Contents PART I ESTATE PLANNING: A PRACTICE-ORIENTED APPROACH

Transcription

1 Contents PART I ESTATE PLANNING: A PRACTICE-ORIENTED APPROACH CHAPTER 1 HOW TO USE THIS BOOK Locating the Proper Form and Use of Accompanying Materials The Three Major Will and Trust Forms Headings Wills as Primary Testamentary Instruments Five Categories Revocable (Living) Trusts and Pour-Over Wills (Part VII) Five Categories Irrevocable Trusts (Part VIII) Five Categories Alternative Forms and Clauses Maryland Estate Tax Considerations Summary CHAPTER 2 ESTATE PLANNING: ESSENTIAL OBJECTIVES The Essential Estate Planning Objectives: Disposition of Assets and Tax Avoidance Dispositive Estate Planning Estate Tax Planning Initiating the Estate Planning Process: Strategies and Recommendations Coordinating the Different Segments Initial Client Contact: Objectives *Form 2-1: Letter to Client Following Initial Client Contact to Accompany Estate Planning Questionnaire for Married Client *Form 2-2: Estate Planning Questionnaire for Married Client *Form 2-2A: Estate Planning Questionnaire for Single Client Effective Gathering of Client Information: The Client Estate Planning Questionnaire Family Information Assets and Liabilities Initial Client Meeting Information Gathering Dispositive Goals Selection of Fiduciaries and Guardians Wills vs. Probate Substitutes xiii Copyright, January 2016

2 *Form 2-3: Memorandum to Client Re: Advantages and Disadvantages of Revocable Trusts vis-à-vis Wills in Maryland Powers of Attorney Nature and Scope of the Estate Planning Engagement and Attorney s Fee Discussing the Engagement and Fee *Form 2-4: Engagement/Fee Letter with Dual Representation Provisions Establishing the Fee Ethical Issues in Representing Both Husband and Wife Cover Letters to Clients Enclosing Draft Documents PART II SIMPLE WILLS: FOR MARRIED COUPLES WITH COMBINED ESTATES NOT EXCEEDING LIFETIME ESTATE TAX EXEMPTION Overview of Part II: When to Use Simple Wills CHAPTER 3 SIMPLE WILLS FOR MARRIED COUPLES WITH ADULT CHILDREN Overview Overall Summary of Dispositive Provisions for Wills in Category Pure Sweetheart Wills Outright to Spouse Summary of Dispositive Provisions When to Use These Wills Estate Tax Consequences Forms for Simple Sweetheart Wills *Form SW-1H: Outright Gift of Residuary Estate to Spouse, if Surviving; if Not, Outright to Adult Children Form SW-1W: Companion Will to SW-1H Key Action Subjects for Strategic Planning Sweetheart/Trust Wills to Spouse in Trust Without Tax Planning Overall Summary of Dispositive Provisions Terms of Marital Trusts How They Work When to Use These Wills Comparison of Marital/QTIP vs. Marital/Power of Appointment (POA) Trust Marital/QTIP Trust Marital/POA Trust Estate Tax Consequences Forms for Sweetheart/Trust Wills Copyright, January 2016 xiv

3 Form SW-2H: Husband with Adult Children: Gift of Residuary Estate to Marital (QTIP) Trust, if Spouse Does Not Survive, Outright to Adult Children Form SW-2W: Companion Will to SW-2H Form SW-3H: Husband with Adult Children: Gift of Residuary Estate to Marital POA Trust, Remainder to Distributees Appointed by Surviving Spouse; upon Failure to Exercise Power Remainder to Adult Children; if Spouse Does Not Survive, Outright to Adult Children Form SW-3W: Companion Will to SW-3H *Form SW-2/3: Template Simple Will Form for Testator with Adult Children with Alternative Dispositive Provisions for Marital Trust (QTIP or POA) Key Action Subjects for Strategic Planning Wills Disposing Property Outright to Children (No Provision for Spouse) Summary of Dispositive Provisions When to Use These Wills Estate Tax Consequences Caution: Spouse s Right of Election in Maryland Will Forms for Outright Disposition to Children *Form SW-4H: Male Testator with Adult Children Whose Spouse Has Either Predeceased Him or Is Not to Be Left Anything under Will: Outright Gift of Residuary Estate to Adult Children Form SW-4W: Companion Will to SW-4H Key Action Subjects for Strategic Planning CHAPTER 4: SIMPLE WILLS FOR MARRIED COUPLES WITH MINOR CHILDREN Overview Overall Summary of Dispositive Provisions for Wills in Category Pure Sweetheart Wills to Spouse Outright, with Contingent Trusts for Children Summary of Dispositive Provisions Distribution of Separate Children s Trusts Distribution of Pot Trust for Children When to Use These Wills Estate Tax Consequences xv Copyright, January 2016

