1. http://www.advfn.com/money-words_term_1508_divestiture.html
Divestiture
Divestiture definition :
A complete asset or investment disposal such as outright sale or liquidation.
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http://www.ca-trusts.com/tradmin.html
THE FEDERAL ESTATE TAX has been repealed for 2010, but whether the tax will return will
depend on Congress. More up-to-date information is available on the blog for this website.
Until Congress takes action, no one knows what will happen to the estate tax. The following
information may be useful if the tax is imposed again in 2011:
THE FEDERAL ESTATE TAX is a tax on any transfer of assets from a deceased person's estate
to his or her heirs, except for transfers to spouses. Under current law, the federal estate tax will
be repealed as of January 1, 2010, but only for one year.
ALL OF THE ASSETS owned by the deceased person are subject to the estate tax, including
property in joint tenancy, living trusts, IRAs, and life insurance (if the insurance was owned or
controlled by the decedent).
EACH ESTATE HAS AN EXCLUSION from the tax that will increase each year until 2009, when
it will be $3,500,000. The exclusion amounts are as follows:
Year of Death Exemption
2002 $1,000,000
2003 $1,000,000
2004 $1,500,000
2005 $1,500,000
2006 $2,000,000
2007 $2,000,000
2008 $2,000,000
2009 $3,500,000
2010 Repealed
2011 $1,000,000
The maximum rates for the federal estate tax are as follows:
Year of Death Maximum Tax Rate
2001 55 %
2002 50 %
2003 49 %
2004 48 %
2005 47 %
2006 46 %
2007 45 %
2008 45 %
2009 45 %
2010 0%
2011 55%

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http://ca-trusts.blogspot.com/
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http://www.eastbayestateplan.com/faq-estate-planning.asp
Q. If I have a living trust, will my family avoid paying estate taxes?
A. This is one of the biggest misconceptions that people have with respect to living trusts and
estate planning. A properly funded living trust avoids probate when you pass away. However,
probate and the federal estate tax have nothing to do with one another. In order to save federal
estate taxes, your lawyer must incorporate estate tax planning provisions into your living trust;
and, generally, a living trust can only reduce (not in all cases eliminate) estate taxes and only if
you're married.
Q. How can I obtain help with funding my living trust?
A. There are several resources you may want to consider when funding your living trust. The
first is the attorney who drafts your estate planning documents. Usually, he or she will need to file
the deed of your trust for any real estate that is being placed in your trust and may fund your non-
real estate assets for you or give you letters or instructions that will help you transfer those
assets. However, your CPA, CFP, or financial advisor can also help with retitling non-real estate
assets or with completing forms to name your trust as beneficiary. Examples of such assets are
bank accounts, investment accounts, and IRAs. Considering how important it is to have your
assets properly titled once your revocable living trust has been created, it may be wise to seek
the assistance of all your advisors in funding your trust.
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http://www.jamesgburns.com/blog/page/3/
“How to Save Your IRA from Destruction”
Posted on January 1st, 2009 James 2 comments
If you have an IRA and you’re concerned about how to pass it on to your loved ones, an
approach of naming a trust as the designated beneficiary has several benefits over directly
naming the beneficiaries. The issues that can affect the named beneficiary to name a few are
they could be a minor, they might not be careful with money, or they may have marital or creditor
issues, and could be disabled to the extent the inheritance would affect their governmental
benefits. Next, if the beneficiary dies before distribution, the alternate beneficiaries may not be
accurate. Another condition we often see is the beneficiary may purposely or accidentally
withdraw monies from the IRA causing adverse tax consequences. Additionally naming the
client’s revocable living trust as the beneficiary, even with the appropriate language that extends
payout called “conduit provisions” may create issues with the age of beneficiaries in order to
“stretch-out” the required minimum distributions.
