CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAM Estate Planning

1. CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAMEstate Planning Session 4The Federal Gift Tax

2. Session Details

3. Determining Gift Tax Liability • Affects only gratuitous lifetime transfers • Exempt from gift tax • Political contributions • Direct and exclusive payment of medical and tuition expenses • Was it a completed transfer? • Donor must part with dominion and control • Transfer to a revocable trust is not complete • Transfer to an irrevocable trust not complete if donor can • Add additional beneficiaries • Delete an existing beneficiary • Alter beneficiary’s right to trust assets

4. Determining Gift Tax Liability continued Gift Splitting • Donor must have spouse; if subsequently divorced, must not remarry in same year • Spouses must be a citizen or resident alien • Consenting spouse must not have a GPOA • Cannot split if gift is to spouse • Both spouses must consent to split • If one gift is split, all gifts for the year by both spouses must be split

5. Determining Gift Tax Liability continued Annual Exclusions • Donee must have a present interest (PI) • Count the number of donees with a PI • Deduct the lesser of the value of all present interests, or the maximum annual exclusion for year of completion of each PI gift

6. Determining Gift Tax Liability Marital Deduction • Is property included in the decedent’s (DC) GE (ET) or total calendar year gifts (GT)? • Does property pass to transferor’s spouse? • For GT, must be a completed gift, and donor’s spouse is donee

7. Determining if Asset is Entitled to Marital Deduction continued Is the property a non-terminable interest or a deductible terminable interest? • Definition of terminable interest • Transferor has given someone other than spouse an interest in the same property; and • Spouse cannot control where the property will go after his/her interest ends or fails • Examples of a terminable interest: • Spouse receives an income interest in trust for term certain • Life estate w/o GPOA or QTIP election

8. Determining if Asset is Entitled to Marital Deduction continued Is the property a non-terminable interest or a deductible terminable interest? • Exceptions to terminable interest rule (aka deductible terminable interests): • Life estate + GPOA or QTIP election • Spouse is sole income beneficiary in CRAT/CRUT (exception for grantor) • QTIP with an election • Example of a non-terminable interest not in trust: • Life estate + GPOA or QTIP election • Examples of non-terminable interests in trust: • Estate trust • General power of appointment trust • QTIP trust with an election

9. Determining if Asset is Entitled to Charitable Deduction Prerequisites • Qualified charity • Donation of cash or property • Gratuitous completed transfer • If partial interest, must be in approved form • Asset must be in donor’s total calendar year gifts (GT)

10. Determining if Asset is Entitled to Charitable Deduction continued Remember • Deduction only for excess of value given over that received • Entitled to annual exclusion first for gift of a present interest (GT only) • Formula: Tax on total taxable gifts, minus tax on prior taxable gifts, equals tax on current taxable gifts

11. Life &Times of Jose O’Shea 2002 2003 Following is a complete listing of José O'Shea's gifts (all made on January 2 in years shown): Compute the gift tax for each gift. 2014

12. Federal Gift Tax Worksheet 2002 Gift

13. Federal Gift Tax Worksheet 2003 Gift

14. Federal Gift Tax Worksheet 2014 Gift

15. Question 1 Only direct transfers of present interests are completed transfers that are taxable for federal gift tax purposes. True False

16. Question 2 “Gift splitting” means that spouses may file a joint gift tax return. True False

17. CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAMEstate Planning Session 4End of Slides