Critical Elections for Trust, Gift, and Estate Returns: Forms 1041, 709 and 706; GST, QTIP, 663(b), 645

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Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, March 3, 2022

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Course Materials

This course will explain the numerous elections available when preparing gift, estate, and trust returns. Some elections are easily made but critical (gift-splitting, choice of year, Section 663(b)). Other elections require much more thought and expertise (GST allocation, QTIP election, Section 645). Either way, missing an election can be more than a missed opportunity: it can have a significant tax impact on the donees of a gift or beneficiaries of an estate or trust. Our panel will review the most common elections related to Forms 1041, 706 and 709, and discuss how and when to make each.

Description

How often do you prepare a trust return and see the trust's marginal tax rate is too high? Section 663(b) provides a window of opportunity to utilize distributions made within the first 65 days of subsequent year in the current year, thereby shifting income to the beneficiary's tax return.

An executor or practitioner has many elections to consider for estate income tax returns. First, there is electing the fiscal year of the estate, which provides deferral opportunities. Next, under Section 645, an executor can combine a revocable trust with the estate return and file a single Form 1041. The benefits of combining these returns are more than merely eliminating the administrative burden of filing two returns.

Portability and the largest estate and gift exemptions ever, $12.06 million in 2022, have left significantly fewer taxable estates. Considering the higher exemption and the availability of portability, whether or not to make a QTIP election on assets transferred via a trust for the benefit of a spouse deserves scrutiny. Making or not making the election determines whether the trust's assets are stepped-up again upon the surviving spouse's death and whether the surviving spouse receives the full benefit of the first spouse's exemption.

For inter-vivos transfers, there are numerous gift tax elections to consider. Perhaps the most complicated consideration is whether to elect using the GST exemption for the transfer(s) made. Many practitioners fail to make these allocations or make them incorrectly. Experts recommend that you proactively choose to either use or elect out of the automatic GST allocations. A more straightforward consideration is the election to split gifts made by spouses. Too often though, required gift tax return filings get overlooked/missed. Practitioners often are not aware their client has made a taxable gift.

Listen as our panel of experts identifies and explains critical elections for Forms 706, 709, and 1041, the situations applicable to each election, and how to make each election.

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Outline

  1. Fiduciary return elections
    1. 663(b)
    2. 645
    3. Fiscal year end
  2. Estate tax elections
    1. Portability
    2. QTIP
    3. Deducting expenses
  3. Gift tax elections
    1. GST
    2. Gift splitting

Benefits

The panel will review these and other important issues:

  • Making the 65-day election under Section 663(b)
  • How and when to allocate GST exemption
  • How to utilize a deceased spouse's ported exemption
  • The benefits of combining returns under Section 645
  • Filing Form 706 to elect portability

Faculty

Doyle, Jere
Jeremiah W. (Jere) Doyle, IV
Senior Vice President
Bank of New York Mellon

Mr. Doyle provides clients with integrated wealth management advice on how to hold, manage and transfer their...  |  Read More

Grob, Jonathan
Jonathan L. Grob
Attorney
McGrath North Mullin & Kratz

Mr. Grob helps his clients structure their transactions, operations and wealth transfers in a tax-efficient way, while...  |  Read More

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