Estate Tax on Gift Tax: The Liability Conundrum
4 Pages Posted: 8 Jun 2009 Last revised: 12 Jun 2009
Date Written: June 8, 2009
This article addresses the specific question of who -- as between the beneficiaries of the estate and the lifetime donees -- will bear responsibility for estate tax generated with respect to gift tax included in the decedent’s gross estate, absent a specific provision to the contrary. Although some case law suggests that the donee of the lifetime transfer should pay the taxes, this result is at odds with the Uniform Estate Tax Apportionment Act (UETAA). The UETAA’s approach to this issue is more administratively convenient and thus represents a more sensible approach. Because the UETAA has not been adopted widely, we offer a simple form of agreement that can be adapted for use by any donor who wishes to change the statutory default rules about the payment of additional estate tax liabilities.
Keywords: estate tax, gift tax, wills, tax apportionment, apportionment clause, Uniform Estate Tax Apportionment Act
JEL Classification: K34, K11, K34
Suggested Citation: Suggested Citation