CFP Estate

Question 1

ILIT Taxation

Answer 1

Grantor trust - taxed to grantor, even if income pays life insurance policy premiums

Question 2

Unearned income SSI limits

Answer 2

must be lower than $861… income distributions from trusts to disabled beneficiaries could disqualify someone from SSI (this is why Special Needs Trusts are so important)

Question 3

Earned income SSI limi

Answer 3

$1,767 per month single
$2,607 per month couple

Question 4

Standby Trust

Answer 4

Used to manage a person’s assets if they become incapacitated
Grantor is trustee and beneficiary

Question 5

Simple Trust

Answer 5

All income must be distributed currently
Funds cannot be paid, permanently set aside, or used for charitable purposes
Amounts allocated to the corpus cannot be distributed

Question 6

Not available for AVD

Answer 6

depreciating assets: cars, patents, life estates, remainder interests, copyrights, intellectual property

Question 7

Estate Tax Formula

Answer 7

Gross Estate
- Minus: expenses, debts. taxes, losses
Adjusted Gross Estate
- Minus: marital and charitable deductions
Taxable Estate

Question 8

Used when principal needs agent to complete a specific form on their behalf

Answer 8

non-durable poa

Question 9

Section 303 Redemption

Answer 9

Allows the purchase of a portion of a decedent shareholder’s stock by the shareholder corporation to be treated as a sale or exchange rather than a dividend

Question 10

Section 303 Redemption Requirements

Answer 10

Redeemed stock must be included in decedent’s gross estate
Value for federal estate tax of all stock of the corporation that is included in determining the value of the decedent’s gross estate must be more than 35% of the excess of…
the value of the gross estate over [(estate expense, indebtedness, taxes) + losses)]

VALUE OF STOCK MUST EXCEED 35% OF GROSS ESTATE

Question 11

Section 2032A

Answer 11

An executor may elect to value qualifying real property based on its ACTUAL SPECIAL USE rather than its HIGHEST AND BEST USE

Max reduction in estate is $1,230,000

Question 12

Section 2032A Requirements

Answer 12

On date of death, property must be involved in qualified use
Value of property must be at least 50% of gross estate
At least 25% of the gross estate must be closely held business real property (commonly farm)
Property must pass to a qualified heir
Property must have been owned and used by biz for 5 out of 8 years

Question 13

Section 6166

Answer 13

A personal representative may defer payment of estate taxes if the interest in a closely held business exceeds 35% of the decedent’s adjusted gross estate

Created to alleviate estate liquidity problems

Question 14

If using Section 6166…

Answer 14

Executor may use installment payments to pay the federal estate tax attributable to the decedent’s interest in a closely held business

up to 10 equal, annual installments

Question 15

Payment of Section 6166

Answer 15

First of 10 annual payments must be made by the 5th anniverary of the due date of the estate tax liability

Question 16

3 Year Rule

Answer 16

When interest in a property is pulled back into gross estate if not outlived for 3 years

Question 17

What qualifies for 3 year rule?

Answer 17

Life estate relinquished within 3 years of death
Reversionary interest given up within 3 years of death
Transfer of a life insurance policy into an ILIT within 3 years of death (DOES NOT APPLY IF OWNER OF THE POLICY IS NOT THE INSURED)
Gift tax liability paid within 3 years of death (not the gift itself)