4 4.2.6 Forms for Sweetheart Wills with Contingent Trusts for Children Form SW-5H: Husband with Minor Children: Outright Gift of Residuary Estate to Spouse, if Surviving; if Not, to Separate Trusts for Children Complete Distribution at Age Form SW-5W: Companion Will to SW-5H Form SW-6H: Outright Gift of Residuary Estate to Spouse, if Surviving; if Not, to Pot Trust for Children until Youngest Child Attains Age of Form SW-6W: Companion Will to SW-6H *Form SW-5/6: Template Simple Will Form for Testator with Minor Children with Alternative Dispositive Provisions for Children s Trusts (Separate Trusts or Pot Trust) Key Action Subjects for Strategic Planning Sweetheart/Trust Wills to Spouse in Trust with Contingent Trusts for Children Summary of Dispositive Provisions Dispositive Terms of Marital Trusts Distribution Alternatives for Children s Trusts When to Use These Wills Comparison of Marital/QTIP vs. Marital/POA Trust Estate Tax Consequences Forms for Sweetheart Trust Wills with Children s Trusts Form SW-7H: Husband with Minor Children: Gift of Residuary Estate to Marital (QTIP) Trust, Remainder (or Entire Estate if Spouse Does Not Survive) to Separate Trusts for Children Complete Distribution at Age Form SW-7W: Companion Will to SW-7H Form SW-8H: Husband with Minor Children: Gift of Residuary Estate to Marital (QTIP) Trust, Remainder (or Entire Estate if Spouse Does Not Survive) to Pot Trust for Children Complete Distribution when Youngest Child Attains Age 25; if Spouse Does Not Survive, to Children s Pot Trust Form SW-8W: Companion Will to SW-8H Form SW-9H: Husband with Minor Children: Gift of Residuary Estate to Marital Power of Copyright, January 2016 xvi

5 Appointment Trust for Benefit of Spouse for Life, Remainder to Distributees Appointed by Surviving Spouse; upon Failure to Exercise Power, Remainder to Children in Separate Trusts Complete Distribution at Age 30; if Spouse Does Not Survive, to Separate Trusts for Children Complete Distribution at Age Form SW-9W: Companion Will to SW-9H Form SW-10H: Husband with Minor Children: Gift of Residuary Estate to Marital Power of Appointment Trust for Benefit of Wife for Life, Remainder to Distributees Appointed by Surviving Spouse; upon Failure to Exercise Power, Remainder to Children in Pot Trust until Youngest Child Attains Age 25; if Wife Does Not Survive, to Pot Trust until Youngest Child Attains Age Form SW-10W: Companion Will to SW-10H *Form SW-7 10: Template Simple Will Form for Testator with Minor Children with Alternative Dispositive Clauses for Marital Trusts for Spouse and Trust for Children Key Action Subjects for Strategic Planning Wills Disposing Property Outright to Trust for Minor Children (No Provision for Spouse) Summary of Dispositive Provisions When to Use These Wills Estate Tax Consequences Caution: Spouse s Right of Election in Maryland Forms for Wills Disposing of Property to Trust for Minor Children Form SW-11H: Male Testator with Minor Children Whose Spouse Has Predeceased Him, or Is to Be Given No Interest under Will: Gift of Residuary Estate to Separate Trusts for Children Complete Distribution at Age Form SW-11W: Companion Will to SW-11H Form SW-12H: Male Testator with Minor Children Whose Spouse Has Predeceased Him, or Is to Be Given No Interest under Will: Gift of Residuary Estate to Pot xvii Copyright, January 2016

6 Trust until Youngest Child Attains Age of Form SW-12W: Companion Will to SW-12H *Form SW-11/12: Template Simple Will Form with Alternative Dispositive Clauses for Testator with Minor Children, Whose Spouse Has Predeceased Him, or Is to Be Given No Interest under Will; Gift of Residuary Estate for Children (Separate Trusts or Pot Trust) Key Action Subjects for Strategic Planning PART III TAX PLANNING WILLS WITH CREDIT SHELTER/BYPASS TRUSTS IN COMBINATION WITH MARITAL BEQUEST (OUTRIGHT OR QTIP TRUST): FOR MARRIED COUPLES WITH COMBINED ESTATES EXCEEDING LIFETIME EXEMPTION (APPLICABLE EXCLUSION AMOUNT) CHAPTER 5 STRATEGIC PLANNING WITH CREDIT SHELTER/ BYPASS TRUSTS Effective Utilization of Lifetime Estate Tax Exemption Through Trusts Example: The Sweetheart Will Pitfall and the Credit Shelter/Bypass Trust Solution Workings of the Bypass Trust Alternatives for Structuring Bypass Trust A Using a Bypass Trust with a Limited Power of Appointment to Allow for Disclaimer The A-B Will System and Formula Clauses CHAPTER 6 TAX PLANNING WILLS WITH CREDIT SHELTER/BYPASS TRUSTS IN COMBINATION WITH MARITAL BEQUEST (OUTRIGHT OR QTIP TRUST) FOR MARRIED COUPLES WITH COMBINED ESTATES EXCEEDING LIFETIME EXEMPTION Wills with Bypass Trust and Outright Marital Bequest for Married Couples with Adult Children General Description of Wills Summary of Dispositive Provisions Graphic Summary of Dispositive Provisions of Credit Shelter/Bypass Trust and Estate Tax Effects When to Use These Wills Estate Tax Consequences Will Forms with Bypass Trust and Outright Marital Copyright, January 2016 xviii

