Why is This Topic Important to Wealth Managers? This blogticle serves as a reminder and review of the treatment of deceased estates from 2010 (making an a section 1022 election).

Estate Tax

The IRS recently published guidance [1] with regard to the time and manner in which the executor of the estate of a decedent who died in 2010 elects, pursuant to the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, [2] (TRA), to have the estate tax not apply and to have the carryover basis rules in section 1022 apply to property transferred as a result of the decedent’s death.

Generally, subtitle A of title V of the Economic Growth and Tax Relief Reconciliation Act of 2001, [3] (EGTRRA) enacted section 2210, which made chapter 11 (the estate tax) inapplicable to the estate of any decedent who died in 2010 and chapter 13 (the GST tax) inapplicable to generation-skipping transfers made in 2010.

On December 17, 2010, TRA became law, which reinstated the estate and GST taxes.  However, section 301(c) of TRA allows the executor of the estate of a decedent who died in 2010 to elect to apply the Internal Revenue Code (IRC) as though section 301(a) of TRA did not apply with respect to chapter 11 and with respect to property acquired or passing from the decedent (within the meaning of IRC section 1014(b)).  Thus, TRA allows the executor of the estate of a decedent who died in 2010 to elect not to have the provisions of chapter 11 apply to the decedent’s estate, but rather, to have the provisions of section 1022 apply (Section 1022 Election).

Even though an executor may elect out of the estate tax under TRA, the provisions of chapter 13 (GST tax) nonetheless continue to apply.  Nevertheless, TRA, provides that the applicable tax rate for each GST occurring during 2010 is zero.  [4]

TRA also retroactively repealed section 2511(c), which treated each transfer in trust during 2010 as a gift unless the trust was treated as wholly owned by the donor or the donor’s spouse.  Because of this retroactive repeal, this section does not apply even if a Section 1022 Election is made.

GST

The GST tax was retroactively reinstated by TRA and applies to the estates of all decedents who died after December 31, 2009, regardless of whether a Section 1022 Election is made.  The GST tax is computed by multiplying the taxable amount by the applicable rate. [5]

Under the TRA the maximum federal estate tax rate for purposes of computing the GST tax on such a transfer is deemed to be zero which, when multiplied by any inclusion ratio, will result in an applicable rate of zero.  As under the law applicable to GSTs occurring prior to 2010, the only way to achieve a zero inclusion ratio for the transfer is to make a timely allocation of GST exemption to the transfer.

Next week’s blogticles will discuss planning opportunities.

We invite your opinions and comments by posting them below, or by calling the Panel of Experts.

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[1] Notice 2011-66

[2] See section 301(c) TRA, P.L. 111-312 (124 Stat. 3296)

[3] P.L. 107-16.

[4] Section 302(c) of TRA.

[5] IRC Section 2602.

Why is this Topic Important to Wealth Managers? This blogticle represents part two of five in a series on the unified estate and gift tax as well as the portability of the spousal credit. Most wealth managers are aware of the new changes to the federal estate and gift tax structure with the unification and increased exemption amount of five million dollars. This week we discuss the estate and gift tax in detail so that wealth managers are well prepared to address client planning needs.

The Tax Relief Act of 2010 first reinstates the estate taxes effective for decedents dying and transfers made after December 31, 2009. The estate tax applicable exclusion amount is $5 million under the provision and is indexed for inflation for decedents dying in calendar years after 2011, and the maximum estate tax rate is 35 percent. [1]

Additionally, for gifts made after December 31, 2010, the gift tax is reunified with the estate tax, with an applicable exclusion amount of $5 million and a top estate and gift tax rate of 35 percent.

Also, for transfers made at death after December 31, 2010, the new law generally provides for ‘stepped-up” basis in property passing from the decedent; the carryover basis rules for gifts is unaffected. Gain or loss, if any, on the disposition of property is measured by the taxpayer’s amount realized (i.e., gross proceeds received) on the disposition, less the taxpayer’s basis in such property.[2] Basis generally represents a taxpayer’s investment in property, with certain adjustments required after acquisition. For example, basis is increased by the cost of capital improvements made to the property and decreased by depreciation deductions taken with respect to the property.

