Estate Planning for Forest Landowners - South Dakota Department ...

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Chapter 3. The Federal Estate and Gift Tax Process Page Background.................................................................................................................................................. 15 Unified Rates and Credits............................................................................................................................ 15 Unified Rates......................................................................................................................................... 15 Applicable Credit Amount.................................................................................................................... 15 Determination of Gross and Taxable Estate................................................................................................. 15 Gross Estate.......................................................................................................................................... 15 Valuation............................................................................................................................................... 17 Taxable Estate....................................................................................................................................... 17 Determination of Tax Due..................................................................................................................... 18 Credit Reductions................................................................................................................................. 18 Estate Tax Computation........................................................................................................................ 18 Chapter 4. Valuation of Assets for Estate and Gift Purposes General Considerations................................................................................................................................ 21 Undervaluation...................................................................................................................................... 21 State Death Tax Considerations............................................................................................................ 21 Special Considerations................................................................................................................................. 21 Discounting for Minority and Undivided Interests............................................................................... 21 Life Insurance....................................................................................................................................... 22 Future Interests...................................................................................................................................... 22 Closely Held Corporate Stock...................................................................................................................... 22 Factors to Consider............................................................................................................................... 22 Degree of Control................................................................................................................................. 23 Valuation Discounts.............................................................................................................................. 23 Partnership and Limited Liability Company Interests................................................................................. 24 Valuation Discounts.............................................................................................................................. 24 Deathbed FLP Agreements................................................................................................................... 24 Limited Liability Company Interests.................................................................................................... 25 Forest Land and Timber............................................................................................................................... 25 Methods of Valuation............................................................................................................................ 25 Valuation of Bare Land......................................................................................................................... 26 Valuation of Merchantable Timber....................................................................................................... 27 Valuation of Premerchantable Timber: A Case Study.......................................................................... 27 Reported Timber Specific Court Decisions.................................................................................................. 29 Corporate Stock.................................................................................................................................... 29 Partnership Interests.............................................................................................................................. 29 Fee Interests.......................................................................................................................................... 29 vi
Chapter 5. The Legal Process Page Basis of the Law........................................................................................................................................... 31 Statutory Basis...................................................................................................................................... 31 Administrative Basis............................................................................................................................. 31 Judicial Basis........................................................................................................................................ 31 Wills............................................................................................................................................................. 31 Need for and Advantages of a Will....................................................................................................... 31 Will Preparation and Execution............................................................................................................ 32 Joint, Mutual and Reciprocal Wills....................................................................................................... 32 Changing a Will.................................................................................................................................... 32 Power of Attorney........................................................................................................................................ 32 Durable Power of Attorney................................................................................................................... 32 Springing Power of Attorney................................................................................................................ 32 Probate......................................................................................................................................................... 32 Probate Administration and Costs................................................................................................................ 33 PART II. APPLICATION OF GENERAL ESTATE PLANNING TOOLS TO FOREST LAND Chapter 6. Use of the Marital Deduction in Estate Planning Overview...................................................................................................................................................... 37 Qualifying for the Marital Deduction.......................................................................................................... 37 Status as Surviving Spouse................................................................................................................... 37 Transfer of Property Interests............................................................................................................... 37 Exceptions to the Terminal Interest Rule..................................................................................................... 38 QTIP Election....................................................................................................................................... 38 The General Power of Appointment..................................................................................................... 38 Survivorship Condition......................................................................................................................... 38 Right to the Payment............................................................................................................................. 38 An Income Interest................................................................................................................................ 38 QTIP and the Marital Deduction.................................................................................................................. 38 Qualification for the QTIP.................................................................................................................... 38 Contingent Income Interests................................................................................................................. 39 To What Extent Should the Marital Deduction Be Used?........................................................................... 39 Legal Rights.......................................................................................................................................... 39 Nontax Factors...................................................................................................................................... 39 Marital Deduction Deferral................................................................................................................... 39 How to Make a Marital Deduction Bequest................................................................................................. 40 Basic Patterns........................................................................................................................................ 40 Formula Marital Deduction Bequests................................................................................................... 41 The Choice of Marital Deduction Formula........................................................................................... 41 vii
Page 1 and 2: United States Department of Agricul
Page 3: Estate Planning for Forest Landowne
Page 7: Contents Page Abstract ............