However, in 2005, the IRS issued Private Letter Ruling 200537044 (the “PLR”) that approved a
new type of revocable trust created solely to be the beneficiary of an IRA account. As a result of
this PLR, it is now possible for you to create an individual trust known as an IRA Beneficiary
Trust® which provides maximum protection and flexibility for your retirement investments.

3. This IRA Beneficiary Trust® insures that your beneficiaries will extend (“stretch-out”) their taxable
Minimum Required Distributions (MRDs) on the IRA over a much longer period of time. By using
this trust, the age of each beneficiary becomes the effective age for that beneficiary’s required
minimum distribution. As an effect, the IRAs can continue to compound for many years free of
income-tax and may literally grow to be worth millions of dollars! This type of trust goes by many
names and has also been called an IRA trust, an IRA Inheritance Trust, a standalone IRA trust,
an IRA stretch trust or an IRA protection trust.When your loved one/s inherit your IRA fund and
they keep the funds in the IRA over their lives and only take the minimum required distributions
each year (the “stretch-out”), the amount of money that can accumulate and be paid to them
should be massive in comparison to taking the monies directly and facing the immediate tax on
them. For example, assume you have a $150,000 IRA account; we will also further assume you
have two different ages (10 and 25) for your beneficiaries and presume that the account averages
an annualized 7% return. First, for the beneficiary who is age 35[i] and inherits IRA proceeds
upon your departure, the total benefit is $1,212,165 of after-tax benefit as opposed to $663,496
for taking the proceeds directly without the stretch-out. For the 10 year old beneficiary,[ii] they will
receive approximately $4,589,236 after-tax benefit as opposed to $2,641,198 which is what they
would receive lacking the stretch-out because of the immediate taxes due when they receive your
funds directly.
Therefore, you can see that this wealth amassing strategy only works if the beneficiaries hold the
inherited funds inside the IRA account. If a beneficiary takes all of the funds out of the IRA
account (referred to as a “blow-out” because it blows the stretch-out), this wealth accumulation
technique is lost. One great reason to create an IRA Beneficiary Trust® is to preserve the stretch-
out and prevent a blow-out. Unfortunately, we see this blow-out too often and it jeopardizes
wealth that must be saved. Many times your beneficiaries will not be aware of the tax rules and
their distribution choices, so they’ll withdraw from the IRA funds at the first opportunity or do a
forbidden rollover. Even if you hope that your children or beneficiaries will do the right thing by
keeping the funds in the IRA account for their lives to “stretch-out” payments, they may expose it
to numerous threats and hope is not a planning strategy as I’ve indicated in my book “The 3
Secret Pillars of Wealth.”
Some of the threats come in the form of a divorce where your beneficiary’s spouse could seek
half of the inherited IRA if they live in a community property state. The divorce rate is out of
control and a huge numbers of inherited money has become a target for the ex-spouse. Even
though inherited property is considered separate property it may become the only thing available
and because divorces can be very costly and last for years, your beneficiary may succumb to the
pressures of long and nasty divorce litigation and be willing to surrender a large portion of the IRA
account just to settle the divorce.
If you have a reasonable IRA you want to pass down or don’t think you’ll need to live on your IRA
you absolutely should be thinking about this strategy.
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http://search.irs.gov/web/query.html?st=11&charset=utf-8&col=allirs&qs=-Wct%3A
%22Internal+Revenue+Manual
%22&qt=ira+divesting+estate+tax&cqp=&fcol=&chkbox0=0&chkbox1=0&chkbox2=0&chkbox3=0
&chkbox4=0&chkbox5=0&chkbox6=0&chkbox7=0&chkbox8=0&chkbox9=0&chkbox10=0&chkbox
11=0&chkbox12=0&chkbox13=0&chkbox14=0&chkbox15=0&ff=0&rq=-1
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4. http://online.wsj.com/article/SB10001424052748704247904575240763427045900.html?
mod=rss_Money
The Hidden Dangers in IRAs
Is there a Ponzi scheme lurking in your IRA?
