The Effect of Portability on Partial QTIP Elections. 1. 3. Qualified Terminable Interest Property (QTIP) - for Massachusetts estate tax purposes, property. For marital deduction purposes, QTIP is deemed to pass to the surviving spouse and not to any other person. The IRS explained that when the old Revenue Procedure 2001-38 was issued (specifically, before the availability of portability), an unnecessary QTIP election produced adverse tax consequences and no benefit for taxpayers. What change did the new legislation make in the inclusion in the Massachusetts gross estate of property owned jointly by a husband and wife? Historically, and prior to the issuance of Rev. The Massachusetts estate tax is a transfer tax imposed on the value of all property in the estate of a decedent at the date of death, and not on the value of property received by each beneficiary. Any estate failing to comply with this provision will be assessed a penalty of $100 or 10% of the additional tax, whichever is less. 4) to which an election under M.G.L. 2016-49 puts to rest a fear that certain QTIP elections would not be respected by the IRS, even though properly made. The surviving spouse may benefit greatly from an increase in his or her ability to make otherwise taxable inter vivos gifts, to join a subsequent spouse in electing to make split-gifts, and potential asset protection through the use of the QTIP election. Proc. Conversely, a QTIP election would reduce the deceased spouse’s taxable estate and thereby maximize the amount of unused exclusion available to be used by the decedent’s surviving spouse. 70 ... election must be made (no more than one year after the due date for the estate tax return, with extensions), permitting a non-US citizen spouse to avoid the use of a, 3) QTIP inclusion in the Massachusetts gross estate. b) Under M.G.L. This change now allows trusts to make QTIP elections even if that trust is not required to reduce its estate tax to zero. The IRS, in the new Revenue Procedure 2016-49 modifies and supersedes Rev. Proc. 16 As a result of the partial Illinois QTIP election, there is zero estate tax owed on H's death for both federal and Illinois purposes. 4. is needed. • A portability election is now permitted allowing the deceased spouse's executor to save the deceased spouse's unused estate tax exclusion amount, thereby making the unused exemption available to the surviving spouse. As to future tax repercussions, they are Lastly, the taxpayer must provide sufficient evidence to support his or her claim that the QTIP election meets the requirements under Rev. This property is also excluded from the $10,000 threshold for that calendar year. "�m��]X���j,B��C���?� Under M.G.L. a) Under M.G.L. To protect the surviving spouse from predators and to assure that the intended remainder beneficiaries (e.g., children from the first spouse’s prior marriage) received the inheritance on the death of the surviving new spouse, this bequest that qualified for the marital deduction would be made into a special marital trust called a “QTIP.” This stands for qualified terminable interest property trust. What change did the new legislation make in allowance of the reformation of charitable instruments?
Alternatively, which is more fun to contemplate, she might wish to augment/maximize her exemption so that she can use it to entice a new husband to marry her to gain that benefit (since a wealthy new husband could use her exemption on a gift tax return to protect gifts of his wealth to his children from a prior marriage). The husband’s executor, confused by the complexity of the estate tax rules, meant to treat the trust that these assets passed to as a bypass trust. Top-requested sites to log in to services provided by the state.
Advisers fretted over whether the procedure to void and nullify QTIP elections provided as a kind gesture by the IRS in Revenue Procedure 2001-38 going to make it questionable as to whether a taxpayer living in a portable world could make an otherwise unnecessary QTIP election to maximize the available unused estate tax exclusion amount, i.e., to maximize the DSUE. That Revenue Procedure provided relief by, The executor of the estate neither made nor was considered to have made the portability election as provided in § 2010(c)(5)(A) and the regulations thereunder; and. The remainder of the estate over that amount would be bequeathed in a manner that qualified for the estate tax marital deduction. The surviving spouse could be the only beneficiary during her lifetime and had to receive income distributed at least annually. c. 65C, § 3A(c) or made a transfer of property which would require the property to be included the gross estate, and. 0000004335 00000 n
b) Under M.G.L. Since bequests to the credit shelter trust are taxable (unlike bequests to the marital deduction QTIP Trust) they use up exemption of the first spouse. What is the difference between a Clayton election and a Partial QTIP election? 0000042908 00000 n
For purposes of this Technical Information Release, the following terms have the following meanings: Alternate Valuation - the value of all property included in the decedent's gross estate at the alternate valuation date, which in general is six months after the date of decedent's death. For the partial QTIP election, only the percentage of the property listed for QTIP treatment can be specified — not specific property. c. 65CF § 4(b), the executor of the estate of a non-resident decedent with real estate and tangible personal property located in Massachusetts must file a Massachusetts estate tax return and also a Massachusetts non-resident decedent affidavit (Form-NRA), which provides the formula to compute the Massachusetts estate tax for a non-resident decedent. § 14(b), as amended, effective December 31, 1985, to protect a bona fide purchaser for value, there is no estate tax lien on Massachusetts real estate where the property is transferred as follows: 2) by a deed not disclosing an intent that the transfer will take effect at or after the decedent's death, and the deed was recorded before the decedent's death; and. 4. Portability might result in the executor of the first deceased spouse’s estate wanting to elect QTIP treatment for property even where the election is not necessary to reduce the estate tax liability. c. 65C, § 5(a); ii) actuarial tables for the valuation of annuities (Code § 2031), under M.G.L.
c. 65C, § 3(b), as amended, effective December 31, 1985, interest is allowed as a deduction for Massachusetts estate tax purposes only if it has been paid in full or has accrued within three years from the due date of the estate tax return, regardless of any extension of time to file the return. This partial Illinois QTIP election is expressly authorized under 35 ILCS 405/2(b-1). The consequences of a reverse QTIP election is that the decedent remains, for GST tax purposes, the transferor of the QTIP trust for which the election is made. c.65C, § 3(c). [See IRC §2652(a)(3).] 0000003318 00000 n
2001-38 to eliminate this one worry of tax practitioners (but don’t be concerned we’ll all find other technicalities to obsess over). . Proc.
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