7 Form TP-1H: Marital Bequest Outright to Spouse; Credit Shelter Bequest to Residuary/ Bypass Trust with Income and Principal to Spouse, Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes Form TP-1W: Companion Will to TP-1H Form TP-2H: Marital Bequest Outright to Spouse; Credit Shelter Bequest to Residuary/ Bypass Trust with Spray of Income and Principal to Spouse and Children, Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes Form TP-2W: Companion Will to TP-2H Form TP-3H: Marital Bequest Outright to Spouse; Credit Shelter Bequest to Residuary/ Bypass Trust with Income to Spouse, Spray of Principal to Spouse and Children, Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes Form TP-3W: Companion Will to TP-3H *Form TP-1 3: Template form for Testator with Adult Children: with Alternative Dispositive Methods for Residuary/Bypass Trust Client Presentation Charts for TP-1, TP-2, and TP Key Action Subjects for Strategic Planning Wills with Bypass Trust and Outright Marital Bequest for Married Couples with Minor Children General Description of Wills Overall Summary of Dispositive Provisions Graphic Summary of Dispositive Provisions of Credit Shelter/Bypass Trust and Estate Tax Effects When to Use These Wills Estate Tax Consequences Forms for Bypass Trust and Outright Marital with Trusts for Children Form TP-4H: Marital Bequest Outright to Spouse; Credit Shelter Bequest to Residuary/ Bypass Trust with Income and Principal to Spouse, Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes (Separate Trusts for Descendants Under 30) xix Copyright, January 2016

8 Form TP-4W: Companion Will to TP-4H Form TP-5H: Marital Bequest Outright to Spouse; Credit Shelter Bequest to Residuary/ Bypass Trust with Spray of Income and Principal to Spouse and Children, Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes (Separate Trusts for Descendants under 30) Form TP-5W: Companion Will to TP-5H Form TP-6H: Marital Bequest Outright to Spouse; Credit Shelter Bequest to Residuary/ Bypass Trust with Income to Spouse and Spray of Principal to Spouse and Children, Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes (Separate Trusts for Descendants under 30) Form TP-6W: Companion Will to TP-6H Form TP-7H: Marital Bequest Outright to Spouse; Credit Shelter Bequest to Residuary/ Bypass Trust with Income and Principal to Spouse, Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes (Pot Trust until Youngest Child Attains 25) Form TP-7W: Companion Will to TP-7H Form TP-8H: Marital Bequest Outright to Spouse; Credit Shelter Bequest to Residuary/ Bypass Trust with Spray of Income and Principal to Spouse and Children, Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes (Pot Trust until Youngest Child Attains 25) Form TP-8W: Companion Will to TP-8H Form TP-9H: Marital Bequest Outright to Spouse; Credit Shelter Bequest to Residuary/ Bypass Trust with Income to Spouse and Spray of Principal to Spouse and Children, Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes (Pot Trust until Youngest Child Attains 25) Form TP-9W: Companion Will to TP-9H *Form TP-4 9: Template Form for Testator with Minor Children: with Alternative Dispositive Copyright, January 2016 xx

9 Methods for Residuary/Bypass Trust and Trust for Children Client Presentation Charts for TP-4, TP-5, TP-6, TP-7, TP-8, and TP Key Action Subjects for Strategic Planning CHAPTER 7 STRATEGIC TAX PLANNING WITH MARITAL/ QTIP TRUSTS ( A SHARE) IN COMBINATION WITH BYPASS TRUST ( B SHARE): THE A-B TRUST STRUCTURE Description of The A-B Trust Structure The Marital Trust In General The Unlimited Marital Deduction and Strategic Planning with QTIP Trusts Federal Tax Requirements of QTIP Trust Maryland Estate Tax Planning and QTIP Trusts CHAPTER 8 TAX PLANNING WILLS WITH QTIP AND BYPASS TRUSTS: FOR MARRIED COUPLES WITH COMBINED ESTATES EXCEEDING LIFETIME EXEMPTION (PECUNIARY FORMULA) Wills with QTIP and Bypass Trusts for Married Couples with Adult Children General Description of Wills Summary of Dispositive Provisions Summary of Dispositive Provisions and Estate Tax Effects of Marital and Credit Shelter/Bypass Trusts When to Use These Wills Estate Tax Consequences Form Wills with QTIP and Bypass Trusts Married Couple with Adult Children Form TP-10H: Marital Bequest to QTIP Trust; Credit Shelter Bequest to Residuary/Bypass Trust with Income and Principal to Spouse; Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes Form TP -10W: Companion Will TP-10H Form TP-11H: Marital Bequest to QTIP Trust; Credit Shelter Bequest to Residuary/Bypass Trust with Spray of Income and Principal to Spouse and Children; Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes Form TP-11W: Companion Will to TP-11H xxi Copyright, January 2016