That may sound like a bizarre question. But in recent years, a number of well-off professionals
and their families have been ensnared in frauds that prey on individual retirement accounts,
according to securities lawyers and firms that manage these accounts.
[FAMILY] Mark Matcho
The vehicle typically targeted by such schemes is a self-directed IRA—a type of retirement
account that enables the owner to pursue a variety of investments outside the scope of stocks,
bonds and mutual funds. Self-directed IRAs are often used to hold hard assets like land, and
alternative investments such as hedge funds and so-called private placements. (Private
placements are securities sold without a public offering, typically to a small group of investors.)
Essentially, you are allowed to invest in anything except life insurance or collectibles.
Self-directed IRAs, which make up a minuscule share of the overall IRA market, are perfectly
legitimate vehicles, and the rules governing them are basically the same as for traditional IRAs.
But few large investment companies or banks will set up such accounts because of their
complexity. Instead, you'll need to find one of the custodial or administrative firms that specialize
in handling self-directed IRAs, such as Entrust Group in Reno, Nev., which says it blocks
investments that it knows are under investigation by securities regulators.
Costs typically include an annual custodial fee and transaction fees, ranging from $50 to a few
thousand dollars a year, depending on assets and activity. Some lawyers, accountants and
consultants will set up and maintain self-directed IRAs as well, often charging higher fees. Some
bank trust departments, particularly those at community banks, also handle the accounts.
Yet self-directed IRAs can be much trickier to handle than plain-vanilla retirement accounts,
accountants and tax lawyers say. One of the most-common traps is "self dealing." Investors aren't
supposed to benefit from the investment before they start making withdrawals in retirement. That
means any profits they make from an IRA investment must go to the IRA and not another account
—a stipulation that often trips people up and could disqualify the entire IRA. Also, if you use an
IRA asset to buy an asset you currently use, such as a vacation home or a condo for a child in
college, it could be a tax-law violation.
Given that self-directed IRAs can hold almost any type of asset, they can also make it easier for
ordinary investors to get burned. Faye Albert, a 67-year-old actuary in Miami, says she moved
two IRAs and a pension account to self-directed IRAs at a Connecticut bank at the urging of a
colleague and fellow actuary. Ms. Albert says the actuary pooled Ms. Albert's savings—which
eventually totaled some $1 million—with other assets to invest in what proved to be the Ponzi
scheme run by Bernard Madoff.
Ms. Albert says that she thought the bank, Connecticut Community Bank in Westport, Conn., was
holding her Madoff-invested assets in her account since it was charging her custodial fees. She
learned in late 2008 that it wasn't. "I thought my money was doing well, so I wasn't really following
the details," she says.
Ms. Albert filed a lawsuit last November against the bank in U.S. District Court in New Haven,
Conn., accusing it of negligence, breaching its fiduciary duty, and aiding and abetting fraud,
among other allegations. The bank has denied the allegations in a court filing, and its attorney
declined to comment further. In April, Connecticut's attorney general filed a suit against the bank,
saying it had "aided and abetted" Mr. Madoff's Ponzi scheme and failed to verify Mr. Madoff's

5. investments. The bank denies the allegations and says it will "vigorously defend the lawsuit."
In cases of fraud that start with self-directed IRAs, there are typically no real investments backing
the private placement, so the scheme eventually falls apart, says Pat Huddleston, a former
Securities and Exchange Commission attorney in Atlanta who serves as a court-appointed
receiver in such cases.
Hugh Bromma, chief executive of Entrust Group, says this happened recently to his own 78-year-
old mother-in-law. She recently lost $40,000 in an IRA investment that turned out to be a Ponzi
scheme. She thought she had placed the money in a certificate of deposit, but the paperwork
turned out to be "a copy of a certificate you could buy at the drugstore," Mr. Bromma says. "It said
it was an FDIC-insured deposit at NationsBank, which hasn't existed for years, of course." The
fraud came to light only after the alleged perpetrator died in January.