Under the new law the basis of property passing from a decedent’s estate is given the fair market value on the date of the decedent’s death (or, if the alternate valuation date is elected, the earlier of six months after the decedent’s death or the date the property is sold or distributed by the estate). This step up in basis generally eliminates the recognition of income on any appreciation of the property that occurred prior to the decedent’s death. If the value of property on the date of the decedent’s death was less than its adjusted basis, the property takes a stepped-down basis when it passes from a decedent’s estate. This stepped-down basis eliminates the tax benefit from any unrealized loss. [3]

Under the modified carryover basis regime, recipients of property acquired by gift, bequest, devise, or inheritance receive an adjusted basis or the fair market value of the property. Thus, the character of gain on the sale of property received from a gift is carried over to the donee. For example, real estate that has been depreciated and would be subject to recapture if sold by the donor will be subject to recapture if sold by the donee. [4]

Tomorrow’s blogticle will continue our weeklong series on the gift and estate tax.

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

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[1] TRA of 2010 § 302(a).

[2] IRC Sec. 1001.

[3] There is an exception to the rule that assets subject to the Federal estate tax receive stepped-up basis in the case of ‘‘income in respect of a decedent.’’ See IRC Sec. 1014(c). The basis of assets that are ‘‘income in respect of a decedent’’ is a carryover basis (i.e., the basis of such assets to the estate or heir is the same as it was in the hands of the decedent) increased by estate tax paid on that asset. Income in respect of a decedent includes rights to income that has been earned, but not recognized, by the date of death (e.g., wages that were earned, but not paid, before death), individual retirement accounts (IRAs), and assets held in accounts governed by section 401(k).

[4] U.S. Congress. Joint Committee on Taxation. General Explanation of Tax Legislation Enacted in the 111th Congress, 556 (JCS-2-11). Text from: Committee Reports. Available at: http://www.jct.gov/publications.html?func=showdown&id=3777 (last accessed April 6, 2011).

Why is this Topic Important to Wealth Managers? This blogticle represents part one of a five in a series on the estate and gift tax and portability of the spousal credit. Most wealth managers are cognizant of the new changes to the federal estate and gift tax structure with an increased exemption amount of five million dollars. This week we discuss the current estate and gift tax in detail so that wealth managers are well prepared to address client planning needs.

As most wealth managers are aware, extension of the Bush tax cuts created a number of changes related to the gift and estate tax. For a better understanding of the new federal gift and estate tax provisions, and how they relate to clients’ estate plans, the prior law will first be discussed.

In general, a gift tax is imposed on certain lifetime transfers and an estate tax is imposed on certain transfers at death;  the federal gift and estate tax are taxes on the right to transfer property; not a tax on the underlying property itself.[1] In 2001, the federal estate tax exemption was $675,000 with a top estate tax rate of 55%.[2] When the Bush administration passed its tax cut legislation, the federal estate tax exemption underwent a series of increases.  By 2009, the exemption escalated to $3.5 million with a top tax rate of 45%.[3] The federal estate tax exemption was repealed in 2010, and the Bush’s tax cuts sunset provisions were set to expire in 2011, which meant that the federal estate tax would have been $1 million with a top rate of 55%.[4]

Nevertheless, President Obama’s tax compromise – the Tax Relief, Unemployment Insurance Authorization, and Job Creation Act of 2010 (Tax Relief Act of 2010 or TRA of 2010) – which came into effect on December 17, 2010, changed the direction of expiring provisions. [5] The Tax Relief Act of 2010 contains new sunset provisions which extend certain tax cuts and provides for gift and estate tax amendments.

Moreover, the Tax Relief Act of 2010 created a number of favorable conditions that may  be beneficial to your clients—but in order to fully take advantage of these changes  it will help to review the  Tax Relief Act of 2010  and how it directly relates to client planning.

As presented in the AMAFX Advisors Journal, whether or not to give substantial lifetime gifts in 2011 and 2012 is going to be a hot topic between now and the end of 2012. But deciding whether to take advantage of the record high ($5 million) gift, estate and GST tax exclusion amount and low (35%) transfer tax rate isn’t a trivial matter.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For in-depth analysis of the federal estate tax, the federal gift tax, and the GST tax, see AMAFX Advisor’s Main Library: A – Federal Estate Tax General, A – Nature and Background Of The Federal Gift Tax, and A – Generation Skipping Transfers Explained.

Tomorrow’s blogticle will continue our weeklong series on the gift and estate tax.

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

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[1] AMAFX-AUS Main Library. The Federal Estate Tax.  http://www.advisorfx.com/articles/f2_1_12_1090.aspx?action=13 (last accessed April 6, 2011).

