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Joe Paterno Transfers His Interest in His House to His Wife for $1: Legitimate or Not?

The Penn State scandal has dominated media headlines in recent weeks.  While the vast majority of the coverage has been directed toward the alleged criminal acts and potential cover-ups, there has been a fair amount of buzz surrounding Joe Paterno’s July 2011 transfer of his entire interest in his home to his wife for $1.  Many have speculated that Joe Paterno had no legitimate reason to transfer sole ownership of the house to his wife, and that he must be trying to shield assets from potential civil litigation.  While I will not speculate as to Joe Paterno’s rationale for making such a transfer, I believe it is incorrect to take the position that there is no legitimate reason for doing so.  In many instances, spouses can reduce their potential estate tax burden by making inter-spousal transfers of assets.

The following is a simple example of how an inter-spousal transfer can

Methods of Giving

Methods of Giving

November 16, 2011

Authored by: Stacie J. Rottenstreich and Karin Barkhorn

As we approach Thanksgiving and the holiday season many of us turn our thoughts to gift giving to family and loved ones. The Federal gift tax system allows us some opportunities to do such “gifting” in a tax free manner. A few states impose independent state gift taxes, so an expert in your state should be consulted before considering any of these gifting transactions. Each individual has a total of $5,000,000 he can give away during his lifetime before owing any gift tax. However, there are several gifting opportunities which do not count as part of your $5,000,000 lifetime total. It is as if the Federal tax law has deemed them non gifts. Present interest gifts of $13,000 in 2011 and 2012 to any number of recipients are not subject to gift

IRS Releases Form 8939

October 6, 2011

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IRS Releases Form 8939

October 6, 2011

Authored by: Stephanie Moll

The IRS has released Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent.  Instructions for completing the Form have not been released.

This Form is to be used by the estates of decedents who died in 2010 and have elected not to be subject to the federal estate tax.  While the estate will not be subject to the federal estate tax, the estate’s executors will only be able to allocate up to $1.3 million in basis increase to the decedent’s assets, plus an additional $3 million in basis increase for certain gifts to a surviving spouse (outright gifts and qualified terminable interest property “QTIP”) .

Intentionally Defective Irrevocable Trusts: A Great Way to Transfer Wealth, Especially In Low Interest Rate Environments

The current low interest rate environment provides excellent opportunities to transfer wealth to family members.   One approach commonly used to accomplish this goal is to sell assets to an intentionally defective irrevocable trust (“IDIT”).  An IDIT is an irrevocable trust for the benefit of someone other than the creator of the trust (the “Settlor”), perhaps Settlor’s descendants.  However, the “intentionally defective” component of the IDIT means that, for income tax purposes, the assets in the trust will continue to be treated as owned by Settlor.  Thus, Settlor’s sale of assets to the IDIT will not result in income tax consequences.   Additionally, Settlor’s payment of income taxes on the income earned by the IDIT provides an additional means of reducing Settlor’s taxable estate, while allowing the benefits of the income earned by the IDIT to benefit Settlor’s descendants.

Typically, Settlor will take back a promissory note for the assets

Lessons from 9/11

Lessons from 9/11

September 1, 2011

Authored by: Stacie J. Rottenstreich and Karin Barkhorn

We are rapidly approaching the tenth anniversary of the September 11th tragedy. There is much to be learned from an estate planning perspective in the aftermath.  

Many of those who perished died without having executed a Last Will and Testament. If you die without a Will, the state in which you are domiciled at the time of your death will determine under the laws of intestacy where the property you held in your own name will pass. It takes many people by surprise, but the list of intestate takers or heirs may not be the people you want to inherit and they might not take in the percentages or shares you would want.

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