He recommends that investors concentrate on learning about the underlying investment, rather
than focusing on the promised return. "Find out if it's a security or not, and if not, why not," Mr.
Bromma says. "Find out what you're actually investing in. Can I touch it? Is there a physical
address? Where can I find out more about it?"
After learning of the fraud, he says he has tried, with limited success, to analyze his mother-in-
law's other investments. "It's like pulling teeth," Mr. Bromma says. "She says she trusted this guy
for 20 years with her assets and doesn't want her children knowing her business." He says she
bought an annuity through the same adviser—but instead of paying interest only, as she thought,
it is returning interest and principal each year, which means it will be worthless at the end of its
term.
Mr. Huddleston, who has started a sideline business that performs background checks on
investment advisers, recommends starting the conversation about investments with your parents
by asking them if they would tell you if they thought someone was trying to take advantage of
you.
"Of course they'll say yes," he says, "because they don't want you to get hurt. So then you can
say you appreciate that, and it gives you a chance to ask if you can do the same for them."
—Email: familyvalue@wsj.com
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http://www.entrustcalifornia.com/news/?Tag=Investor+due+diligence
Choosing an IRA Custodian or Administrator for Self-Directed IRAs
Posted by Entrust California on Wed, Oct 28, 2009
The ability to make your own investment choices from a broad range of investment types is why
most people choose to establish a self-directed IRA. But investors should also extend this
freedom to choose investments to selecting an administrator who meets their expectations of
safety, credibility, competence, and customer service. When choosing a custodian or
administrator for your IRA, like choosing an investment, there’s some criteria to consider.
First, here is some background information. An IRA custodian must be a bank, credit union, trust
company, savings and loan, or an entity that is licensed and regulated by the IRS as a “non-bank
custodian.” The assets are always held by a bank. Banks who offer self-directed IRAs often
contract out the administration, recordkeeping, and other services to third parties, often known as
third-party administrators, but the custodian of the IRA never relinquishes custodial control over
the IRA and the assets in it. Banks often vest the assets of IRAs in a nominee name for the
benefit of your IRA. Banks have hired third parties to provide such functions for decades, even for

6. IRAs that are not self-directed. (The relationship between the IRA customer, custodian, and third-
party administrator is described in IRS form 5305.)
Depository banks are always regulated and supervised by state and national regulatory bodies.
Banks that hire outside administrators are required to ensure that the administrators adopt the
policies and procedures approved by the custodian. The administrator must also perform its
obligations to the custodian to the same or better standard as the custodial bank. The
administrator is often required to have an independent third party verify all transactions. Cash
transactions are often only permitted by the independent third party, providing a level of control
and oversight not found in many banks.
When choosing an IRA custodian or administrator for your hard-earned dollars, here are some
things to consider:
1.
Make sure that you receive the custodial document, form 5305, from your administrator. Do
not open an account without this document.
2.
Read form 5305 to confirm that a relationship exists between the custodian and the nominee
or administrator. You might want to call the custodian to determine that the custodian has a
relationship with the administrator named.
3.
Make sure that the undirected funds in your IRA are FDIC-insured. If the IRA has more than
$250,000 in cash, find out if the custodian and administrator have programs for pass-through
insurance from other banks to protect cash in excess of the bank limit. FDIC insurance is backed
by the U.S. government. Brokerage firms use SIPC insurance, which is not backed by the U.S.
government, so there might be risk associated with cash deposits at brokerage firms.
4.
Visit your administrator or custodian. Make sure that they have a physical address. If the
custodian operates in a different state from the one it is chartered in, make sure that the state
regulatory authorities permit operations from a different state. A simple phone call to the
regulators should suffice.
5.
Find out how much insurance the administrator and custodian maintain for any eventuality
involving your account and the limits of coverage, for example, for errors and omissions.
6.