[2] Darien B. Jacobson, Brian G. Raub, and Barry W. Johnson, The Estate Tax: Ninety Years and Counting, 122. Available at: http://www.irs.gov/pub/irs-soi/ninetyestate.pdf (last accessed April 8, 2011).

[3] Jacobson, Raub, and Johnson, supra note 2, at 124.

[4] Id.

[5] Tax Relief, Unemployment Insurance Authorization, and Job Creation Act of 2010, P.L. 111-312; U.S. Congress. House of Representatives. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, 24 (H.R. 4853). Available at:  http://www.gpo.gov/fdsys/pkg/BILLS-111hr4853enr/pdf/BILLS-111hr4853enr.pdf (last accessed April 6, 2011).

Why is this Topic Important to Wealth Managers?  Discusses the Estate and Generation Skipping Transfer Tax with regards to the new Obama Tax Cuts.

The recent Obama Tax Cuts reinstated the estate and generation skipping transfer taxes effective for decedents dying and transfers made after December 31, 2009.  As was discussed earlier this week, the estate tax applicable exclusion amount is $5 million for decedents dying in calendar years after 2011, and the maximum estate tax rate is 35 percent. Furthermore, the generation skipping transfer tax exemption for decedents dying or gifts made after December 31, 2009, is equal to the applicable exclusion amount for estate tax purposes ($5 million for 2010).

For a general background on the Generation Skipping Transfer Tax, see our November 1^st Blogticle entitled: Life Insurance and the Generation—Skipping Transfer Tax

Although technically the generation skipping transfer tax is applicable for 2010, the generation skipping transfer tax rate for transfers made during 2010 is zero percent. After this year, the generation skipping transfer tax rate equals the highest estate and gift tax rate in effect for such year (35 percent in 2011 and 2012), notwithstanding the exclusion amounts.

Moreover, under the new law, a recipient of property acquired from a decedent who dies after December 31, 2009, generally will receive fair market value basis (i.e., “step up” in basis). [1]

Election for decedents who die during 2010

In the case of a decedent who dies during 2010, the new law generally allows the executor of such decedent’s estate to make an election whereby the estate would not be subject to estate tax, and the basis of assets acquired from the decedent would be determined under the modified carryover basis rules. [2]

Portability of unused exemption between spouses

Under the new law, any applicable exclusion amount that remains unused (including those used in the calculation of the generation skipping transfer tax), from the death of a deceased spouse, beginning next year, is available for use by the surviving spouse, in addition to such surviving spouse’s applicable exclusion amount.  A surviving spouse may use the unused amount in addition to such surviving spouse’s own $5 million exclusion for taxable transfers made during life or at death for a total of $10 million.

Extension of certain filing deadlines

The new law also provides for the extension of filing deadlines for certain transfer tax returns. Specifically, in the case of a decedent dying after December 31, 2009, and before the date of enactment, the due date shall not be earlier than the date which is nine months after the date of enactment to file and pay the estate tax

Sunset provision

Under the bill, the sunset of the new law of applies to estates of decedents dying, gifts made, or generation skipping transfers made after December 31, 2012.

Tomorrow’s blog will continue to discuss pertinent provisions of the new Tax Cuts and how they relate to wealth managers.

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

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[1] See generally 26 U.S.C. § 1014.

[2] For determination of modified basis carryover, see 26 U.S.C. § 1022.

Why is this Topic Important to Wealth Managers? Discusses relevant provisions of the “Obama Tax Cuts”.  Provides a topical overview of pertinent provisions for wealth managers.

On Friday, President Obama signed into legislation, what is quickly becoming known as the Obama Tax Cuts, which extend tax breaks initially created by the George Bush Administration about a decade ago.  For the previous discussions and various versions of this “long and winding road” of the passage of this new tax law – see Tax Deal Reached

The new tax law “The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (HR. 4853)“ provides an extension for two years (unless otherwise noted), of generally the following (not all inclusive):

The continuation of the 10, 15, 25, 28, 33, 35-percent regular income tax brackets.  Sec 101.

The continuance of the removal of itemized deduction limit and personal exemption phase-out.  Sec 101.

Child tax credit extensions along with increased earnings threshold for credit determination.  Sec. 101 and 103.

Increases the basic standard deduction for a married couples filing jointly to twice that of the standard deduction for unmarried individuals.  Sec 101

Extends certain earned income tax credit provisions including for determination of application of tax credit to income tax liability. Sec 101 and Sec 103.

