Tax Apportionment in Wills and Estate Documents: Allocating Wealth Transfer Taxes Among Beneficiaries

Recognizing Defective Tax Allocation Provisions, Navigating Source of Law Questions, Determining Treatment of Spousal Transfers

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


Conducted on Wednesday, December 5, 2018

Recorded event now available

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Program Materials

This webinar will prepare fiduciaries and tax advisers with a practical guide to navigating the challenges of estate and transfer tax apportionment. The panel will discuss how to interpret estate planning documents in instances where the apportionment is unclear, as well as understanding the proper tax reporting under both general and complex tax apportionment clauses. The webinar will also address source-of-law questions in instances of missing or defective tax apportionment clauses in estate documents.

Description

Tax apportionment is one of the most critical and often neglected parts of an estate plan. However, it can lead to serious tax consequences if the clauses are missing or defective. Tax advisers and fiduciaries need to have a thorough grasp on how tax apportionment clauses function within estate documents to allocate transfer taxes according to the testator’s intent.

A tax apportionment clause determines how the burden of wealth transfer taxes is spread out among beneficiaries of a taxable estate. If the provision is missing or unclear, state laws mandating some form of “equitable apportionment” will govern the allocation of estate tax liability. These state laws often will involve distribution of estate assets that may be contrary to the testator’s intent. Additionally, defective apportionments may impact marital and/or charitable deductions and may impose unexpected taxes on non-probate assets which are intended to pass outside of a will. In addition to state law provisions, practitioners must be aware how federal apportionment provisions apply.

Fiduciary advisers and tax compliance professionals must pay close attention to the structure of tax apportionment clauses in estate documents, especially for those states that impose a state-level wealth transfer taxes. Also, tax advisers must understand the exclusion of certain assets passed through QTIPs or other spousal structures.

Listen as our experienced panel discusses the sources of law regarding apportionment of federal and state taxes affecting estates. Learn how apportionment clauses affect the estate, gift, income, and generation-skipping tax as well as retirement assets.

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Outline

  1. Apportionment clauses in general
  2. Source of law
    1. Federal
    2. State
    3. Equitable apportionment provisions
  3. Impact of missing or defective tax allocation provisions
    1. Estate tax
    2. Gift tax
    3. Income tax
    4. Generation-skipping tax
  4. Predeceased spousal assets previously qualifying for marital deduction
  5. Apportionment clauses and retirement assets

Benefits

The panel will review these and other high priority issues:

  • What fiduciaries and tax advisers should scrutinize in tax apportionment clauses within the estate, gift, income, and generation-skipping tax regimes
  • Treatment of property included in a decedent’s estate which previously qualified for the marital deduction in the estate of the decedent’s predeceased spouse
  • How tax apportionment clauses affect retirement plan assets
  • The sources of law for tax apportionment
  • How portability and marital trusts affect tax clauses and apportionment
  • Impact of tax apportionment clauses on distributions to grandchildren, other specific beneficiaries, or charities

Faculty

Dougherty, James
James I. Dougherty

Partner
Withers Bergman

Mr. Dougherty focuses his practice on probate, tax, trust, and estate issues. He assists executors and beneficiaries...  |  Read More

Fung, T. Sandra
T. Sandra Fung

Atty
Withers Bergman

Ms. Fung is part of the firm's private client and tax team. Her practice focuses on private wealth matters with an...  |  Read More

Rikoon, Jonathan
Jonathan J. Rikoon

Partner
Loeb & Loeb

Mr. Rikoon practices in the areas of trust and estate planning, administration and litigation. He engages in...  |  Read More

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