Determine how long the custodian or administrator has been in business involving self-
directed IRAs. Although time is not always an indicator of quality, those who have been in
business for a long time have done things properly because they have subjected to regulatory
scrutiny.
7.
Information provided by a self-directed IRA administrator in print or on a website must always
assure you that they sell no product or, if they do, it must be fully disclosed in their materials.
Stock brokers might offer self-directed IRAs and also sell securities or insurance products. If an
custodian or administrator provides you with literature from an investment provider along with
their IRA package, beware. True, impartial self-directed IRA custodians and administrators
cannot provide products, such as LLCs, real estate, notes, or securities, in any form.
8.

7. Determine if the custodian or administrator provides regular education through the Internet or
its offices. The education must be education only and not for selling investments.
9.
If there are offers that seem to permit you to use your IRA for purposes other than retirement
or appear to be to good to be true, check them out and evaluate them using an independent legal
or accounting advisor.
10.
Establish service levels for your account. Do the people responsible for handling your account
know the subject matter? Does the office handling your account understand local customs for
transactions?
11.
Is the reporting for your transactions in a form that is effective for you, such as online, in real
time, paper-based, 24/7 access, and so on
12.
Are fees understandable and fully disclosed?
13.
Watch out for providers that make efforts to disparage their competitors. In fact, many states
have laws barring the entities that they regulate from espousing negative comments about
another custodian or administrator. Rather than rely on the negative information, do your own
independent analysis and due diligence.
By Hugh Bromma, CEO of The Entrust Group
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http://hubpages.com/hub/How-to-save-your-IRA
How to save your IRA
By Kentent
Recession
* Money Features
http://asktheexpert.blogs.money.cnn.com/2008/02/11/a-recession-wont-wreck-your-
retirement/ This link offers advice for how to handle your IRA in times of a recession, so that you
do not reach retirement and have no money waiting for you to retire wit
* Portfolio Recession
This is a great link for learning about how you can make your portfolio recession proof,
including your retirement investments, such as your IRA. It offers information for how to save your
IRA.
During a recession, many people's investments
go down the drain. If you are saving for retirement with investments, such as an IRA, a recession
can be really unsettling. It can be worrisome that you will lose your retirement savings, and be left
with little or no money to retire with. This fear often leads people to divesting their accounts early,
and taking the penalties over the potential losses they may face as the markets go down. It is true
that during a recession your IRA may be at some sort of risk, but there are things you can do to
save your IRA. The following are some great tips for keeping your IRA safe and secure during
poor economic times.

8. One of the ideal ways to save your IRA, or to protect it from the effects of a recession is to
diversify the way your IRA money is invested. Generally during a recession, certain sectors of the
market will decline more than others, and so to ensure that no matter what the situation, your
portfolio does not decline too much, diversify. Of course, this may not protect your money
enough. So, consider investments that are FDIC insured, such as long term investing in CDs or
banks. Of course this is not the way to save your IRA, but save money for retirement. Let's look at
ways to better protect your IRA.
IRAs are one of the most popular ways to save money for retirement, and there are many
different options for how you save with an IRA. For those who have their IRA invested in stocks
and securities, a recession can mean loss. When the markets start to decline, people get
nervous, and they divest their accounts, which means loss. Unless you are retiring right away, the
best thing you can do to save your IRA is to continue contributing to it, and do not empty it. In
many cases, you can benefit from a recession when it comes to your retirement plans because if
you leave your money in, and keep contributing, you can buy more for less. This means that one
of the worst things you could possibly do is take the money out of your account.
Because most IRAs have an option to let you choose how you will invest the money that is in it,
you can choose ways to invest that are less susceptible to economy changes. Some people
choose to invest their money in high risk international companies or high risk stocks so that they
can see their money grow faster and in larger amounts. Others may choose a more conservative
report, such as a money market IRA, or IRA's used to buy bonds. These more conservative
approaches are better during a recession, and mean less chance of loss, but in
Surviving a Recession
* Protect Your 401(k) in Turbulent Times
This is a great article from an investor that offers tips for protecting your IRA and 401k the
biggest advice is that even during a recession you should not stop contributing to your IRA.