Extends qualified dividend income taxable at net capital gains rates. Sec 102

Extends the maximum rate of tax on adjusted net capital gains to 15 percent. Sec 102.

Extends Hope and American Opportunity Tax Credit with regards to secondary education.  Sec 103.

Alternative Minimum Tax (AMT) exemption amounts for taxable years 2010; $72,450, for married filing jointly and $47,450, for unmarried individuals, and 2011; $74,450, for married filing jointly, and $48,450 for unmarried individuals. Sec 201.

The provision reinstates the estate and generation skipping transfer taxes with exclusion amount of $5 million, with a maximum estate tax rate of 35 percent.  Sec 301-304.

For gifts made in 2010, exclusion amount is $1 million, and the gift tax rate is 35 percent, for gifts made December 31, 2010, the gift tax is reunified with the estate tax, with an applicable exclusion amount of $5 million and a top estate and gift tax rate of 35 percent.  Sec 301-304.

The generation skipping transfer tax exemption continues in an amount of $5 million.  Generation skipping transfer tax rate for transfers made during 2010 is zero percent. The generation skipping transfer tax rate for transfers made after 2010 is equal to the highest estate and gift tax rate in effect for such year (35 percent for 2011 and 2012).  Sec 301-304.

Repeals the modified carryover basis rules—now a recipient of property acquired from a decedent will generally receive a “step-up” or fair market value basis. Sec 301-304.

Extends and expands the additional first-year depreciation to equal 100 percent of the cost of qualified property placed in service after September 8, 2010 and before January 1, 2012, and provides for a 50 percent first-year additional depreciation deduction for qualified property placed in service after December 31, 2011 and before January 1, 2013.  Sec 401.

Starting in 2012, the maximum amount a taxpayer may expense is $125,000 of the cost of qualifying property placed in service for the taxable year. The $125,000 amount is reduced (but not below zero) by the amount by which the cost of qualifying property placed in service during the taxable year exceeds $500,000.  Sec 402.

Reduces the employee FICA tax by two percentage points for one year (2011 only). Also reduces self-employment taxes tax by two percentage points for taxable years of individuals that begin in 2011. Sec  601.

The Act extends the rules regarding contributions of capital gain real property for conservation/charity purposes for two years for contributions made in taxable years beginning before January 1, 2012. Sec 725.

We provide a link below to the actual Bill (now new law) that you may look at each section listed above after each change.  Then, we provide a link to the Congressional explanation of the changes:

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (HR. 4853) Bill: http://www.gpo.gov/fdsys/pkg/BILLS-111hr4853eas2/pdf/BILLS-111hr4853eas2.pdf Last Accessed 12/19/2010.

Joint Committee on Taxation.  Technical Explanation of the Revenue Provisions Contained in the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” Scheduled For Consideration By The United States Senate. JCX-55-10.  December 10, 2010.  Accessible through: http://www.jct.gov/publications.html?func=startdown&id=3716.  Last Accessed 12/19/2010.

Tomorrow’s blog will discuss certain provisions of the tax cuts in more detail.

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

Why is this Topic Important to Wealth Managers? Discusses gifts and the general income tax implications gifts have to those who are the beneficiaries.  Also discusses gifts as they relate to estate taxes.

As Christmas and Holiday time approaches, some clients who may be expecting large sums from Santa or other sources as gifts, may be interested to know the tax laws on gifts generally; today’s blogiticle present’s our “re-gifting” of an old idea, Section 102 of the Internal Revenue Code.

For those who haven’t had an opportunity to read the Code lately, (some estimate the Code and Regulations are close to 80,000 pages) there are still a few “friendly” sections that remain which serve as a reminder of a time gone by.  Side Note:  These authors have not yet evaluated the shortest Code section in terms of actual words, but if we were to, our guess is that Section 102 would be in the running at 212 words.

Section 102(a) reads: “Gross income does not include the value of property acquired by gift, bequest, devise, or inheritance.”  It is worth noting, if we go back to Section 61, and the starting point for gross income, that Section 61(a) states:  “Except as otherwise provided in this subtitle gross income means all income from whatever source derived…”   The “[e]xcept as otherwise provided” is applicable here to amounts received as a gift, bequest, devise, or inheritance, which are specifically excluded from gross income.  In other words, a taxpayer can give another taxpayer a gift of $1,000,000 and the latter will not recognize a penny of income for tax purposes, so long as it is really a gift, bequest, devise or inheritance.

