“Estate planning is not just about taxes — it is also about family.”
There is much to say here.
Long, long ago (when I began practicing law), trusts were taxed at rates more favorable than that of individuals. It was all the rage to set up trusts to save on income taxes. Following a common pattern, legislation was enacted that ignored certain trusts (called "grantor trusts") for income tax purposes. The IRS used its regulatory authority to keep trusts from being taxed separately by liberally interpreting the statute. Then things changed. Now trusts are taxed at higher rates than individuals, at least at lower income levels. So, creative tax practitioners began to deliberately make trusts subject to the grantor trust rules. Further, it was discovered that a gift to an irrevocable trust could be made complete for gift tax purposes, and yet still be subject to the grantor trust rules, which meant that the grantor paid the trusts income taxes. Is the payment of the trusts income taxes a taxable gift to the trust? Apparently not. Thus was born the IDIGIT, the intentionally defective grantor trust.
Your Will gives different property to A, B and C. D gets a $1 million pecuniary (cash) legacy, which can be satisfied in cash of in kind. The remainder of your estate goes to E. The estate tax is $2 million. Who pays it, A, B, C, D or E? Some of them? All of them? In what proportions?
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