* Protect your Portfolio Recession in 2008
This is a great article for how you can protect your investments, including the money in your
IRA during a recession. It does not focus on growth, rather just on protecting the money you have
already invested.
* 9 Tips on Surviving a Financial Meltdown
This is a great article for how to survive the recession, and help your investment accounts
survive it as well, including accounts like your IRA and other savings plans.
To save your IRA during a recession, consider changing the way that your funds are being
invested. You may want to convert your stocks and securities into bonds
or money market accounts. This is a wise option because you can make your investment safer,
but also avoid the taxes, penalties, and fees that come from pulling money out of your IRA before
you retire.
If the economy is in a recession and you have several years until retirement, then you can invest
in stocks, and other less secure investments, and then just let the economy get back on track.
However, you won't be able to do this if you don't have a high tolerance level. If you are worried,
don't look at what is going on, when your statement comes, just file it away. That way you will not
panic and sell while things are low. Too many people get nervous, and then they lose money
because they make rash, emotional based decisions.
If you are retiring soon, and you want to save your IRA from recession, then be sure to invest
conservatively. If you do not have the time to ride out a poor economic time, then you should
make your IRA as bulletproof as possible, even if it means not as high of a return. The risk is
lower, as is the return, but at least you will have money to retire with. So, make sure you have a
clear idea of when you will be wanting to retire so you can determine how conservative you need
to be with your IRA.

9. Generally after a recession, there is economic growth. You can save your IRA by planning for the
time of economic growth and getting yourself in a good position to take advantage of it. This
means that while things are cheap, buy them up. As long as you do not pull your money out if
things continue to go south, you probably won't lose any money, but gain a lot.
So, if you want to save your IRA, make sure you have funds to invest in it during a recession. The
best way to do that is to eliminate your debts so that you free up money, and learn how to stretch
your dollar further. You will want to look for ways to cut back your expenses, whether it is
entertainment, housing, or something else. You can drive less, shower for shorter periods of time,
refinance your mortgage loans
to get lower interest rates, cancel unnecessary subscriptions and services, and learn how to save
for a rainy day. By practicing wise financial habits in all areas of your life, you will have more luck
saving your IRA. This is because you will have money to bolster it while times are tough.
There are things that should not be done if you are trying to save your IRA, they are as follows:
Saving you IRA
* Retirement Accounts
This is a great article about how you should not keep your money under your mattress during
a recession, but how investing it is still going to be a good idea, especially in retirement accounts.
* How to Protect Yourself if the Economy Sours
This article is written for those in fear of recession. It offers tips for making wise financial
management decisions, including IRAs during a recession so that your finances stay stable.
1. Do not try to outthink the markets. During a recession especially it is difficult to know what the
markets will do, and so trying to time the markets in order to make more from your IRA funds is a
poor strategy. Instead, just leave your money alone and be consistent. By consistently adding to
your IRA you will find that you will be buying when prices are high, and when they are low, which
means you will pay an average amount. When prices are low, if you have extra to invest, do so,
but don't stop investing.
2. Do not try to and move your money around quickly from place to place, it is just going to be a
lot of work, and if you do read the market wrong, you may end up losing more than you gain. In
addition to the likelihood of you knowing the market being poor, you will end up losing money and
time with transaction fees, commission, and penalties. So, avoid this, and your IRA will be in
better shape. People have been trying to read the markets and get ahead of the game for years.
On occasion they are lucky, but usually it just leads to hassle and frustration.