A gift requires a “detached and disinterested generosity,” “out of affection, respect, admiration, charity or like impulses.” [1] Generally, all the facts and circumstances surrounding the event will be examined to determine if the exchange was one with donative intent. [2]

There are two small exceptions to Section 102 and those are:

1)       The income produced from property that was a classified as a gift, bequest, devise or inheritance, i.e., interest earned annually on the $1,000,000 gift, is taxable income to the beneficiary. [3]

2)       Generally, amounts paid from employers to employees are not excluded from gross income, notwithstanding certain allowances. [4]

It is important to remember that the income tax consequences to the beneficiary of a gift are in addition to the rules regarding the Gift tax in relation to estate taxes generally.  The Gift tax is a tax that is in place to prevent those from easily avoiding the estate tax by gifting amounts away.  Congress has placed an amount that is excluded from the calculation of tax on gifts for each calendar year; $13,000 per donee ($26,000 for married couples) in 2010. [5] This does not mean one who receives more than $13,000 will incur any income tax liability so long as it is a gift, as excluded from gross income under Section 102(a).

For further discussion on the gift tax generally see, AdvisorFX: Nature and Background of the Federal Gift Tax.

Tomorrow’s blogticle will discuss more helpful information regarding year-end transactions and exchanges.

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

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[1] Commissioner v. Duberstein, 363 U.S. 278, 285 (U.S. 1960).

[2] Commissioner v. Duberstein at 286.

[3] 26 U.S.C. § 102(b).

[4] 26 U.S.C. § 102(c).

[5] 26 U.S.C. § 2503.

An estate has asked the U.S. Supreme Court to consider whether the GST tax “grandfathering exemption” is ambiguous.  Two circuit courts of appeal have held that the statute is ambiguous while another two circuits hold that it is plain and unambiguous.

The Supreme Court is being asked to settle the split between the circuits.

The Generation Skipping Trusts

A generation skipping trust is a trust designed to shift property from one generation to another without passing the property through an intervening generation—e.g. a trust that transfers property from grandparents to their grandchildren.  Generally the “child beneficiaries” (children of the grantor) take only an income interest in the trust with grandchildren taking a remainder interest in the trust.  When the child beneficiaries die, trust assets will be transferred to the grandchildren.  Assuming the child beneficiaries took only an income interest in the trust and did not hold any incidents of ownership in the trust, the trust will not be included in the children’s estates when they die.

So, for example, if Grandfather funds a trust will for $5 million, naming his three adult children as income beneficiaries and his grandchildren as remainder beneficiaries, the trust is a generation skipping trust.  Read this complete article at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For in-depth analysis of the generation skipping transfer tax, see Advisor’s Main Library: Section 2.1 A—Generation Skipping Transfers Explained

We invite your questions and comments by posting them below or by calling the Panel of Experts.

Why is this Topic Important to Wealth Managers?  Provides details about one concept that wealth managers often overlook, the generation skipping transfer tax.  Also presents general concept themes and examples to show effective uses of life insurance and trust in consideration of the tax. 

In general, the generation-skipping transfer tax is levied on the value of life insurance that is transferred during the grantors lifetime or at death, to a skip person. [1]  The GST is levied in addition to estate and gift taxes. [2]

The generation-skipping transfer (GST) tax “scheduled to resume in 2011 at a rate of 55%, with a $1 million exemption. The rate was 45% in 2009, with a $3.5 million exemption.” [3]  For more information about the expiring tax cuts and new tax rates, see our blogticle: AdvisorFYI: Estate and Gift Taxes, Tax Cuts and More. 

“Certain direct gifts that qualify for the gift tax exclusion may also qualify for an annual exclusion that can be applied against the GST tax.” [4]  Many wealth managers encourage clients to take full advantage of the annual exclusion to avoid GST tax considerations at some later point.  However, “the expiration of the GST tax has complicated matters for wealthy individuals hoping to make 2010 gifts in trust that skip generations.” [5]  The use of trusts in consideration of the GST tax is discussed below.  For examples of insurance uses with trusts generally, see our previous blogticle: Trusts that Purchase Life Insurance; Known Formally as the “Irrevocable Life Insurance Trust

It is helpful to understand key terms and concepts when discussing the GST tax.  A skip person is at least two generations below the transferor’s generation. [6]  Grandchildren are common skip people along with most trust arrangements where trust beneficiaries are skip persons.

On the other hand, the GST tax does not apply to amounts transferred to non-skip people, those who are no more than one generation after the transferor, or who are any generation above the transferor. [7] Examples of the former are children or siblings.  Examples of the latter generally include parents and grandparents. 