Page 11 and 12: Page Tax Treatment of Trusts.......
Page 13 and 14: Page Continued Ownership Within the
Page 15 and 16: Page Loss of Capital...............
Page 17: PART I INTRODUCTION
Page 20 and 21: The Importance of Forestry Estate P
Page 23 and 24: Chapter 2 Estate Planning Objective
Page 25 and 26: Chapter 2 Illiquidity of Land and T
Page 27 and 28: Chapter 2 objectives completely, so
Page 29: Chapter 2 provided rather than on t
Page 32 and 33: The Federal Estate and Gift Tax Pro
Page 34 and 35: The Federal Estate and Gift Tax Pro
Page 37 and 38: Chapter 4 Valuation of Assets for E
Page 39 and 40: Chapter 4 Depending on the circumst
Page 41 and 42: Chapter 4 substance for Federal est
Page 43 and 44: Chapter 4 is accomplished using an
Page 45 and 46: Chapter 4 flows forward to the pres
Page 47 and 48: Chapter 5 The Legal Process Basis o
Page 49: Chapter 5 Probate Administration an
Page 53 and 54: Chapter 6 Use of the Marital Deduct
Page 55 and 56: Chapter 6 his (her) life (this inco
Page 57 and 58: Chapter 6 for two reasons. First, i
Page 59 and 60:
Chapter 7 Disclaimers, Settlements,
Page 61 and 62:
Chapter 8 Gifts of Forestry Assets
Page 63 and 64:
Chapter 8 children ultimately recei
Page 65 and 66:
Chapter 8 Problem property—If for
Page 67 and 68:
Chapter 8 principal portion a gift
Page 69 and 70:
Chapter 8 Charitable remainder trus
Page 71:
Chapter 8 of the property for timbe
Page 74 and 75:
Role of Trusts beneficiaries of bot
Page 76 and 77:
Role of Trusts Gift Taxes A transfe
Page 78 and 79:
Role of Trusts Testamentary Trusts
Page 80 and 81:
Role of Trusts Two Estate Transfers
Page 82 and 83:
Role of Trusts may not produce inco
Page 84 and 85:
Life Insurance of the policy’s gi
Page 86 and 87:
Life Insurance Premiums paid by the
Page 89 and 90:
Chapter 11 Installment Contracts Ge
Page 91 and 92:
Chapter 11 Disadvantages There also
Page 93:
PART III APPLICATION OF FORESTRY- S
Page 96 and 97:
Special Use Valuation Qualified Hei
Page 98 and 99:
Special Use Valuation contracted wi
Page 100 and 101:
Special Use Valuation make a protec
Page 102 and 103:
Special Use Valuation the “Multip
Page 104 and 105:
Special Use Valuation interest disp
Page 106 and 107:
Deferral and Extension of Estate Ta
Page 108 and 109:
Deferral and Extension of Estate Ta
Page 111 and 112:
Chapter 14 Sole and Joint Ownership
Page 113:
Chapter 14 property held by the dec
Page 116 and 117:
Partnerships Withdrawals—The abil
Page 118 and 119:
Partnerships in chapter 4, minority
Page 120 and 121:
Corporations of directors to be ele
Page 122 and 123:
Corporations can be shareholders. N
Page 124 and 125:
Corporations permitted for stock in
Page 126 and 127:
Limited Liability Companies would h
Page 128 and 129:
State Tramsfer Taxes Table 18.1—S
Page 130 and 131:
State Tramsfer Taxes Table 18.3—S
Page 132 and 133:
State Tramsfer Taxes Overall, 32 St
Page 134 and 135:
The Benefit of Planning a Forest Es
Page 137 and 138:
Appendix I Sources by Order of Appe
Page 139 and 140:
Appendix I Chapter 7 Internal Reven
Page 141 and 142:
Appendix I Chapter 11 Internal Reve
Page 143 and 144:
Appendix I Internal Revenue Code se
Page 145 and 146:
Appendix II Glossary Adjusted gross
Page 147:
Appendix II Marital deduction: The
Page 151 and 152:
Appendix III Form 706 (Rev. August
Page 153 and 154:
Appendix III Form 706 (Rev. 8-2008)
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Appendix IV IRS Form 709—United S
Page 194 and 195:
IRS Form 709—United States Gift (
Page 196:
IRS Form 709—United States Gift (
Page 200:
The Forest Service, United States D
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