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Estates & Trusts

Trust and Estate New Items

By December 12, 2013No Comments

New Items:

  • Top Marginal Estate Tax Rate of 40%
  • $5,250,000 (for 2013) and $5,340,000( for 2014) indexed estate, gift and GST exemptions
  • Top Rate of 20% for Capital Gains and Qualified Dividends
  • 3.8% Medicare Tax on Net Investment Income – this tax applies to the undistributed net investment income of trusts in excess of the income level at which the highest trust rate applies, $11,950 for 2013

On the Horizon “Administration 2014 Proposals”:

  • New GRAT Requirements:
  • Ten-year minimum term would be required
  • A maximum term of the life expectancy of the annuitant plus 10 years
  • The remainder interest must have a value greater than zero
  • The annuity amount could not decrease in any year during the annuity term


  •  Gift Tax Returns
  • If you haven’t filed your gift tax return, one reason to file is to commence running the statute of limitations (three years, or six years if omitted gift assets are worth 25% of the total gifts).

Don’t Forget:

  •  Crummey Letters:
  •  A Crummey Trust is a vehicle to transfer assets to your child in a way which will achieve the estate planning goal for transferring wealth tax-free from one generation to the next, but will also limit the younger generation’s decision-making power over the assets that have been transferred. If the trust is properly established, then the annual right to a distribution, irrespective of any actual distribution to the beneficiary, allows a “present interest” to be created that is sufficient to maximize use of the annual gift tax exclusion.
  •  In a Crummey Trust, the beneficiary must be given the right to make one withdrawal from the trust each year. The right to demand one withdrawal can be made only once each year and if the beneficiary elects not to take a withdrawal, the right lapses. The object of the Crummey Trust is to make the right available in such a way that it is not exercised.
  • The beneficiary must receive notice of his or her right to withdraw funds from the trust. If no notice is given, this renders the trust illusory and defective. The notice must give the beneficiary a certain period of time in which to demand a withdrawal. If the beneficiary’s power to withdraw funds from the trust exceeds five percent of the trust’s assets, or $5,000, failure to exercise the power to withdraw is deemed a gift by the beneficiary. The notice requirement is not met if the beneficiary waives his or her right to notice.
  •  Crummey Trusts create present interests in the beneficiary. This results because the beneficiary has the right to demand possession of the transferred property, even though that right may be exercised only once each year. When trust distributions require the consent of multiple beneficiaries or third persons, the transfer does not create a present interest but a future interest. Making the beneficiary’s right to withdraw contingent upon some future act, such as entering or leaving school, also makes the transfer a future interest.
  • The following is a sample beneficiary notification letter:

Dear Beneficiary:
This is to notify you that pursuant to article ___ of the _______ Trust, as the result of transfer of funds from your parent of $________, you are entitled to withdraw funds from the trust having a value equal to some portion or all of the funds transferred (as described in the Trust Agreement).

To exercise your withdrawal right, you must deliver to the Trustee of the Trust, within 45 days after your receipt of this notification, a written demand for payment. If you exercise your right to withdraw funds from the Trust, the Trustee will make payment to you from the corpus of the Trust. If you elect not to make a withdrawal within 45 days, you will not be permitted to make a withdrawal until next year.


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