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Old 02-01-2016, 05:37 PM
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Is life estate gift?

My dad (NRA) set up irrevocable trust. House is only asset. My kids are beneficiaries. I am trustee. Dad gave my right to live in the house as long as I am alive. After my death estate passes to kids. Is it gift? If so, how much I have to pay to IRS? House was bought for $400 (2012). Now it may be $500K



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Old 02-02-2016, 07:17 AM
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Originally Posted by rom299 View Post

#1;. After my death estate passes to kids. Is it gift?



#2; If so, how much I have to pay to IRS? House was bought for $400 (2012). Now it may be $500K
#1; no not a gift;this is generation-skipping transfer tax situation. The house is placed in the trust for the your dad?s grandchildren. The income, if there is any rental income, may be distributed among the grandchildren in accordance with their needs and the principal of the trust will be distributed outright to the grandchildren. If the trust property is not subject to estate tax at your death, then, a generation-skipping tax will be imposed when you die.
As your dad is leaving the house to his grandchildren, there is an additional tax you should know about. generation skipping transfer tax is a tax on property that is passed from a grandparent to a grandchild or great-grandchild in a will or trust. The tax is also assessed on property passed to unrelated individuals more than 37.5 years younger.


#2; as mentioned above; The generation skipping transfer tax is the government?s defense against an end run around estate / gift taxes.so to speak, the tax tax is a federal tax imposed on gifts given to skip-persons to make certain that taxes are paid at each generational level and cannot be escaped through the use of a trust.



It imposes a flat tax on gifts and bequests above the estate/lifetime gift exclusion($5.43 M for 2015 I guess) that avoid gift or estate tax by skipping one or more generations, such as to grandchildren . I mean so The tax is only due when the grandchildren receive amounts in excess of the GST estate tax credit. most people will never encounter the GST tax due to higher tax credit levels.



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Old 02-02-2016, 07:33 PM
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1. How much is GST? How much grandkids will pay?

Does the fact that grandpa (settlor) is Non Resident Alien change out come?

Probably "estate/lifetime gift exclusion($5.43 M for 2015 ) or the similar" will not apply.

2. But the fact that Settlor reserved Life Estate for me is it gift?

OK.. Estate (house) will pass to grandkids at my death. But I can live in the house as long as I am alive (according to trust provisions). Is this (mine) life estate gift?
How IRS estimate value of this gift? Right to stay in the house. How much is that?



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Old 02-03-2016, 05:48 AM
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Originally Posted by rom299 View Post
1. How much is GST? How much grandkids will pay?

Does the fact that grandpa (settlor) is Non Resident Alien change out come?

Probably "estate/lifetime gift exclusion($5.43 M for 2015 ) or the similar" will not apply.

2. But the fact that Settlor reserved Life Estate for me is it gift?

OK.. Estate (house) will pass to grandkids at my death. But I can live in the house as long as I am alive (according to trust provisions). Is this (mine) life estate gift?
How IRS estimate value of this gift? Right to stay in the house. How much is that?
After my death estate passes to kids. Is it gift?=====> no not a gift;this is generation-skipping transfer tax situation. The house is placed in the trust for the your dad?s grandchildren. The income, if there is any rental income, may be distributed among the grandchildren in accordance with their needs and the principal of the trust will be distributed outright to the grandchildren. If the trust property is not subject to estate tax at your death, then, a generation-skipping tax will be imposed when you die.
As your dad is leaving the house to his grandchildren, there is an additional tax you should know about. generation skipping transfer tax is a tax on property that is passed from a grandparent to a grandchild or great-grandchild in a will or trust. The tax is also assessed on property passed to unrelated individuals more than 37.5 years younger.


If so, how much I have to pay to IRS? House was bought for $400 (2012). Now it may be $500K=========as mentioned above; The generation skipping transfer tax is the government?s defense against an end run around estate / gift taxes.so to speak, the tax tax is a federal tax imposed on gifts given to skip-persons to make certain that taxes are paid at each generational level and cannot be escaped through the use of a trust.



It imposes a flat tax on gifts and bequests above the estate/lifetime gift exclusion($5.43 M for 2015 I guess) that avoid gift or estate tax by skipping one or more generations, such as to grandchildren . I mean so The tax is only due when the grandchildren receive amounts in excess of the GST estate tax credit. most people will never encounter the GST tax due to higher tax credit levels.



How much is GST? How much grandkids will pay?=====> I do not think so;As said,
Most relatively simple estates ,i.e.,small amounts of other easily valued assets, do not require the filing of an estate tax return. A filing is required for estates with combined gross assets and prior taxable gifts exceeding $5,430,000 in 2015, and $5,450,000 in 2016.
Does the fact that grandpa (settlor) is Non Resident Alien change out come?========> unless the GP is in the situation mentioned above, then, he is NOT subject to US estate tax. The
U.S. has unique estate and gift tax rules applicable to resident and nonresident aliens;

Probably "estate/lifetime gift exclusion($5.43 M for 2015 ) or the similar" will not apply.==>>then, no need to file form 706. In general, US. estate tax
applies to a nonresident alien decedent?s gross estate which at the time of his death is situated in the U.S.,

