Employment benefits with regard to the gross estate
March 26, 2014
What joint interests are included in the gross estate?
March 26, 2014
Show all

Are pre-death transfers included in the gross estate?

Yes, estate tax reaches pre-death transfers. The estate tax cannot reach property that was the subject of a completed gift during the decedent’s lifetime. Thus, to prevent easy avoidance of the estate tax by “deathbed transfers,” the estate tax has always included transfers made shortly before death. Section 2035 of the Code calls for inclusion in the gross estate of certain gifts made within three years of the decedent’s death. Congressional action, on the other hand, has excluded outright gifts for the most part due to the unification of estate and gift tax, but section 2035 continues to interact with other sections.

The lasting impact of the three year rule means: 1) although a gift made within three years of death is not included in the donor’s estate, any gift taxes paid with respect to such gifts are included, and 2) if the decedent possessed or retained a taxable interest or power with respect to certain property which would be included under another section of the code, the transfer or release of that power or interest within three years will be part of the gross estate. Were it not for this rule, the payment of related gift taxes would reduce the gross estate since if the decedent paid the taxes, the amount would not be in the estate, and the estate would be entitled to a credit.