10 Form TP-12H: Marital Bequest to QTIP Trust; Credit Shelter Bequest to Residuary/Bypass Trust with Income to Spouse, Spray of Principal to Spouse and Children; Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes Form TP-12W: Companion Will to TP-12H *Form TP-10 12: Template Form for Testator with Adult Children: Marital (QTIP) Trust with Alternative Dispositive Methods for Residuary/Bypass Trust Client Presentation Charts for TP-10, TP-11, and TP Key Action Subjects for Strategic Planning Wills with QTIP and Bypass Trusts Married Couples with Minor Children General Description of Wills Summary of Dispositive Provisions Summary of Dispositive Provisions and Tax Effects of Marital and Credit Shelter/Bypass Trusts When to Use These Wills Estate Tax Consequences Form Wills with QTIP and Bypass Trust for Married Couples with Minor Children Form TP-13H: Marital Bequest to QTIP Trust; Credit Shelter Bequest to Residuary/Bypass Trust with Income and Principal to Spouse; Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes (Separate Trusts for Descendants under30) Form TP-13W: Companion Will to TP-13H Form TP-14H: Marital Bequest to QTIP Trust; Residuary/Bypass Trust with Spray of Income and Principal to Spouse and Children; Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes (Separate Trusts for Descendants under 30) Form TP-14W: Companion Will to TP-14H Form TP-15H: Marital Bequest to QTIP Trust; Credit Shelter Bequest to Residuary/ Bypass Trust with Income to Spouse and Spray of Principal to Spouse and Children; Remainder (or Entire Estate if Spouse Does Not Survive) to Living Copyright, January 2016 xxii

11 Descendants, per Stirpes (Separate Trusts for Descendants under 30) Form TP-15W: Companion Will to TP-15H Form TP-16H: Marital Bequest to QTIP Trust; Credit Shelter Bequest to Residuary/Bypass Trust with Income and Principal to Spouse; Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes (Pot Trust until Youngest Child Attains 25) Form TP-16W: Companion Will to TP-16H Form TP-17H: Marital Bequest to QTIP Trust; Credit Shelter Bequest to Residuary/Bypass Trust with Spray of Income and Principal to Spouse and Children; Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes (Pot Trust until Youngest Child Attains 25) Form TP-17W: Companion Will to TP-17H Form TP-18H: Marital Bequest to QTIP Trust; Credit Shelter Bequest to Residuary/Bypass Trust with Income to Spouse and Spray of Principal to Spouse and Children; Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes (Pot Trust until Youngest Child Attains 25) Form TP-18W: Companion Will to TP-18H *Form TP-13 18: Template Form for Testator with Minor Children: with QTIP Trust and Alternative Dispositive Methods for Residuary/Bypass Trust and for Trusts for Children Client Presentation Charts for TP-13, TP-14, TP-15, TP-16, TP-17, and TP Key Action Subjects for Strategic Planning CHAPTER 9 TAX PLANNING WILLS WITH MARITAL ( A ) AND CREDIT SHELTER ( B ) SHARES: USE OF PECUNIARY CREDIT SHELTER AND RESIDUARY MARITAL BEQUESTS (REVERSE PECUNIARY FORMULA) Overview and Practical Considerations Reverse Pecuniary Wills with Bypass Trust and Outright Marital Bequest Married Couples With Adult Children xxiii Copyright, January 2016

12 9.2.1 General Description of Wills Summary of Dispositive Provisions When to Use These Wills Estate Tax Consequences Form Reverse Pecuniary Wills with Bypass Trust and Outright Marital Bequest *Form TP-19H: Pecuniary Credit Shelter Bequest to Bypass Trust for Benefit of Spouse and Children; Marital Bequest Outright to Spouse; Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes Form TP-19W: Companion Will to TP-19H Client Presentation Chart for TP Reverse Pecuniary Wills for Married Couples with Adult Children (with QTIP Trust) General Description of Wills Summary of Dispositive Provisions When to Use These Wills Estate Tax Consequences Form Reverse Pecuniary Wills with QTIP and Bypass Trusts *Form TP-20H: Pecuniary Credit Shelter Bequest to Bypass Trust; Marital Bequest to QTIP Trust; Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes Form TP-20W: Companion Will to TP-20H Client Presentation Chart for TP Reverse Pecuniary Wills with Bypass Trust and Outright Marital Bequest for Married Couples with Minor Children General Description of Wills Summary of Dispositive Provisions When to Use These Wills Estate Tax Consequences Form Reverse Pecuniary Wills with Bypass Trust and Outright Marital Form TP-21H: Pecuniary Credit Shelter Bequest to Bypass Trust for Benefit of Spouse and Children; Marital Bequest Outright to Spouse; Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes (Separate Trusts for Children under 30) Copyright, January 2016 xxiv

