Ch 1 - Forecasting Estate Settlement Costs Flashcards Preview

CLU > Ch 1 - Forecasting Estate Settlement Costs > Flashcards

Flashcards in Ch 1 - Forecasting Estate Settlement Costs Deck (38):
0

Real Estate Fees

Legal Fees

Accounting Fees

Possible Gift Tax Trustee Fees

Name the 5 Asset Transfer Costs during lifetime.

1

Documentation fees

Realty transfer tax

Name the 2 real estate fees

2

Final Expenses

Probate

Appraisal Fees

Taxes

Name the 4 Asset Transfer Costs at Death

3

Funeral

Medical

Debts

Taxes

What are final expenses?

4

Court costs

Attorney

Executor

Accountant

What are probate costs?

5

Buy-sell agreements

When are appraisal fees necessary?

6

Federal

State

GST

What taxes are due at death?

7

No annual exclusion is available

Appreciation is "in"

High effective tax rates

Tax inclusive

Name 4 Facts about Estate Tax Costs?

8

Administrative cost projections

Estate tax estimations

Inflation projections

Name 3 forecasting issues when making informed guesstimates

9

Appraisal skills of forecaster

Input availability of clients other advisors

Types of assets held

Willingness to pay for accurate appraisals

Name 4 valuation estimation factors

10

Credit reports

Proper/Casualty liability insurance

Mortgages

Clients financial statements

Appraisal guide books

Business valuation software

Name 6 valuation sources

11

Real property

Cash/money equivalents

Stocks/bonds

Notes/mortgages

Outstanding loans by decadent to others

Income tax refunds due

Patent/copyrights

Damages owed decedent

Dividends declared and payable

Income in respect of decedent

Partnership/unincorporated business interests

Tangible personal property

Vested future rights

Decadents share of property held with others

Name the 14 items that qualify for Section 2033 inclusion.

12

*Transfer of rights of retained interests for life

*Transfer of rights taking effect at death

*Transfer of rights to alter amend revoke or terminate transferred property

*Transfer of power to affect beneficial interests in transferred property

*Transfer of life insurance policies

*Gift taxes paid

Name the 6 items that qualify for Section 2035 inclusion - i.e. Within 3 years of death

13

Transfers by gift with retained life interest

Retention of voting rights

Property comes back into estate at date of death value

Name the 3 items that qualify for Section 2036 inclusion.

14

Change beneficiaries for income or corpus

Hasten/delay time for receipt of property

Increase/decrease beneficiary's share

Terminate trust

Revoke trust

Manage/control trust property

Replace trustee with self/spouse

Name the 7 inclusion powers for section 2038 revocable transfers. Power to:

15

Add to trust corpus

Help determine investment policies

Direct issuance of voting proxies

Name the 3 NON inclusion powers for section 2038 revocable transfers. Power to:

16

*Did decedent have the right to an annuity while alive

*Did the decedent leave anything to a survivor

*Did the decedent or decadents employer provide some or all of the funds

Name the 3 things required for section 2039 annuity inclusion

17

Amount includible is the value of the survivor annuity provided by decadents or employers funds

What is the amount includible in a section 2039 annuity inclusion

18

Section 2040 - Joint Tenancies Right of Survivorship Married: 50% rule Barry & Betty buy a $200k house. It is titled in both names jointly with right of survivorship. Barry pays $150 and Betty pays $50. Barry dies shortly after home was purchased. What amount is included in Barry's GROSS Estate?

100K

19

Self

Creditors

Estate

Estate creditors

Section 2041 - general power of appointment - allows unlimited right to appoint property to:

20

Section 2041 - general power of appointment are limited rights taxed?

No - limited rights are not taxableUnder

21

Section 2041 - general power of appointment - when transfer rights were created by another donor: Mom creates trust fund with life income to son. Son can invade principal so not a limited power. What happens to the remainder?

Remainder goes to the moms other heirs

22

Section 2041 - general power of appointment - when transfer rights were created by another donor: Mom creates trust fund with life income to son. Son has testamentary power to appoint remainder to include his estate or estate creditors. What happens to the remainder if son does not exercise right?

Remainder goes to moms other heirs

23

*Direct/indirect responsibility to pay insurers estate expenses

*Retention of incidents of ownership by insured

Under section 2042 - Life Insurance Inclusion, what 2 scenarios cause life insurance to not be included in estate

24

Inheritance tax

State estate tax

Credit estate tax - decoupled states only

Name the 3 elements of state death taxes

25

Tax on right of beneficiary to receive estate property

What is inheritance tax

26

Tax on right of decedent to leave property to beneficiaries

What is state estate tax

27

Tax to bring state death tax up to credit amount allowed by federal law

What is credit estate tax in decoupled states

28

Gross Estate

Less:

  • Funeral expenses
  • Administrative expenses
  • Debts Taxes Losses

Equals: ??

Step 1 for computing federal estate tax - Adjusted Gross Estate

29

Adjusted Gross estate

Less:

  • Marital deduction
  • Charitable deduction
  • State Death Tax deduction

Equals:  ??

Step 2 for computing federal estate tax - Taxable Estate

30

Taxable Estate

Plus:

  • Adjusted taxable gifts (Post 1976 lifetime taxable transfers not included in gross estate)
  • Tentative tax base
  • Also have tentative tax and Gift tax payable on post-1976 gifts

Equals:  ???

Step 3 for computing federal estate tax - Estate Tax Payable Before Credits

31

Estate Tax Payable before credits

Less:

  • Applicable credit amount
  • Credit for foreign death taxes
  • Credit for gift tax for pre-1977 gifts
  • Credit for tax on prior transfers

Equals:  ??

Step 4 for computing federal estate tax - Net Federal Estate Tax Payable

32

Estate tax credit is 2,045,800 Estate tax inclusion is 5.25 million

What is the 2013 applicable credit amount?

33

Federal estate taxes

State death taxes

Funeral & administrative expenses

Unpaid property taxes

Unpaid income taxes

Creditor claims

What are the cash needs of an estate?

34

Confidence for client

Enables accurate estate settlement forecast

Highlights property ownership interests

Helps client formulate goals

Helps financial advisor recommend proper plan

What are the advantages of Fact Finders?

35

Estimate cost for current date of death Project costs in future then identify planning methods to:

  • Reduce settlement costs
  • Preserve estate assets
  • Secure additional funding (like life insurance)

How do you calculate estate settlement costs for Singles

36

Use 2 mortality contingencies

One person dies in current years and one in the future

Assume:

  • administrative costs -3%; growth rate
  • -2-4% Marital deduction usage
  • Both applicable credit amounts?
  • Deferral of all estate taxes at 1st death
  • Optimal marital deduction?

How do you calculate estate settlement costs for Marrieds?

37

Adequate retirement income

Estate tax deferral

Minimize taxes

Reduction of probate costs

Maximize children's inheritances

Charitable wishes

Special needs

What are the common spousal estate planning goals of spouses