What is a pecuniary marital trust?
When a pecuniary formula is used in a trust document, the formula identifies and guarantees a specific sum to the marital trust share or family trust share of an estate plan by stating that the share will be funded with an amount that will result in the least amount of federal estate taxes.
What is a pecuniary trust?
A pecuniary trust is a gift of a specific amount of money. For example, “I give $ 100,000 to my Trustee, to hold in trust for my children”. Often, pecuniary gifts are expressed by use of a formula.
What is pecuniary funding?
A pecuniary formula funds a specific dollar amount. For example, a pecuniary formula would direct the trustee to distribute to the marital trust the smallest amount that, if allowed as a marital deduction, would result in the least possible federal estate tax.
Do pecuniary bequests carry out DNI?
As defined in Section 663(a)(1), specific bequests do not carry out DNI under specific circumstances. This is an exception to the general rules under Sections 661 and 662 requiring the inclusion, in beneficiaries’ gross income, of amounts required to be paid, credited, or distributed by an estate or trust.
What is pecuniary marital formula?
The marital pecuniary formula provides for the least amount necessary to result in zero estate tax at the first death to pass to the Marital Trust and the remainder to the Family Trust.
How does a QTIP trust work?
Under a QTIP, income is paid to a surviving spouse, while the balance of the funds is held in trust until that spouse’s death, at which point it is then paid out to the beneficiaries specified by the grantor.
Are bequests from a trust taxable?
According to the IRS, gifts, inheritances, and bequests are generally not considered taxable income for recipients.
Are pecuniary bequests taxable?
The IRS Chief Counsel released a legal memorandum (ILM 200644020) that concluded that satisfying a pecuniary charitable bequest with an IRA will trigger taxable income to the estate.
What is pecuniary gift?
[Probate Code Section 21118(b) describes a “pecuniary gift” as a “transfer of property made in an instrument that either is expressly stated as a fixed dollar amount or is a dollar amount determinable by the provisions of the instrument.” An example would be, “I give $3,000 to Steve.”]
Are bequests tax deductible?
In general, there is an unlimited deduction of charitable bequests against the value of an estate, making it a powerful tool for reducing estate tax. It is possible for an estate to deduct charitable bequests of not only cash, but also property such as real estate, stock, IRAs, autos and other assets.
What is a fractional marital formula?
The fractional share formula is expressed as a fraction equal to the value of the assets being transferred to the Marital Trust, where the numerator is equal to the amount of the marital deduction sought, and the denominator is the value of the total assets available for funding.
Can surviving spouse be trustee of QTIP trust?
Your executor or trustee must elect QTIP treatment for the trust. Depending on the principal invasion standard and nature of assets in the trust, the surviving spouse may be able to act as her own trustee over the QTIP.
How is a pecuniary bequest funded?
Date of death values. Under the fairly representative method, the executor or trustee can pick and choose the assets to fund the pecuniary bequest. Sheltering opportunities are limited because assets selected to fund the trust must be fairly representative of gains and losses that have occurred from the date of death to the date of funding.
What is a pecuniary or fractional bequest?
Under most trust agreements and trust provisions of a will, funding a marital trust and credit shelter trust (also referred to as the bypass, family or B trust) will either be a pecuniary or fractional bequest. A pecuniary bequest is a disposition of a specific fixed-dollar amount.
Do pecuniary bequest trusts cause capital gains?
However, any asset used to fund the pecuniary bequest trust that has appreciated in value from the date of death to the date of funding triggers a capital gain. The Internal Revenue Service views funding under this method as a sale of the asset to the trust being funded.
What assets can be allocated to a pecuniary Trust?
Appreciating assets can be allocated to the credit shelter trust, and assets with little growth potential can be distributed to the marital trust. However, any asset used to fund the pecuniary bequest trust that has appreciated in value from the date of death to the date of funding triggers a capital gain.