13 Form TP-21W: Companion Will to TP-21H Form TP-22H: Pecuniary Credit Shelter Bequest to Bypass Trust for Benefit of Spouse and Children; Marital Bequest Outright to Spouse; Remainder (or Entire Estate if Spouse Does Not Survive) to Pot Trust until Youngest Child Attains Form TP-22W: Companion Will to TP-22H *Form TP-21/22: Template Form for Married Testator with Minor Children; Pecuniary Credit Shelter Bequests to Bypass Trust and Outright Marital Bequest with Alternative Clauses for Children s Trusts (Separate Trusts or Pot Trust) Client Presentation Charts for TP-21 and TP Reverse Pecuniary Wills for Married Couples with Minor Children (with QTIP Trust) General Description of Wills Summary of Dispositive Provisions When to Use These Wills Estate Tax Consequences Form Reverse Pecuniary Wills with QTIP and Bypass Trusts Form TP-23H: Pecuniary Credit Shelter Bequest to Bypass Trust; Marital Bequest to QTIP Trust; Remainder of Trusts (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes (Separate Trusts for Children under 30) Form TP-23W: Companion Will to TP-23H Form TP-24H: Pecuniary Credit Shelter Bequest to Bypass Trust; Marital Bequest to QTIP Trust; Remainder of Trusts (or Entire Estate if Spouse Does Not Survive) to Pot Trust until Youngest Child Attains Form TP-24W: Companion Will to TP-24H *Form TP-23/24: Template Form for Married Testator with Minor Children; Pecuniary Credit Shelter Bequest to Bypass Trust; Marital Bequest to QTIP Trust; Alternative Clauses for Children s Trusts (Separate Trusts or Pot Trust) Client Presentation Charts for TP-23 and TP Key Action Subjects for Strategic Planning xxv Copyright, January 2016

14 PART IV FLEXIBLE TAX PLANNING WILLS WITH DISCLAIMER TRUSTS: MARRIED COUPLES WITH COMBINED ESTATES APPROACHING OR EXPECTED TO EXCEED LIFETIME EXEMPTION OR WHO DESIRE A FLEXIBLE APPROACH CHAPTER 10 STRATEGIC PLANNING WITH FLEXIBLE DISCLAIMER TRUSTS Overview of the Disclaimer Trust Technique Requirements of a Qualified Disclaimer Federal Tax Requirements and Consequences The Maryland Disclaimer Law *Form 10-1: Disclaimer of Shares of Stock *Form 10-2: Disclaimer of Interest under Revocable Trust When Is a Disclaimer Used in General Reducing the Marital Deduction Through a Disclaimer: A Case Study Increased Use of Disclaimer Trusts under EGTRRA and ATRA The Impact of the Increasing Lifetime Exemption on Formula Clause Wills and Revocable Trust the EGTRRA/ATRA Trap The Flexible Disclaimer Trust Solution Some Pitfalls and Disadvantages of Disclaimer Approach Increased Use of Disclaimer Trusts in Light of Maryland s Decoupled Estate Tax CHAPTER 11 TAX PLANNING WILLS WITH DISCLAIMER TRUSTS Disclaimer Wills For Married Couples with Adult Children Summary of Dispositive Provisions Summary of Dispositive Provisions and Tax Effects of Disclaimer Trust When to Use These Wills Estate Tax Consequences Form Wills with Disclaimer Trusts for Married Couples with Adult Children Form DW-1H: Gift of Residuary Estate Outright to Spouse with Disclaimer Option to Disclaimer Trust for Benefit of Spouse, Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes Form DW-1W: Companion Will to DW-1H Form DW-2H: Gift of Residuary Estate Outright to Spouse with Disclaimer Option to Copyright, January 2016 xxvi

15 Disclaimer Trust for Benefit of Spouse and Descendants during Spouse s Life (Preference to Spouse), Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes Form DW-2W: Companion Will to DW-2H Form DW-3H: Gift of Residuary Estate Outright to Spouse with Disclaimer Option to Disclaimer Trust (Income to Spouse, Spray of Principal to Spouse and Descendants), Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes Form DW-3W: Companion Will to DW-3H *Form DW-1 3: Template Form for Married Testator with Adult Children: Will with Disclaimer Trust with Alternative Methods for Trust Distributions Key Action Subjects for Strategic Planning Disclaimer Wills for Married Couples with Minor Children Dispositive Provisions of Wills in Category Summary of Dispositive Provisions and Tax Effects of Disclaimer Trust When to Use These Wills Estate Tax Consequences Form Wills with Disclaimer Trusts for Married Couples with Minor Children Form DW-4H: Gift of Residuary Estate Outright to Spouse with Disclaimer Option to Disclaimer Trust for Benefit of Spouse, Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes (Separate Trusts for Descendants under 30) Form DW-4W: Companion Will DW-4H Form DW-5H: Gift of Residuary Estate Outright to Spouse with Disclaimer Option to Disclaimer Trust Spray of Income and Principal to Spouse and Descendants; Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes (Separate Trusts for Descendants under 30) xxvii Copyright, January 2016