3. Don't divest your accounts. Pulling your money out of an IRA early usually means high
penalties and loss. If your retirement account is taking a loss, ride it out and stick to your original
retirement investment plan. You will only be able to save your IRA if you do not change your
investment strategies frequently. Instead, assess your tolerance levels and make investment
decisions, especially IRA investing, based on your tolerance levels, whether that means you can
take risks and invest in stocks, or need something more secure, so you stick to mutual funds, and
bonds. Also, if you pull your money out, or quit contributing to your retirement accounts, your
employer will too, so take advantage of your work plans and even if things are going down, keep
investing.
4. Never invest money that you need. While it is a smart idea to continue investing during a
recession, and while it usually will help save your IRA, it would not be wise to put your home, or
financial well-being in jeopardy to continue investing. You should only be investing "extra" money,
or in other words, money you can live without. This way if the money is lost, you won't be in as
bad of trouble.
In summary, if you want to save your IRA during tough economic times, or during a recession,
then be sure to make wise financial decisions so that you do not have to pull money out. In
addition to that, consider vesting your funds into more secure, less susceptible investment
options. Last but not least, if you do not have a high tolerance level for risk, or can't manage
watching your retirement investments decline, then ignore the market until you have to look at it,

10. or until the economy bounces back.
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http://www.caring.com/questions/put-ira-in-a-living-trust
There are a lot of good reasons to combine your IRA and living revocable trust, but the process
can be complicated so it's important to work with an attorney or other estate planning professional
to make it is done correctly.
in general, a living revocable trust is a good way to avoid probate and its attendant delays and
costs. It also is a good way to provide for family members when you do not want them to receive
inheritances in a lump sum, but rather have the money managed for them professionally and
distributed as you determine when you set up the trust. You also can provide for the trustee to
have tremendous discretion in the making of distributions to the beneficiaries of the trust. A living
revocable trust is quite flexible and can readily be adapted to your own family's particular needs
and situation. In addition, because it is revocable, you can change it throughout your lifetime.
The most effective way to combine an IRA and a revocable trust is to designate the trust as the
beneficiary of the IRA at your death. The rules for doing this are quite precise, but an experienced
estate planning lawyer will be able to do this for you. Inherited IRAs provide a great opportunity
for the continuance of income tax deferral or, in the case of a Roth IRA, the continuance of tax-
free growth over the lifetime of the person inheriting the IRA. One thing to keep in mind: in order
to maximize the tax savings, if more than one person will inherit the IRA, you should set up an
individual trust for each beneficiary.
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http://www.statefarm.com/insurance/life_annuity/estate_plan/taxgone.asp
Federal Estate Tax Update 2002-2010
The Economic Growth and Tax Relief Reconciliation Act of 2001 includes the repeal of federal
estate taxes for people dying after December 31, 2009. Between January 1, 2002 and December
31, 2009, the current federal estate tax will gradually decrease as shown in the following table.
Year Highest Estate and
Gift Tax Rate Amount Exempt
from Estate Tax
2002 50% $1 million
2003 49% $1 million
2004 48% $1.5 million
2005 47% $1.5 million
2006 46% $2 million
2007 45% $2 million
2008 45% $2 million
2009 45% $3.5 million
2010 Top Individual Rate
(for gift tax only) Unlimited - Taxes Repealed
It's very important to be aware that this repeal is temporary; the entire law "sunsets" (expires)
after December 31, 2010. This means that the provisions of this 2001 Tax Act will no longer be
effective on January 1, 2011 and the tax structure as it existed in 2001 will take effect again (in
2011, Federal estate tax will be assessed on property in excess of $1 million with a maximum tax
rate of 55%.)

11. Federal Gift Tax
Congress did NOT repeal the federal gift tax, although it raised the lifetime gift tax exemption (the
amount that may be passed without gift tax) to $1 million, effective in 2002. This means that a
person could make a total of $1 million of gifts over his/her lifetime before owing any federal gift
tax. Gifts of more than $1 million WILL be taxed, regardless of the exemption for transfers at
death. Beginning in 2010, the gift tax rate will equal the highest individual income tax rate
(currently scheduled to be 35% in 2010).
