If you give away money or property during your life, those transfers may be subject to federal gift tax and perhaps state gift tax. The money and property you own when you die (i.e., your estate) may also be subject to federal estate taxes and some form of state death tax. You should understand these taxes and when they do and do not apply, especially since the passage of the Economic Growth and Tax Relief Reconciliation Act of 2001 (the 2001 Tax Act). This law contains several changes that are complicated and uncertain, making estate planning all the more difficult.
Federal gift tax and federal estate tax – background
Under pre-2001 Tax Act law, no gift tax or estate taxes were imposed on the first $675,000 of combined transfers (those made during life and those made at death). The tax rate tables were unified into one–that is, the same rates applied to gifts made and property owned by persons who died in 2001. Like income tax rates, gift and estate tax rates were graduated. Under this unified system, the recipient of a lifetime gift received a carryover basis in the property received, while the recipient of a bequest, or gift made at death, got a step-up in basis (usually fair market value on the date of death of the person who made the bequest or gift).
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Posted by Michael Chapman at 12:53 PM UTC
- Uptrend in stocks is broken
- Bonds now in uptrend (good for stocks)
- Still plenty of liquidity
- Volatility picks up (good for trading)
Yesterdays 3.5% drop in the S&P index took out 3 months of gains and left the index down 1.4% for the year. Trends in equities are sideways at best, and may within the next two weeks turn down.
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Posted by Michael Chapman at 9:11 PM UTC
…and Perception Verses Reality
In last week’s column I mentioned that the number of items for concern was really down to three: 1. The Commitment of Traders reports shows the “smart” money (large commercials) is betting on a down move. 2. The housing market fall out and 3. Various overbought sentiment indicators are at levels that produced tops in the past. Friday’s release of new housing starts, down 14.3%, for January was a big shock. The lowest estimate was about 6% above the actual number. Because the FED is concerned about inflationary pressures bad news becomes good. Perhaps a slow down in consumer spending will off set wage price inflationary pressures and the FED won’t have to raise interest rates is how the thinking goes.
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Posted by Michael Chapman at 12:52 PM UTC
A trustee is a person (or institution) selected to administer a trust. A trustee’s role is to adhere to the terms of the trust document and fulfill its objectives. A trustee can be an individual (professional or nonprofessional) or a corporate trustee, such as a bank or trust company. You, as the grantor, should choose a trustee carefully because an inappropriate choice could invalidate the trust and have serious tax consequences. You must also weigh many other personal, family, business, investment, and nontax concerns. For a large or complicated trust, a combination of individual and corporate trustees may best provide the expertise needed to manage the trust with the flexibility to respond to beneficiaries’ changing needs.
Trust administration
Trust administration is the area of law that defines a trustee’s duties, powers, and liabilities in relation to the beneficiaries. A trustee has specific duties. The scope of a trustee’s powers depends on the extent of those duties. Because the trustee is personally liable for breaches of duty, the extent of a trustee’s duties also determines his or her liability.
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Posted by Michael Chapman at 12:52 PM UTC
