Estate/trust

Question 1

Inheritance tax

Answer 1

Tax on person receiving the money or property

Question 2

Death tax (estate tax)

Answer 2

Tax on person giving the money or property upon death. Does not apply to everyone (35%-40%)

Question 3

When is death tax applied

Answer 3

On ALL of the specified amount over 5M for singles and 10M for adults

Question 4

What is exempt from estate tax?

Answer 4

Estates left to a spouse or a charity

Question 5

Gift tax

Answer 5

35% on any transfers of wealth over 13000 Within one year

Question 6

Stepped-up basis

Answer 6

After death tax, the value of your estate upon death becomes the new original value

Question 7

3 parts of a trust

Answer 7

Thruster/grantor/settlor, trustee, beneficiary

Question 8

What kind of relationship is a trust

Answer 8

Fiduciary (meaning there is a caretaker), someone acting in the grantors best interest

Question 9

Two types of trust

Answer 9

Revocable living trust (changeable when alive)

Irrevocable trust- unchangeable and determined from will

Question 10

Number one benefit of a trust

Answer 10

Any assets in a trust bypass the asset probate process when someone dies, something you can’t do with a basic will.

Question 11

QTIP trust

Answer 11

Qualified terminable interest property

–Where the spouse gets all of the estate until she dies and it is willed from there

Question 12

Estate tax formula

Answer 12

Estate-gifts to charity- part given to spouse= estate amount

Question 13

Freezing preferred stock

Answer 13

Est a call price via buy back clause, an option on the stock certificate. Nobody will pay more for the stock than what the call price is

Question 14

What should you give to charity?

Answer 14

High appreciated things because charities don’t pay income tax and thus don’t pay tax on the gain

Question 15

String

Answer 15

People involved in things implicitly . Incidents of ownership

Question 16

Joint tenancy

Answer 16

Things are split 50/50 on death, for instance house between spouses

Question 17

Major helper in estate tax planning is….

Answer 17

Preferred stock because we can do whatever we want with pref stock

Question 18

What is a way to give large donations tax free?

Answer 18

Use debt,
Issue a bond to to te charity (ex JBU). Jbu lends and all the money and we pay it back with interest, charity, and the face amount. Genius

Question 19

Adverse party

Answer 19

A person involved in a trust who has to give permission for a grantor to be involved in his own trust….a mommy for trusts

Question 20

Corpus (trust principal)

Answer 20

Asset within a trust

Question 21

Crummy Power

Answer 21

Purpose is to qualify gifts to a trust for annual exclusion from gift tax.
Beneficiary allowed to withdraw money for a period of time (example, a month) to qualify for present interest under gift tax

But when they don’t accept the money, it is like the kid “gives the money to the trust” by not accepting it. The giver gives the gift and the money instead goes into a trust (Irrevocable life-insurance trust) for life insurance where it is made to pay premiums on life insurance to give the beneficiary beaucoup bucks upon death of the grantor, while making sure the estate taxes are at a minimum.

The giver can already have negotiated with the receiver now so both parties benefit.

Question 22

Bypass trust/b trust/credit shelter

Answer 22

Reduce or bypass estate taxes via irrevocable trust

Hold asset of 1st spouse and wife does too in order to avoid losing tax exclusions

Question 23

Charitable lead trust

Answer 23

A trust set up to pay a charity every yr until the end of the trust life. The remaining funds go to selected beneficiaries
If fixed income, an annuity trust
If a %, its a unitrust

Question 24

Charitable remainder trust

Answer 24

CRAT and CRUT payments made to beneficiaries each yr until end of the yr. The remainder to charity

Question 25

Living trust

Answer 25

Grantor is trustee and beneficiary. Used to avoid probate and provide asset management during disability

Question 26

Disposition

Answer 26

Getting rid of an asset via direct sale

Question 27

Major dif btwn revocable and irrevocable trust

Answer 27

Ability to change and completion of gift for tax purposes

Question 28

Prenuptial

Answer 28

Deciding in advance who really owns what in a married couple in case of divorce

Question 29

A put vs a call

Answer 29

Put is where the buyer has control over the price. Call is the owner over the price

Question 30

to contest

Answer 30

to argue against something

Question 31

executor

Answer 31

appointed to execute a WILL!!

Question 32

Purposes of a trust

Answer 32

Avoid probate (time because it can take a while for things to be hashed out) and its more immediate, and its cheaper and if someone has sticky family issues.

Question 33

ILIT

Answer 33

irrevocable life insurance trust, usually set up via the crummy power to buy life insurance so that the beneficiaries don’t receive the gift right now but rather that gift goes toward the premium for the life insurance, of which they will receive at a later time.

Question 34

When is it cheaper to give, life or after life?

Answer 34

LIFE, because once you die, there is a STEPPED UP BASIS. oh dam.

Question 35

It’s always important to never use just the word tax

Answer 35

there is income taxable and there is estate tax, both of which are separate from one another

Question 36

exclusion

Answer 36

everyone gets 5.34 million of tax free estate/gifts in a lifetime

Question 37

Trusts are like people meaning…

Answer 37

they pay income tax and the trustee of the trust must fill out a fiduciary return

Question 38

all dividend income from a trust is….

Answer 38

INCOME TAXABLE, nigga

Question 39

tenants by entirety

Answer 39

surviving spouse becomes owner of everything

Question 40

stepped-up basis

Answer 40

any appreciated item that occurs in one’s life. UPON DEATH, THE FMV at date of death is new basis.

STRATEGY: HOLD ON TO APPRECIATED THINGS, get ride of those deps antes de morir!!!

Question 41

Devise

Answer 41

when real estate is left through a will

Question 42

Bequest

Answer 42

giving assets via a gift by the will

When given to charity “A legacy gift”

Question 43

Endowment

Answer 43

a bequest used for a SPECIFIC purpose

Question 44

adjusted basis

Answer 44

FMV-Adjusted basis

Question 45

charitable donations max amount

Answer 45

only can give to up to 50% of AGI every year

Question 46

Gift tax vs Estate Tax

Answer 46

Gift tax is during life, estate during death.

Question 47

when is a gift complete?

Answer 47

when the owner has no more power to revest titles (example: Example death or irrevocable trust)

Question 48

bona fide

Answer 48

honest, genuine, IN GOOD FAITH

Question 49

ways to evaluate the worth of a business

Answer 49

1. Net assets method (equity)
2. Capitalize earnings (used by IRS), making business worth the highest to tax a lot.
   make into asset
   earnings/risk factor= the return on investments
   multiple by 6
   (For a brand new business multiply net income by 3)
3. Goodwill calculation

Question 50

testate vs intestate

Answer 50

with a will, or without a will

Question 51

Dowry

Answer 51

money brought into a marriage

Question 52

Estate tax with gen skip and gift

Answer 52

Estate and gift are separated from generation

Question 53

Medicaid

Answer 53

income must be below a specified amount. State run. Every state is different.

Question 54

Medicare

Answer 54

for older people. Federally run

Question 55

Biggest expense of Rental property

Answer 55

depreciation

Question 56

SSI

Answer 56

Supplemental security income.

• pays benefits to disabled adults and children who have limited income and resources.
• also payable to people 65 and older without disabilities who meet the financial limits.

People who have worked long enough may also be able to receive Social Security disability or retirement benefits as well as SSI.