Maryland Review

Volume 14 | Issue 1 Article 4

Income, Gift nda Estate Tax Considerations in Marriage and G. Van Velsor Wolf

Follow this and additional works at: http://digitalcommons.law.umaryland.edu/mlr Part of the Estates and Trusts Commons, and the Family Law Commons

Recommended Citation G. V. Wolf, Income, Gift na d Estate Tax Considerations in Marriage and Divorce, 14 Md. L. Rev. 3 (1954) Available at: http://digitalcommons.law.umaryland.edu/mlr/vol14/iss1/4

This Article is brought to you for free and open access by the Academic Journals at DigitalCommons@UM Carey Law. It has been accepted for inclusion in Maryland Law Review by an authorized administrator of DigitalCommons@UM Carey Law. For more information, please contact [email protected]. 19541 MARITAL TAX CONSIDERATIONS

INCOME, GIFT AND ESTATE TAX CONSIDERATIONS IN MARRIAGE AND DIVORCE* By G. VAN VELSOR WOLFt

CREATING THE FAMILY UNIT Tax Benefits of Matrimony Although recognized in different countries in quite dif- ferent ways, the family as an economic unit seems to have

t Of the Baltimore City Bar; A.B., Yale University, 1930; LL.B., Harvard Law School, 1933. * This article will appear as a Chapter in a forthcoming book, BASIC ESTATE PLANNING, being compiled and edited by John Alan Appleman, Esq., of the Illinois Bar, to be published (copyright reserved) by The Bobbs- Merrill Publishing Company, Indianapolis, Indiana [final publication to be temporarily withheld, see n. 176, p. 60]. Because the REVIEw feels that the article will be of great value to the many attorneys whose practice or schedule does not enable them to stay abreast of the tax field, the RFWiEw is including, as an index, a summary of the section and subsection headings, and a list of abbreviations of the vari- ous publications referred to and the technical terminology used. INDEX Page Page CREATINO THE FMILY UNIT.... 3 Alimony payments (con't.) Tax benefits of matrimony-__ 3 Income taxes (con't.) Timing the marital status..-- 5 Lump sum - instalment, Ante-nuptial agreements 7 periodic payment ...... 31 Gift taxes _ _- 7 Support of children..... 35 Timing ------8 Life insurance premiums.... 36 Estate taxes 8 Attorneys' fees 38 Income taxes 9 Accumulating deductions-. 39 Timing 11 Amendment of agreement Summary - ante-nuptial agree- after ...... 40 ments - 11 Providing for alimony through a trust...-...... 41 USE OF THE FAMILY UNIT---- 12 Payment of alimony Pitfalls to watch-..... 12 through an annuity_...... 44 Family partnerships 14 Marital settlements involving Summary - family partner- property rights 45 ships 18 Gift taxes 45 Gift and lease-back ... . 19 Transfers under a decree Family annuities 20 of court 46 DISSOLVING THE FAMILY UNIT..... 23 Transfers for the benefit of Death .M...... -. ... 23 children 48 Separation or divorce....-..-- 24 Timing of transfer...... 49 Alimony payments 25 Valuation of gift in instal- Income taxes 25 ments . 50 Decree necessary _ 25 Separate agreements 50 Type of decree . 26 Income taxes 51 Divorce Immediately ... 27 Death of wife ..... 52 Necessity of a writing 27 Death of husband------.--- 52 Payments must be for sup- Income taxes . ....52 port - 28 Estate taxes 52 Support obligation must Life insurance ...... 53 exist at time 28 Income to wife___ 53 Agreement incident to de- Taxable in husband's estate 55 Summary - cree - 29 separation agree- Payments in cash or prop- ments 56 erty; savings 31 INTERNAL REVENUE CODE OF 1954- 60 MARYLAND LAW REVIEW [VOL. XIV become entitled more recently to special, or at least new, benefits. We are told that in some places allowances are made or bonuses are paid for the birth of children, whether or not in wedlock. In the United States the approach is more subtle. The benefits are substantial, but only after the marriage vows have been exchanged. Contemplation of matrimony, even under a completely valid and binding