Alternate Valuation Date: Final Regulations
On January 3, 2005, the IRS issued final regulations that give guidance on making an alternate valuation election when filing an estate tax return, Form 706. These final regulations change the earlier proposed regulations issued on December 24, 2003 and make changes to IRS Section 2032.
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Basics of Tax Planning and AICPA Interpretation No. 1-2
The basic purpose of tax planning is to minimize a client’s tax liability in both current and future years. There are multiple tax planning strategies that can reduce a client’s overall tax liability, shift the timing of a taxable event, or even shift some of the tax liability from one taxpayer to another. AICPA's Interpretation No. 1-2, Tax Planning, offers some important guidelines for providing tax-planning services.
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Generation-Skipping Transfers: What You Need to Consider
A generation-skipping transfer (GST) is the transfer of an asset to a beneficiary who is at least two generations below the transferor’s generation (a.k.a., a "skip person," such as a grandchild). The transfer may be an outright transfer or it may be a transfer to a trust for the skip person's benefit. There is a GST tax imposed on certain of these transfers. It is a separate tax, apart from the estate or gift tax. The type of transfer determines who is liable for the GST tax.
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Lifetime Gifts: What You Need to Consider
There are many reasons to give someone a gift but there are at least as many reasons why any sizeable gift should involve some tax planning for estate, income, and gift tax purposes, as well as for overall wealth management. Tax planning and wealth management go hand in hand. With proper planning you can transfer a significant amount of wealth either tax free or with considerable tax savings.
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Payment of Estate Tax in Installments
Wouldn't it be great if the IRS allowed you to pay your tax liability over 14 years? Even better, what if for the first five years you only had to pay interest on the amount due and that interest would be assessed at only a nominal 2% rate? While this is not possible for regular income taxes, it is a possibility for certain amounts of estate tax.
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Penalties for Undervaluing an Estate
The federal estate tax is levied on the transfer of property at death. Since the amount of the estate tax liability depends on the value of the property transferred, it is important that the estate not be overvalued. However, as important as it is not to overvalue the estate, you also don't want to risk penalties for undervaluing it. Generally, all property must be valued at its fair market value either at the time of death or on the alternate valuation date (usually six months afterwards).
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Planning for Testamentary Transfers of Property
This article is intended as an overview of basic planning for testamentary transfers of property and the alternative approaches that are available to you.
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Required Distributions from Qualified Retirement Plans
You cannot keep money in a qualified retirement plan indefinitely. Because such accounts are tax-deferred and are not tax free, eventually you must start taking distributions. In fact, there is a requirement that you do so. This article will assist you in understanding the required distributions that must be withdrawn from such plans.
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Retirement Planning and Nonspousal Beneficiaries
Retirement distribution planning, if done well, can shield your heirs from large amounts of tax exposure. While wills control probate assets and trusts control trust assets, IRAs and qualified retirement plans are controlled either by the designation of a beneficiary or the default provisions of the contract. Planning for the distribution of an IRA or qualified retirement plan is of utmost importance as such funds often constitute the largest asset of an estate. The focus of this article is when the designated beneficiary of an IRA or qualified retirement plan is a nonspouse.
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Stretch IRAs: Should You Set One Up?
Next to one's primary residence, probably the largest single asset most taxpayers own is their IRA. While good estate tax planning is essential to all wealth management, this is especially true for taking full advantage of an IRA’s potential.
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