2. But the fact that Settlor reserved Life Estate for me is it gift?====You are right it is a gift as your dad is still alivein your GST tax situation; your life estate gift is also called a gift of a remainder interest in a residence as he created the irrevocable trust for your life time, he needs to pay a gift/ estate tax at the time of creating the trust UNLESS he is subject to his available exemption/credits as said above. At your death, the trust pty incurs either estate or GST tax if estate tax does not apply before the house is transfer to your children. However, ther GST does not apply if the house passes to someone in yur children?s? generation, i.e. a sibling or etc in this case GST is deferred until the house passes to someone in a lower generation.
. You may not need to worry about gift tax/estate tax depending on your situation


OK.. Estate (house) will pass to grandkids at my death. But I can live in the house as long as I am alive (according to trust provisions). Is this (mine) life estate gift?=======>>in this case no it is not a gift , plz read above.

1.

How IRS estimate value of this gift? Right to stay in the house. How much is that?====>I am not an expert for this I but guess the IRS uses the Life Estate and Remainder Interest Table to determine the value of life estate or remainder interest held in the home



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Old 02-03-2016, 10:24 PM
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I think I confused you. So, in one paragraph you said Life estate is gift; in other -- it is not. Let me try again: GP creates irrevocable trust. grandkids are beneficiaries. I am (father of kids; and son of GP) granted life estate (can stay in the house as long as I am alive). Is my life estate (right to live in the house) considered as a gift from GP to me?
PS. I am still worry about Dad's (GP) non resident status. In one place I read: "Nonresident aliens are not given the same large amount on estate tax exclusion like a US person. Their amount is $60,000. The amounts of $5M+ are for citizens of the US. NRAs are not afforded that $5mil+ for exclusion on tax for the estate."



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Old 02-03-2016, 10:25 PM
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How much gift is life estate

I think I confused you. So, in one paragraph you said Life estate is gift; in other -- it is not. Let me try again: GP creates irrevocable trust. grandkids are beneficiaries. I am (father of kids; and son of GP) granted life estate (can stay in the house as long as I am alive). Is my life estate (right to live in the house) considered as a gift from GP to me?
PS. I am still worry about Dad's (GP) non resident status. In one place I read: "Nonresident aliens are not given the same large amount on estate tax exclusion like a US person. Their amount is $60,000. The amounts of $5M+ are for citizens of the US. NRAs are not afforded that $5mil+ for exclusion on tax for the estate."



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Old 02-04-2016, 05:23 AM
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Originally Posted by rom299 View Post
I think I confused you. So, in one paragraph you said Life estate is gift; in other -- it is not. Let me try again: GP creates irrevocable trust. grandkids are beneficiaries. I am (father of kids; and son of GP) granted life estate (can stay in the house as long as I am alive). Is my life estate (right to live in the house) considered as a gift from GP to me?
PS. I am still worry about Dad's (GP) non resident status. In one place I read: "Nonresident aliens are not given the same large amount on estate tax exclusion like a US person. Their amount is $60,000. The amounts of $5M+ are for citizens of the US. NRAs are not afforded that $5mil+ for exclusion on tax for the estate."
I think I confused you. So, in one paragraph you said Life estate is gift; in other -- it is not. Let me try again: =>.As said it is a gift as you said it is a gift it is correct; life estae for you in this situation is a gift;however, as you can see, this is GST situation since it the shift of the house by gift to your dad?s grandchildren who are two or more generations below that of the person granting the gift.




GP creates irrevocable trust. grandkids are beneficiaries. I am (father of kids; and son of GP) granted life estate (can stay in the house as long as I am alive). Is my life estate (right to live in the house) considered as a gift from GP to me?------------>> Correct it is a GIFT to you from your dad.
PS. I am still worry about Dad's (GP) non resident status. In one place I read: "Nonresident aliens are not given the same large amount on estate tax exclusion like a US person. Their amount is $60,000. The amounts of $5M+ are for citizens of the US. NRAs are not afforded that $5mil+ for exclusion on tax for the estate."=======>> I guess I need to put it this way. Actually you are correct; a non-U.S. resident, in this case your dad, the U.S. estate and gift tax system is even more onerous and requires a much higher degree of awareness.
Of course for U.S. citizens and non resident alien is that the applicable exemption is now $5.45 M for 2016 and The estate tax rate is 40%.. However, for a nonresident non-citizen the applicable exemption continues to be limited to $60K Thus, estate tax is due when a your dad?s estate transfers U.S. situs assets above $60K. ypur dad is subject to estate and gift tax only on assets that are considered U.S. situs property.so in your situation ypur dad only has the annual gift tax exclusion of $14K per person for 2016 I guess. he does not have the lifetime gift tax exclusion of $5,45M for 2015 that U.S. citizens have.this means that he needs to file gift tax form of 709 aslongas the MV of th e life estate exceeds $14K. The gift tax applies to the transfer by gift of the house. Your dad makes a gift as he gives you the use of the house, without expecting to receive something of at least equal value in return. Please contact an enrolled agent/ a CPA doing taxes in your local; area form more info in detail



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