HOUSE BILL REPORT

HB 392

BYRepresentatives Appelwick, B. Williams and Schmidt

Changing provisions relating to trust marital deduction gift distributions.

House Committe on Ways & Means/Revenue

Majority Report:     Do pass.  (11)

     Signed by Representatives Appelwick, Chair; Basich, Bristow, Grimm, Holland, Madsen, Rust, Schoon, Taylor, Valle and Winsley.

House Staff:Bill Freund (786-7093)

AS REPORTED BY COMMITTEE ON WAYS & MEANS/REVENUE MARCH 5, 1987

BACKGROUND:

Washington has a small estate tax, commonly called a "pick-up" tax.  This tax is equal to the amount of credit allowed under the federal estate tax for state taxes paid by the estate.

Various types of trusts are often used in estate planning.  One of these, the "qualified terminable interest property" (QTIP) trust has certain federal estate tax advantages.  However, Washington law is unclear as to whether an estate fiduciary has the necessary power to elect to take advantage of the special federal estate tax treatment of QTIP trusts.  Exercising a QTIP election under federal law may affect how the federal estate tax is distributed among the beneficiaries of the estate.

SUMMARY:

Unless a will or trust document directs otherwise, the fiduciary under a will:  (1) is given broad power to elect "qualified terminable interest property" (QTIP) treatment under federal estate taxes; and (2) is not required to reimburse beneficiaries for potential increased estate taxes resulting from a QTIP election.

Fiscal Note:    Not Requested.

House Committee ‑ Testified For:     Mike Carrico, Washington State Bar Association.

House Committee - Testified Against: None Presented.

House Committee - Testimony For:     Fiduciaries need more flexibility to take advantage of provisions contained in federal inheritance and gift tax law.

House Committee - Testimony Against: None Presented.