16 Form DW-5W: Companion Will to DW-5H Form DW-6H: Gift of Residuary Estate Outright to Spouse with Disclaimer Option to Disclaimer Trust income to Spouse, Spray of Principal to Spouse and Children, Remainder (or Entire Estate if Spouse Does Not Survive) to Living Descendants, per Stirpes (Separate Trusts for Descendants under 30) Form DW-6W: Companion Will to DW-6H Form DW-7H: Gift of Residuary Estate Outright to Spouse with Disclaimer Option to Disclaimer Trust for Benefit of Spouse, Remainder (or Entire Estate if Spouse Does Not Survive) to Pot Trust until Youngest Child Attains Form DW-7W: Companion Will DW-7H Form DW-8H: Gift of Residuary Estate Outright to Spouse with Disclaimer Option to Disclaimer Trust Spray of Income and Principal to Spouse and Descendants; Remainder (or Entire Estate if Spouse Does Not Survive) to Pot Trust until Youngest Child Attains Form DW-8W: Companion Will to DW-8H Form DW-9H: Gift of Residuary Estate Outright to Spouse with Disclaimer Option to Disclaimer Trust Income to Spouse, Spray of Principal to Spouse and Descendants; Remainder (or Entire Estate if Spouse Does Not Survive) to Pot Trust until Youngest Child Attains Form DW-9W: Companion Will to DW-9H *Form DW-4 9: Template Form for Married Testator with Minor Children with Disclaimer Trust with Alternative Methods for Distribution During Lifetime of Spouse and Alternative Children s Trusts Key Action Subjects for Strategic Planning Copyright, January 2016 xxviii

17 PART V GENERATION-SKIPPING TRANSFER ( GST ) TAX PLANNING WITH GENERATION-SKIPPING TRUSTS FOR LARGE ESTATES CONTENTS CHAPTER 12 STRATEGIC PLANNING WITH GENERATION- SKIPPING TRUSTS Overview of Generation-Skipping Transfer Tax (GST) Sheltering the Tax through the GST Exemption Effective Use of the GST Exemption Benefits to Children and Tax Savings Allocation of GST Exemption to Assets with Greatest Appreciation Potential Structure of Wills with Generation-Skipping Trusts The Reverse QTIP Election: Allocating First Spouse s GST Exemption Marital Trust Use of the First Spouse s Non-Exempt Marital Trust to Allocate GST Exemption of Surviving Spouse Ramifications and Drafting Considerations in Light of EGTRRA, TRA 2010 and ATRA CHAPTER 13 TAX PLANNING WILLS WITH GENERATION-SKIPPING TRUSTS Wills with Generation-Skipping Trusts for Married Couples with Adult Children General Description of Wills Summary of Dispositive Provisions Form Wills with Generation-Skipping Trusts *Form GST-1H: Marital Bequest Divided into Exempt GST and Nonexempt Trusts; Credit Shelter Bequest to Exempt Bypass GST for Benefit of Spouse and Children; Remainder Exempt Trusts to Separate GST Trusts for Children, Nonexempt to Living Descendants, per Stirpes Form GST-1W: Companion Will to GST-1H *Form GST-2H: Marital Bequest Divided into Exempt GST and Nonexempt Trusts; Credit Shelter Bequest to Exempt Bypass GST Trust for Benefit of Spouse and Children; Remainder Exempt Trusts to Separate GST Trusts for Children, Nonexempt to Living Descendants, per Stirpes (with Flexibility for Distribution of Remainder of Nonexempt trust to Children s GST Trusts) xxix Copyright, January 2016

18 Form GST-2W: Companion Will to GST-2H Form GST-3H: Marital Bequest Divided into Exempt GST and Nonexempt Trusts; Credit Shelter Bequest to Separate Exempt GST Trusts for Children; Remainder Exempt Marital to Exempt Children s Trusts, Nonexempt Trust to Living Descendants, per Stirpes Form GST-3W: Companion Will to GST-3H Form GST-4H: Marital Bequest Divided into Exempt GST and Nonexempt Trusts; Credit Shelter Bequest to Separate Exempt GST Trusts for Children; Remainder of Exempt Trusts to Exempt Children s Trusts, Nonexempt to Living Descendants, per Stirpes (with Flexibility for Distribution of Remainder to Nonexempt Trust to Children s GST Trusts) Form GST-4W: Companion Will to GST-4H Form GST-5H: Marital Bequest Divided into Exempt GST and Nonexempt Trust; Credit Shelter Bequest to Exempt GST Bypass Trust for Benefit of Spouse and Children; Remainder Exempt Trusts to GST Spray Trust for Children and Descendants, Nonexempt to Living Descendants, per Stirpes Form GST-5W: Companion Will to GST-5H Form GST-6H: Marital Bequest Divided into Exempt GST and Nonexempt Trusts; Credit Shelter Bequest to Exempt GST Bypass Trust for Benefit of Spouse and Children; Remainder Exempt Trusts to GST Spray Trust for Children and Descendants, Nonexempt to Living Descendants, per Stirpes (with Flexibility for Distribution of Remainder of Nonexempt Trust to Children s GST Trusts) Form GST-6W: Companion Will to GST-6H Form GST-7H: Marital Bequest Divided into Exempt and Nonexempt Trusts; Credit Shelter Bequest to Spray GST Trust for Descendants; Remainder Exempt Marital to Descendant s Trust; Remainder of Nonexempt Trust to Living Descendants, per Stirpes Copyright, January 2016 xxx

