Probate & Trust Law Section Conference Manual ... - Minnesota CLE

to any jurisdiction.” Michael Mulligan, Nearly Twenty Years
After ERTA – Planning for QTIP and the Unlimited Marital
Deduction with the Advantage of Hindsight, ADVANCED
ESTATE PLANNING LECTURE SERIES, Minnesota State
Bar Association, February 2000.
(b) I give to my spouse “a sum equal to the amount by
which the value of the property disposed of by this will
exceeds the aggregate of (1) the value of the property
disposed of by the preceding Articles of this will, (2) a sum
equal to the largest amount, if any, that can pass free from
federal estate tax under this will by reason of any tax referred
to in section 2001(b)(2) of the Internal Revenue Code and the
applicable credit amount and the state death tax credit
(provided use of this credit does not require an increase in the
state death taxes paid) allowable to my estate but no other
credit and after taking into account of my adjusted taxable
gifts and any reduction in them pursuant to Treas. Reg.
§25.2701-5 and property disposed of my previous Articles of
this will and property passing outside of this will which is
includable in my gross estate and does not qualify for the
marital or charitable deduction and after taking account of
charges to principal that are not allowed as deductions in
computing my federal estate tax and (3) my debts, expenses
of administration and other charges payable from principal by
my executors, including the death taxes referred to in Article
---- hereof, which reduce the value of property disposed of by
this will that may qualify for the marital deduction.”
RICHARD B. COVEY, MARITAL DEDUCTION AND
CREDIT SHELTER DISPOSITIONS AND THE USE OF
FORMULA PROVISIONS, 202 (1997).
(ii) Advantages: This formula ensures that the marital share will
be funded with a specific amount. As of the correct valuation date,
that amount will be the lowest possible amount which will result in
the least amount of federal tax. If the estate assets increase in value
during the course of administration, any increase in value will be
allocated to the credit shelter amount.
(iii)
Disadvantages:
(a) If the estate assets decrease in value during the course
of administration, the credit shelter trust is reduced.
(b) If a pecuniary funding formula is used, the actual
funding of the trust will result in a taxable event, resulting in
the realization of capital gain or loss to the estate.
(iv) Example: See Rev. Rul. 56-270: I.R.S. determined marital
deduction pecuniary amount was a bequest of a specific amount and
that the estate realized capital gains to the extent that the fair market
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