Basis of Inherited Property
"Step-up in basis" will continue until December 31, 2009. The "basis" of a piece of property is
generally the purchase price of that property and is used to calculate taxable gain when property
is sold. The greater the increase in value of property, the greater the taxable gain when sold. A
"step-up in basis" means that the basis of inherited property increases to the value of the property
on the date of death.
For the year 2010, "step-up" will be replaced by "carry-over basis" rules. Carry-over basis
generally means the basis of inherited property remains the same as it was for the deceased
owner; which potentially increases the amount of gain (and tax) when the property is sold. When
property is inherited, the heir can choose to take a "step-up" in basis for only $1.3 million of the
property. For any amount inherited over $1.3 million, the heir's basis will be the smaller of the
deceased owner's basis or the date-of-death-market value. The basis of property passing to a
surviving spouse can be increased by an additional $3 million.
Basis of property given to the decedent by someone other than his/her spouse within 3 years of
death cannot be increased.
Remember, in 2011, step-up in basis generally resumes as it existed prior to this Act, because all
provisions of this tax act expire after December 31, 2010.
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http://www.modernmedicine.com/modernmedicine/Modern+Medicine+Now/IRAs-can-be-
inherited/ArticleStandard/Article/detail/691900
Q: Can my family inherit my traditional individual retirement account (IRA)? If so, how do I make
sure it passes to them?
A: The answer to the first part of your question is yes. By designating your family as beneficiaries
of your IRA, you not only give them access to the funds in the account, but you "stretch" the tax
sheltering benefits of an IRA beyond your own life.
To do so, you must be sure to legally designate your family members as the account's
beneficiaries. Also, the Internal Revenue Service mandates required minimum distributions
(RMDs) from your IRA each year once you turn 70 ½ years old. The amount of the RMD is
determined by a "life expectancy factor" that the IRS publishes annually. Forget to take the RMD,
and you or your heirs will pay a penalty of 50% on the amount that should have been withdrawn.
Let's look at an example: a $300,000 IRA that grows and stretches into $2,139,189 over 3
generations, based on a 7% annual rate of return. Harvey, age 70, names his wife, Myrna, as his
sole beneficiary and over 2 years takes RMDs of $22,649 until passing away at age 71.
Myrna, age 66, treats Harvey's IRA as her own, names her son Marc as her sole beneficiary, and
over 8 years takes RMDs of $156,123 until passing away at 77. Myrna can treat Harvey's IRA as
her own because she is his spouse. Once it becomes hers, she is able to delay RMDs until she

12. turns 70 ½ years old.
Marc, age 53, maintains the account as an inherited IRA, names his son Logan as his sole
beneficiary, and takes RMDs totaling $933,576 (based on his own remaining life expectancy of 32
years) over the course of 23 years until passing away at age 75.
Logan, 41, takes RMDs of $1,026,841 (based on Marc's remaining life expectancy until assets
are divested) over the course of 9 years. Logan takes RMDs for 9 years because his father had
taken RMDs for only 23 of his 32-year life expectancy (32-23=9). Total withdrawals are
$2,139,189 over 3 generations.
To fully realize the benefit of stretching your IRA in this way, you must avoid early withdrawals.
Unfortunately, some investors view their IRAs as piggy banks, breaking them open whenever
unexpected expenses arise.
From a financial standpoint this is a serious mistake, one that should be avoided if at all possible.
Not only do you face a 10% penalty for withdrawals (under most circumstances) before the age of
59 ½ and income taxes, but withdrawals from your IRA are difficult to replace due to IRS-
mandated annual contribution limits.
So to recap: Try to delay withdrawals from your IRA until required by the IRS. Designate
appropriate beneficiaries, and instruct them to withdraw at the pace required by the IRS. Take
these steps, and your family can continue to reap the benefits of your IRA over multiple
generations.
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http://free-retirement-plan.com/retirement-plan-distributions/where-can-you-get-qualified-financial-
help-in-retirement/
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