from Jim Dilley
Say a man dies with a $10 million estate. At time of death, he has $2 million left of his lifetime exemption (unified credit as it is known) and $900,000 left of his generation skipping tax exemption. He could leave all to wife, but then he's wasting the $2 million lifetime exemption. He could put $2 million in trust for kids and and then leave the other $8 million to wife. Then later when wife dies, she can structure her will to take advantage of her lifetime exemption and GST exemption as she wants.
But maybe he wants to leave money to grandkids too. He could leave $8 million to wife and $1.1 million to kids and $900,000 to grandkids. This would get at least some money ($900,000) to third generation without paying any estate tax because $900,000 was the amount of his GST exemption.. And it uses all of his lifetime exemption.
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Met with Lytle Nichol 24-sep-10
GTN will.
Assume that estate is $10 million at death and that GTN gave $1 million in gifts during his life. So his lifetime exemption (unified credit) which started at $3.5 million is now (at death) down to $2.5 million. 2009 GST exemption was $3.5 million so we'll use that in this example. He has not used any of GST exemption at time of death.
First, add $1 million in lifetime gifts back to estate so estate is $10m + $1m = $11m. Subtract lifetime exemption from total estate $11m - $3.5m = $7.5m. So $7.5m goes into marital trust for Sarah. The other $3.5m (really $2.5m because the $1m added back to estate is really not there) goes into residuary trust for children.
Marital trust: $7.5m
Residuary trust: $2.5m
But to use GST exemption, make all of the $2.5m in residuary trust GST exempt. That leaves an additional $1m of GST exemption leftover. So use that to exempt $1m of the Marital trust. To do that, split the marital trust into two trusts, M1 exempt, and M2 non-exempt.
So now it looks like this:
M1 $1m (GST exempt)
M2 $6.5m (nont GST exempt)
Residuary trust $2.5m (GST exempt)
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Met with Lytle Nichol 24-sep-10
GTN will.
Assume that estate is $10 million at death and that GTN gave $1 million in gifts during his life. So his lifetime exemption (unified credit) which started at $3.5 million is now (at death) down to $2.5 million. 2009 GST exemption was $3.5 million so we'll use that in this example. He has not used any of GST exemption at time of death.
First, add $1 million in lifetime gifts back to estate so estate is $10m + $1m = $11m. Subtract lifetime exemption from total estate $11m - $3.5m = $7.5m. So $7.5m goes into marital trust for Sarah. The other $3.5m (really $2.5m because the $1m added back to estate is really not there) goes into residuary trust for children.
Marital trust: $7.5m
Residuary trust: $2.5m
But to use GST exemption, make all of the $2.5m in residuary trust GST exempt. That leaves an additional $1m of GST exemption leftover. So use that to exempt $1m of the Marital trust. To do that, split the marital trust into two trusts, M1 exempt, and M2 non-exempt.
So now it looks like this:
M1 $1m (GST exempt)
M2 $6.5m (nont GST exempt)
Residuary trust $2.5m (GST exempt)
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