratings

10-6

(1)

Management of the Cash Pool

10-7

(1)

Estimating Your Estate Tax

10-10

(1)

Role of "Exemption Credit"

10-11

(1)

Years 2010 and Beyond?

10-13

(1)

Scenario 1: Form 706 Simplified

10-15

(1)

Scenario 2: Carryover Basis

10-16

(1)

Back to: "Cash is King"

10-18

(1)

11. FILING GIFT TAX RETURNS

11-1

(1)

Death Bed Usage

11-2

(1)

Overview of Form 709

11-4

(1)

Transfers Subject to Form 709

11-6

(1)

Schedule A, Part 1 Listings

11-7

(1)

Columns B, D, & F Explained

11-9

(1)

Prior Gifts on Schedule B

11-11

(1)

Tax Effect of Prior Gifts

11-13

(1)

Last Chance for Annual Exclusions. Etc

11-14

(1)

12. INITIATING YOUR OWN 706

12-1

Fill Out Part 1 on Page

12-2

(1)

Three Checkboxes in Part 1

12-4

(1)

Four Elections by Executor

12-5

(1)

Importance of "Letters Testamentary

12-6

(1)

Overview of Part 4

12-9

(1)

General Information: Continued

12-10

(1)

Schedules A through U

12-11

(1)

Part 5: Recapitulation Now

12-13

(1)

Putting It Ail Together

12-18

(1)

Completion and Conclusion

12-20

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Organizing Your Estate : How to Purge and Direct Property Transfer to Chosen Family Members by Gift, Bequest, or in Trust While Thinkingly Alive

Summary

Author Biography

Table of Contents

Supplemental Materials