19 Form GST-7W: Companion Will to GST-7H Form GST-8H: Marital Bequest Divided into Exempt and Nonexempt Trusts; Credit Shelter Bequest to Spray GST Trust for Descendants; Remainder Exempt Marital to Descendant s Trust; Remainder of Nonexempt Trust to Living Descendants, per Stirpes (with Flexibility for Distribution of Remainder of Nonexempt Trust to Children s GST Trusts) Form GST-8W: Companion Will to GST-8H Client Presentation Charts for All GST Wills Key Action Subjects for Strategic Planning PART VI WILLS FOR UNMARRIED INDIVIDUALS (SINGLE, WIDOWED, DIVORCED) CHAPTER 14 WILLS FOR UNMARRIED INDIVIDUALS (SINGLE, WIDOWED, DIVORCED) Overview and Overall Dispositive Summary of Wills Selected Simple Wills for Unmarried Persons with Adult Children Summary of Dispositive Provisions When to Use These Wills Estate Tax Consequences Form Simple Wills for Unmarried Persons with Adult Children *Form UM-1M: Unmarried Testator with Adult Children: Outright Gift of Residuary Estate to Adult Children Form UM-1F: Corresponding Will to UM-1M for Testatrix Wills for Unmarried Persons with Minor Children Summary of Dispositive Provisions Distribution of Separate Trusts for Children Distribution of Pot Trusts for Children When to Use These Wills Estate Tax Consequences Form Simple Wills for Unmarried Persons with Minor Children Form UM-2M: Unmarried Testator with Minor Children: Gift of Residuary Estate to Separate Trusts for Children Complete Distribution at Age xxxi Copyright, January 2016

20 Form UM-2F: Corresponding Will to UM-2M for Testatrix Form UM-3M: Unmarried Male Testator with Minor Children: Gift of Residuary Estate to Pot Trust until Youngest Child Reaches Form UM-3F: Corresponding Will to UM-3M for Testatrix *Form UM-2/3: Template Form for Unmarried Testator with Minor Children with Alternative Dispositive Methods of Residuary Estate Clauses for Separate Trusts and Pot Trust Will for Unmarried Individuals without Children Overview Summary of Dispositive Provisions When to Use These Wills Estate Tax Consequences Form Wills for Unmarried Individuals without Children *Form UM-4M: Unmarried Testator Who Desires to Benefit Friend/Companion: Gift of Residuary Estate to Trust for Friend/Companion for Life, Remainder to Nieces and Nephews (Separate Trusts if under 30) Form UM-4F: Corresponding Will to UM-4M for Testatrix Pour-over Will to Revocable Trust Summary of Dispositive Provisions When to Use These Wills Estate Tax Consequences Form Pour-over Will *Form UM-5M: Will for Unmarried Male Testator Pour-over Will to Revocable Trust Created during Lifetime Form UM-5F: Corresponding Will to UM-5M for Unmarried Testatrix Wills for Single Individuals with Generation-Skipping Trusts Overview Overall Summary of Dispositive Provisions Objective of GST Wills for Unmarrieds Detailed Summary of Dispositive Provisions of GST Trusts Copyright, January 2016 xxxii

21 When to Use These Wills Form Wills for Unmarried Individuals with Generation- Skipping Trusts Form UM-6M: Unmarried Testator with Adult Children: Residuary Bequest to Be Divided into: (1) Exempt Portion Separate Generation-Skipping Trusts for Children, Remainder to Grandchildren with Limited Power of Appointment to Children; and (2) Nonexempt Portion Outright to Living Descendants, per Stirpes Form UM-6F: Corresponding Will to UM-6M for testatrix Form UM-7M: Unmarried Testator with Adult Children: Residuary Bequest to Be Divided into: (1) Exempt Portion Separate Generation-Skipping Trusts for Benefit of Each Child and Child s Descendants During Lifetime of Child, Remainder to Grandchildren with Limited Power of Appointment to Children; and (2) Nonexempt Portion Outright to Living Descendants, per Stirpes Form UM-7F: Corresponding Will to UM-7M for Unmarried Testatrix Form UM-8M: Unmarried Testator with Adult Children: Residuary Bequest to Be Divided into: (1) Exempt Portion Dynasty Generation-Skipping Trust for Benefit of Descendants for Maximum Period Allowed by Rule Against Perpetuities; and (2) Nonexempt Portion Outright to Living Descendants, per Stirpes Form UM-8F: Corresponding Will to UM-8M for Unmarried Testatrix *Form UM-6 8: Template Will Forms for Unmarried Testator with Adult Children: with Alternative Dispositive Methods for Residuary Bequest Division between Exempt and Nonexempt Portions Key Action Subjects for Strategic Planning xxxiii Copyright, January 2016

