Will Drafting For Attorneys
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To: Litrel@optonline.net
Dear Chris,
Thanks for your help! My clients are married, early sixties, own their house in Bayport (outright) and have modest (five figures) savings and investments. Additionally, they have a significant collection of model trains and other historical toys that are worth considerably more. They will leave their property to the other (I love you will) and eventually all to their three children in equal shares. In preparing their wills, is their a necessity to address their collection outright or can I simply make it part of the residuary bequest? Also, they have time share in Florida that they are considering gifting to their children who use it more than they do....will a gift tax return be required? Sincerely, JM
Dear JM,
Collections are sometimes valued considerably more by the owner than what the market will eventually pay. As such, we are unclear as to the value of the estate. In your next client conference, you may want to explore valuation and inquire whether certified appraisals exists. This may have estate tax ramifications depending on the value of the house.
As a general matter, you should consider making all personal property a pre-residuary bequest. For instance, when both parents die, and the collection passes to the children, there will a period of estate administration. As you know, the estate is an indpendent taxpayer at moment of decendent's death. The estate will not have a standard deduction - unlike an individual. By making personal property a pre-residuary bequest, the children may avoid taxes that may otherwise be due. Specifically, if during the administration period, the executor pays out part of the residuary estate, this will be taxable to the beneficiary as income. So if a valuable train is given to one of the children that is worth $5,000, that child will owe the tax on the train. By making the train collection a pre-residuary bequest, this can be avoided.
On the time share, the gift tax return will depend on its value. If they are gifting it in equal shares to the children, they can gift (in 2008) $12,000 value to any one person. In this situation, each parent can gift $12,000 to each of the 3 children for a total value of $72,000.00. If the value of the time share is greater, than arguably a gift tax return will be due but taxes will likely not be due as the amount of gift greater than $72,000 can be deducted against the $1,000,000 lifetime exemption for each parent (total $2M). This will be two gift tax returns -[ I recomend Tom Megale, CPA to handle this in Wantagh, NY if your client doesn't have a regular accountant (516) 348-2380 - very good service and fees.]
Don't forget there is an unlimited marital deduction so we are looking ahead on some of these tax issues since both parents are presently alive.
As a practice tip, take a look at the title insurance policy on the time share and give that company a call. Very often they have an easy program to transfer title.
I'm not sure whether time share in Florida will be considered real property or personal property. You'll need to check this out. But you want to avoid probating real property in Florida if you can. Property held in other states/counties will need to be probated there....and Florida can be very expensive...I believe its $1250 just for the probate filing fee....
Be well, Chris
To: Litrel@optonline.net
Dear Chris,
Thanks for your help! My clients are married, early sixties, own their house in Bayport (outright) and have modest (five figures) savings and investments. Additionally, they have a significant collection of model trains and other historical toys that are worth considerably more. They will leave their property to the other (I love you will) and eventually all to their three children in equal shares. In preparing their wills, is their a necessity to address their collection outright or can I simply make it part of the residuary bequest? Also, they have time share in Florida that they are considering gifting to their children who use it more than they do....will a gift tax return be required? Sincerely, JM
Dear JM,
Collections are sometimes valued considerably more by the owner than what the market will eventually pay. As such, we are unclear as to the value of the estate. In your next client conference, you may want to explore valuation and inquire whether certified appraisals exists. This may have estate tax ramifications depending on the value of the house.
As a general matter, you should consider making all personal property a pre-residuary bequest. For instance, when both parents die, and the collection passes to the children, there will a period of estate administration. As you know, the estate is an indpendent taxpayer at moment of decendent's death. The estate will not have a standard deduction - unlike an individual. By making personal property a pre-residuary bequest, the children may avoid taxes that may otherwise be due. Specifically, if during the administration period, the executor pays out part of the residuary estate, this will be taxable to the beneficiary as income. So if a valuable train is given to one of the children that is worth $5,000, that child will owe the tax on the train. By making the train collection a pre-residuary bequest, this can be avoided.
On the time share, the gift tax return will depend on its value. If they are gifting it in equal shares to the children, they can gift (in 2008) $12,000 value to any one person. In this situation, each parent can gift $12,000 to each of the 3 children for a total value of $72,000.00. If the value of the time share is greater, than arguably a gift tax return will be due but taxes will likely not be due as the amount of gift greater than $72,000 can be deducted against the $1,000,000 lifetime exemption for each parent (total $2M). This will be two gift tax returns -[ I recomend Tom Megale, CPA to handle this in Wantagh, NY if your client doesn't have a regular accountant (516) 348-2380 - very good service and fees.]
Don't forget there is an unlimited marital deduction so we are looking ahead on some of these tax issues since both parents are presently alive.
As a practice tip, take a look at the title insurance policy on the time share and give that company a call. Very often they have an easy program to transfer title.
I'm not sure whether time share in Florida will be considered real property or personal property. You'll need to check this out. But you want to avoid probating real property in Florida if you can. Property held in other states/counties will need to be probated there....and Florida can be very expensive...I believe its $1250 just for the probate filing fee....
Be well, Chris
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