When does the GST tax apply?

• Direct Skip- transfer subject to gift or estate tax is made to a skip person (or trust).  [8]
  • Examples: [9]
  • Client gives life insurance policy to a grandchild.
  • Client transfers life insurance policy to an ILIT for grandchildren and great-grandchildren.
  • Client dies owning life insurance and proceeds are paid to grandchild 
• Taxable Transfer- Occurs the moment when there are no more non-skip persons ahead of the skip person for amounts or property held in trust. [10]
  • Example: [11]
  • Client creates a life insurance trust that provides “Income from this trust is to be paid to my three children for life. At the death of the last survivor, principal is to be distributed to my six grandchildren”.
  • When the last non-skip person’s (children’s) interest terminates (in this example, by death), the property in the trust is subject to the GST tax. 
• Taxable Distributions- Occurs when income, principal or property is distributed from a trust to a skip person. [12]
  • Such distributions can occur while the non-kip persons are alive. [13]

Let’s take a look an example [14] of the use of a trust versus “doing nothing”: 

Assume a trust is established and the grantor makes a gift of $1,000,000 (under the GST tax, tax exempt).  Assume further, the trust earns 6.5% annually, and all income is reinvested.  The calculations are made under a 55% federal estate tax rate (which is to occur in 2011 without further action from Congress). 

After the first generation (28 years) the amount held in trust is $5,831,617, assuming this amount is outside the grantor’s estate for estate tax calculation purposes, the estate tax will be zero, and for the third generation, the estate tax too would be zero, if outside the grantor’s estate.  The value in trust after the grandchildren’s generation is just over $34,000,000 and when it gets to the end of the great grandchildren’s generation (84 years from first gift) the amount held in trust, and to be distributed to the great-great grandchildren is $198,320,235.  If the trust was not used the initial gift from grantor is passed through the generations, the great-great grandchildren will end up with a mere $18,071,934 or less than 10% of the amount when the trust is used.  Talk about the time value of money. 

Please note the above example is available in printable .pdf format on AdvisorFX, please log-in to view and print. In addition, the GST tax and use of trusts is further examined on FX under AUS:  Section 2.1 The Generation Skipping Transfer Tax, “C—The Insurance Funded Family Bank.”

Tomorrow’s blog will discuss key employee life insurance.  . 

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

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[1] Leimberg, Doyle.  Tools and Techniques of Life Insurance Planning, 4^th Ed.  375.  2007.  The National Underwriter Company.  Cincinnati, Ohio. 

[2] 26 U.S.C. § 2601. 

[3] Northern Trust.  “2010 Tax Legislation Update — Bush Tax Cuts Expiring.”  http://www.northerntrust.com/wealth/10-summer/2010-tax-legislation-update-bush-tax-cuts-expiring.html.  Last Accessed 10/26/2010. 

[4] Leimberg, Doyle.  Tools and Techniques of Life Insurance Planning, 4^th Ed.  375; see also, 26 U.S.C. § 2642 (c). 

[5] Northern Trust.  “2010 Tax Legislation Update — Bush Tax Cuts Expiring.” 

[6] 26 U.S.C. § 2613. 

[7] 26 U.S.C. § 2612; 26 U.S.C. § 2613(b). 

[8] 2612 (c)

[9] Tools and Techniques of Life Insurance Planning. “Life Insurance and the Generation Skipping Tax.”  PowerPoint Presentation.  Slide: 25-4, see also, Leimberg, Doyle. Tools and Techniques of Life Insurance Planning at 377.

[10] 2612 (a). 

[11] Tools and Techniques of Life Insurance Planning. “Life Insurance and the Generation Skipping Tax.”  PowerPoint Presentation.  Slide: 25-5; see also, Leimberg, Doyle. Tools and Techniques of Life Insurance Planning at 377. 

[12] 2612 (b). 

[13] Tools and Techniques of Life Insurance Planning. “Life Insurance and the Generation Skipping Tax.”  PowerPoint Presentation.  Slide: 25-6; See also, Leimberg, Doyle Tools and Techniques of Life Insurance Planning at 377. 

[14] Example first presented in AUS Main Libraries.  Section 2.1 The Generation Skipping Transfer Tax, C—The Insurance Funded Family Bank.  http://www.advisorfx.com/articles/f2-1_1_12_1260.aspx?action=13.  Last Accessed 10/27/2010.