22 PART VII REVOCABLE (LIVING) TRUSTS AND POUR-OVER WILLS CHAPTER 15 STRATEGIC PLANNING WITH REVOCABLE TRUSTS AS PRIMARY TESTAMENTARY INSTRUMENT Revocable Trusts as Will Substitutes: Advantages, Disadvantages, and Practical Considerations Overview Practical Uses, Advantages, and Disadvantages Probate Avoidance Form 15-A: Probate Fees in Maryland Estate and Income Taxes Planning for Incapacity Ancillary Administration: Real Estate in More than One State Potential for Will Contests Summary Mechanics and Operation of Revocable Trust/Pour-Over Will Structure Transfer of Assets to Trust *Form 15-1: Deed from Grantor to Grantor s Revocable Trust *Form 15-2: Life Estate Deed with Powers *Form 15-3: Life Estate Deed without Powers Trustee Dispositive Provisions During Life of Settlor and upon Death Right to Revoke Tax Identification Number Tax Consequences of a Revocable Trust Gift Taxes Income Tax Estate Tax Pour-Over Will Overall Summary of Forms CHAPTER 16 REVOCABLE TRUSTS AND POUR-OVER WILLS FOR UNMARRIED INDIVIDUALS Overall Summary of Forms and Dispositive Summary Simple Revocable Trust and Pour-Over Will for Unmarried Individual with Adult Children (RT-1 and PO-1) Summary of Dispositive Provisions of RT When to Use This Revocable Trust (RT-1) Income, Gift, and Estate Tax Consequences Copyright, January 2016 xxxiv

23 Forms *Form RT-1: Revocable Trust Agreement for Unmarried Settlor Outright Disposition to Adult Children at Death of Settlor *Form PO-1: Pour-Over Will to Accompany RT Revocable Trust and Pour-Over Will for Unmarried Individuals without Children (RT-2 and PO-2) Summary of Dispositive Provisions of RT When to Use This Revocable Trust (RT-2) Income, Gift, and Estate Tax Consequences Forms *Form RT-2: Revocable Trust Agreement for Unmarried Settlor Who Wishes to Benefit Friend/Companion to Friend/Companion for Life, Remainder to Nieces and Nephews (in Trust if under 30) *Form PO-2: Pour-Over Will to Accompany RT Revocable Trusts and Pour-Over Wills for Unmarried Individuals with Children with Generation-Skipping Trusts (RT-3 and RT-4 and PO-3/4) Summary of Dispositive Provisions of RT-3 and RT Objective of GST Provisions for Unmarrieds Detailed Summary and Estate Tax Effects of Dispositive Provisions of GST-Exempt Trusts under RT-3 and RT When to Use These Revocable Trusts (RT-3 and RT-4) Forms *Form RT-3: Revocable Trust Agreement for Unmarried Individual with Adult Children with GST Trusts for Children upon Death of Settlor *Form RT-4: Revocable Trust Agreement for Unmarried Individual with Adult Children with Dynasty Trust for Descendants for Maximum Perpetuities Period *Form PO-3/4: Pour-Over Will to Accompany RT-3 and RT CHAPTER 17 REVOCABLE TRUSTS AND POUR-OVER WILLS FOR MARRIED COUPLES WITHOUT TAX PLANNING (COMBINED ESTATES NOT EXCEEDING LIFETIME EXEMPTION) Overview and Practical Considerations xxxv Copyright, January 2016

24 17.2 Summary of Dispositive Provisions of RT When to Use This Revocable Trust (RT-5) Income, Gift, and Estate Tax Consequences Forms *Form RT-5: Simple Revocable Trust Agreement for Married Settlor Outright Disposition to Spouse upon Death of Settlor (to Children if Spouse Does Not Survive) *Form PO-5 9: Pour-Over Will to Accompany RT CHAPTER 18 REVOCABLE TRUSTS AND POUR-OVER WILLS WITH CREDIT SHELTER/BYPASS TRUSTS FOR MARRIED COUPLES WITH COMBINED ESTATES EXCEEDING LIFETIME EXEMPTION Strategic Planning with Credit Shelter/Bypass Trusts Summary of Dispositive Provisions of RT Graphic Summary of Dispositive Provisions of Credit Shelter/Bypass Trust under RT-6 and Estate Tax Effects Alternatives for Structuring Bypass Trust A Using a Bypass Trust with a Limited Power of Appointment to Allow for Disclaimer When to Use Revocable Trust RT Income, Gift, and Estate Tax Consequences Forms *Form RT-6: Revocable Trust Agreement for Married Settlor with Credit Shelter/Bypass Trust *Form PO-5 9: Pour-Over Will to Accompany RT CHAPTER 19 REVOCABLE TRUSTS AND POUR-OVER WILLS WITH MARITAL/QTIP TRUST IN COMBINATION WITH CREDIT SHELTER/BYPASS TRUST: THE A-B TRUST STRUCTURE (COMBINED ESTATES EXCEED LIFETIME EXEMPTION) Strategic Planning with A-B Trust Structure Federal Tax Requirements of QTIP Trust A Maryland Estate Tax Planning and QTIP Trusts Summary of Dispositive Provisions of RT Graphic Summary of Dispositive Provisions of Credit Shelter/Bypass Trust under RT-7 and Estate Tax Effects When to Use Revocable Trust RT Income, Gift, and Estate Tax Consequences Forms *Form RT-7: Revocable Trust Agreement for Married Settlor with Marital and Bypass Trusts *Form PO-5 9: Pour-Over Will to Accompany RT Copyright, January 2016 xxxvi