Methods of Asset Transfer. Sale Gift Estate (Die) Combination of two or three There are differences in tax implications. Basis Example. Current Land Value $4,500 / acre Purchase Price $ 1,000$4,500$ 6,000 Die $ 4,500 $ 4,500$4,500 Gift $1,000 $ 4,500$4,500*
Current Land Value $4,500 / acre
* gifting or selling to family, 2 year rule
Elements of a gift.
Must have a donor.
Must have a donee (recipient) of the gift.
Must have actual or constructive receipt of the gift.
a). Determine who gets what
b). Clear title to real estate
c). Pay taxes
Know the nature and extent of your estate
Be able to formulate a plan of distribution
Know the natural objects of your bounty
Understand the relationship of the above
a). Sound mind, of age, not coerced
b). Disinherit a spouse?
f). The will names the executor/trix and nominates the guardians…
g). Special bequests list attached
Will contents - suggested provisions
a). Basis – step up, step down
c). Income in respect of decedent
d). Sale of residence
e). Installment sales and private annuities
f). Special use valuation
a). Annual exclusion
b). Marital deduction
c). Charitable deduction
d). Unified credit
e). Below market interest rate loans
f). Gifts to minors – Iowa Uniform Transfers to minors or trusts
a). Date of death or six months later
b). Special Use Valuation based on a capitalization rate, often reduces value at least 25 percent capped at a limit of $1,020,000 reduction for 2011
c). Other discounts for minority shareholders
Alternate valuation date - requirements:
3 year look back rule:
a). Life estate
b). Transfer was to occur at death
c). Revocable transfer
d). Transfer of life insurance
Taxable Gifts after 1976
b). Attorney fees
c). Executor fees
d). Court costs
e). Burial expenses
f). Marital deductions
g). Charitable deductions
h). Iowa inheritance tax
i). Part of Federal tax paid in previous 10 years
Estate Planning Zones or the Size of your Pie
An estate with a taxable value of less than $5,000,000
An estate with a taxable value between $5,000,000 and $10,000,000
An estate with a taxable value of greater than $10,000,000
If total “pie” for husband and wife is between $5,000,000 and $10,000,000 consider dividing equally and using life estate or trust.
If you have a “Big Pie” seek specialized help and wait a few years to die.
No NONO !!!!! This is your big opportunity
Look at special tools to reduce valuation, consider a gifting program, charitable donations, Special Use, minority discounts and other tools estate planners would suggest.