Estate Planning

Question 1

Lifetime Exclusion amount

Answer 1

2023: $12,920,000

Question 2

Taxable Estate over $1M

Answer 2

Tax: $354,800 + 40% on amount over $1M

Question 3

Discretionary Power of Appointment

Answer 3

Trustee has discretion to give to beneficiaries for purpose of:
Health, Education, Maintenance and Support

Question 4

Alternate Valuation Date

Answer 4

can use valuations 6 months after death
Must lower total gross estate and estate tax due
Applies to all Assets EXCEPT: wasting assets & assets disposed of between death and alt date

Question 5

IRD Assets

Answer 5

Income in respect of a descendent
-income dependent was entitled to, but did not receive before death
- no step up in basis
Ex: IRAs, annuity payments, income earned not paid

Question 6

Inter Vivos Trusts

Answer 6

trust created during life
avoids probate

Question 7

testamentary Trust

Answer 7

trust created at death (per will)
does not avoid probate

Question 8

GRAT

Answer 8

Grantor Retained Annuity Trust
pays fixed annuity to grantor for defined term, remainder to non charitable beneficiary(ies)
if grantor dies before term, included in estate

Question 9

GRUT

Answer 9

Grantor Retained Unitrust
Pays fixed percent of assets each year that is revalued annually
not suitable for hard to value assets

Question 10

QPRT

Answer 10

Qualified Personal Resident Trust
- transfers house to trust, ability to use home (rent after time)
Included in estate if dies before term ends
Only 1 residence per QPRT, person can have 2 QPRTs

Question 11

Sec 2503 (b) and Sec 2503 (c) Trusts

Answer 11

trusts for minors
B: can hold assets for lifetime, income annually
C: Distrubute by age 21 (no income required)

Question 12

ABC Trusts

Answer 12

A Trust: Power of Appointment Trust
B Trust: Credit Shelter/ Bypass Trust
C trust: QTIP Trusts

Question 13

Pooled Income Funds (PIF)

Answer 13

charitable contributions pooled in a trust maintained by the charity
Income for life of donor, remainder to charity
can add contributions after established
Tax Deduction: property value less FMV of retained income

Question 14

CRAT

Answer 14

Charitable Remainder Annuity trust
provides fixed income to donor and remainder gets paid to charity
- min 5% income, no more than 50% initial value
- life or up to 20 year term annuity
no additional contributions, invades corpus if insufficient assets
Deduction: value less retained annuity payments

Question 15

CRUT

Answer 15

Charitable Remainder Unitrust

provides income to donor and remainder gets paid to charity
tax ded: value of property less interest retained payments
- income more flexible than CRAT
-income at least 5% of CURRENT FMV
- life or up to 20 year term annuity
additional contributions permissible

Question 16

Life Insurance Objectives

Answer 16

Protect Income Stream
Source of Funds for Education
Liquidity at Death
Retirement Income
create or sustain family wealth

Question 17

IRC Section 303

Answer 17

the estate of a deceased shareholder may redeem enough shares to cover the death taxes (federal and state estate, inheritance, and generation-skipping transfer taxes), funeral expenses, and administrative expenses of the decedent, and the shares redeemed for this purpose will qualify for capital gains tax treatment.

Question 18

Disclaimer Clause

Answer 18

• heir may disclaim and will go to other listed in disclaimer clause
  
  • disclaiming party cannot benefit
  • disclaiming cannot direct disclaimer
• Spouse may disclaim so more assets go to kids and applicable estate tax credit is utilized
• kids may disclaim so that surviving spouse may inherit to utilize marital deduction

Question 19

survivorship clause

Answer 19

• requires beneficiary to survive the decendent for a specific period of time it inherit
  
  • cannot be longer than 6 months to qualify for marital deduction

Question 20

Crummy Provision

Answer 20

• right of a trust beneficiary to withdraw some or all of any contribution to a trust for a amount of time (30 days)
• may limit withdrawal right to an amount equal or less than annual exclusion

Question 21

GRIT (Grantor Retained Income Trusts)

Answer 21

• created by a person who keeps an income interest in the trust
• grantor will transfer property to the trust, retain income for period of time, and remainder is transferred to beneficiaries at end of term

Question 22

NonDurable / Limited Power of Attorney

Answer 22

Power ends when principal is no longer legally competent

Question 23

Durable Power of Attorney

Answer 23

authority continues after incompetence

Question 24

Springing Power of Attorney

Answer 24

Agent has no power until incompetency

Question 25

QTIP trust

Answer 25

Current Income trust
- Provides surviving spouse with income for life but deceased controls trust property after spouse dies
LAME
L- lifetime income for spouse
A- Annual payments to spouse
M- Mandatory payments
E- Exclusively for spouse

Question 26

Special use Valuation (Sec 2032A)

Answer 26

can elect to use current use value of property instead of FMV - cannot be reduced more than $1.31M
- Must be used in Farming or trade or business actively managed by decedent or family 5 out of 8 years before death