If you are in the market for some prime New York real estate or nearly untouched jewelry from the early 20^th century, you may be in luck. Estate administrators for the Huguette Clark estate are selling key portions of the former mining heiress’s states in order to pay for estate taxes due on her estimated $400 million fortune.

Ms. Clark inherited her fortune as the sole surviving daughter of copper mining industrialist tycoon William Clark, a former United States Senator and the man after whom Clark County, Nevada is named. Ms. Clarke died last year at the age of 104, and while her estate is still in legal limbo, some of her most valuable property is being sold off.

Though she hadn’t worn it for at least 70 years, 17 pieces of Ms. Clark’s personal jewelry collection are being sold at auction at Christie’s auction house in New York in April. The pieces were discovered after her executors opened a safety deposit box she had in a New York bank. All of them were still in their original packaging. The most valuable, a very rare pink diamond ring, is estimated at $8 million in value, though experts believe it will sell for much more because of its condition and its connection to the now famous Ms. Clark.

The estate is also selling three of her New York City apartments, all of which are located in the same building adjacent to Central Park. Two of the apartments encompass the entire eighth floor of the building, while the third encompasses half of the 12^th floor. They are being listed for $55 million, though they apparently need some renovation as they had been unoccupied for decades.

John R. Vermillion & Associates, LLC is a member of the American Academy of Estate Planning Attorneys.

A qualified domestic trust is abbreviated “QDOT;” these trusts are used when an American citizen wants to transfer assets to his or her non-citizen spouse.  Assets passed in a QDOT have the benefit of the unlimited marital deduction so a citizen spouse can pass as much as he or she wants to a spouse.  Otherwise, gifting to a non-citizen spouse is subject to limits.

Why is a QDOT required?  For the same reason the IRS has most of its rules; the government wants to collect taxes on the transfer of assets.  In the case of a non-citizen spouse, the government is concerned that when the citizen spouse dies, the non-citizen spouse will leave the United States, taking the assets with him or her.  If this were to happen, the IRS would miss out taxing the money as it transfers to the next generation.

QDOT Requirements

1.       At least one trustee must be a U.S. citizen or a domestic corporation.

2.       The trust must include a provision that dictates that the trustee must withhold estate tax on principal distributed.

3.       The trust must include a provision that dictates that keeps the trust in adherence with IRS regulations to ensure collection of the estate tax.

4.       When the citizen spouse dies, his or her executor or trustee must elect, using the federal estate tax return (Form 706), to have the trust treated as a QDOT.

If you are a married couple and one of you is a citizen and one of you isn’t, consider a QDOT to qualify assets gifted or inherited by the non-citizen spouse, under the unlimited marital deduction.

John R. Vermillion & Associates, LLC is a member of the American Academy of Estate Planning Attorneys.

If you give away $100, it would really stink to have to pay $50 in gift taxes.  If you have to pay gift taxes, your $100 gift costs you $150.  If you can avoid paying gift taxes, and you can, why wouldn’t you?  You can make tax free gifts; here’s how to do it.

First, all gifts to an American citizen spouse or to a qualified domestic trust for the benefit of a foreign national spouse are tax free.  There is an unlimited marital deduction so any transfers during your lifetime (or at your death) are tax free.

Second, all gifts to a charity are tax free.  This means that you can give as much money as you want to the Animal Rescue League or the community library, tax free.

Third, each year you can give away up to $13,000 to as many people as you’d like and not pay gift tax on the transfer.  This means that no matter if you give $1 away or $1 million away, the gifts are tax free, so long as no individual receives more than $13,000 in a tax year.

Fourth, you can pay unlimited amounts of medical bills for as many people as you’d like and not pay gift tax.  The payments must be made directly to the medical provider, not to the person receiving medical treatment.

Fifth, you can pay unlimited amounts of tuition for as many people as you’d like and not pay gift tax.  The payments must be made directly to the educational provider and be for tuition only.  Don’t give the money to the student.

Sixth, you can use your unified credit exemption during your lifetime.  In 2011, the unified credit amount is $5 million; it’s the same next year (2012) but is indexed for inflation.  In 2013, the unified credit returns to $1 million so make your tax free gifts now.

John R. Vermillion & Associates, LLC is a member of the American Academy of Estate Planning Attorneys.

The unified credit is an exemption that you can use during your lifetime or at your death to eliminate or minimize the amount of taxes owed on the transfer of wealth.  The exemption is called a “unified” credit because it’s a credit against the gift tax for transfers, during your lifetime, or against the federal estate tax, after your death.

In 2011, the unified credit amount is $5 million.  This means that you can give away $5 million and not pay any gift taxes.  However, you do need to file a gift tax return, indicating that you have used a portion or all of your unified credit.

If you die in 2011, your estate can pass any assets up to your unused unified credit amount.

Marie gives $3 million dollars to a trust for her grandchildren on January 30, 2011.  She died December 13, 2011 with an estate worth $1 million. 

There were no gift taxes due on the transfer to Marie’s grandchildren because she used $3 million of her unified credit. 

There are no federal estate taxes due upon her death because she still had $2 million of her unified credit left and she only needed to use $1 million of the credit at death.

The unified credit is like a coupon that you use at the grocery store.  Picture yourself at the checkout line.  You place all your groceries on the belt and give the clerk your coupons.  You pay whatever the coupons don’t cover.

When you give assets away or when you die, assets are virtually placed on the conveyer belt.  You give the IRS your unified credit coupon.  You pay whatever the coupon (i.e. unified credit) doesn’t cover.

If you have questions about the unified credit, gift taxes, or federal estate taxes, consult with a qualified estate planning attorney.

John R. Vermillion & Associates, LLC is a member of the American Academy of Estate Planning Attorneys.

Both the gift tax and the $13,000 annual gift tax exclusion confuse nearly everyone.  The bottom line is that you can give away way more than $13,000 without paying gift tax.  In fact, most people could give away every penny they have and still not pay gift taxes.  Here’s how to give away assets without paying gift tax.

• You can give away $13,000 per calendar year to as many people as you’d like.  The annual gift tax exclusion is unlimited, so long as you spread the gift among individuals so that no one receives more than $13,000.

• However, if you’re married, this amount doubles to $26,000 per individual to an unlimited number of individuals.

• Plus, you can pay an unlimited amount directly to the provider of education or tuition for as many people as you’d like.

• Surprising to most people, with good reason, you can gift up to and additional $5,000,000 to anyone you want in 2011 and 2012, using your lifetime unified credit exemption.

• Again, if you’re married, this amount doubles to $10,000,000.

• 529 plans for higher education have special rules.  You can use 5 years of your annual gift tax exclusion all at one time for as many individuals as you would like.  This means that you can fund a 529 plan with $65,000 all at once.  But, remember that you can’t make additional gifts under your annual gift exclusion until 5 years lapses.

• You guessed it, if you’re married, you and your spouse can jointly gift $130,000 into all the 529 plans you want without incurring any gift tax.

If you make annual gift tax exclusion gifts (i.e. $13,000 or $26,000) or gift directly to a medical or education provider, you do not need to file a gift tax return.  However, if you use some of your lifetime unified credit exemption, you must file an informational gift tax return even though no taxes will be assessed.

John R. Vermillion & Associates, LLC is a member of the American Academy of Estate Planning Attorneys.