Estate Flashcards by NIcole Stotts

Quasi property

Property that would have been community property except that it was acquired while the couple was living in a non community property state

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Who can own community property

Only spouses

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Can creditors sever tenancy by the entirety?

Yes, but only joint creditors

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What techniques can be used to avoid ancillary probate

JTWROS
Revocable living trust
Tenancy by the entirety

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What kind of property does not go through probate?

JTWROS
TBE
revocable trust

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When are survivorship annuities included in gross estate

Annuities full value is included if survivor has right to a lump sum

Present value of future payments is included if the survivor receives periodic payments

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What is a life estate

Gives the owner the absolute right to possess, enjoy, or derive income from the property for life

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Are life estates included in a gross estate

No, only a retained life estate is included

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Why is our transfer tax system considered cumulative

The calculation is based on cumulative transfers

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When will a general power subject the holder to gift tax liability

When there is a lapse

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What is form 709

Gift tax form

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How do you calculate a taxable gift?

FMV-annual exclusion

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What are deductible/exempt gifts

Qualified payment to an education institution for tuition
Qualified payment for medical care
Gift to spouse
Gift to qualified charity
Gift to political organization
Gift to president of USA

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In tax year 2022, what is the max amount you can gift someone and not pay federal gift taxes?

12,076,000

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In an inter vivos trust, who has legal title and who had equitable title?

Trustee holds legal title

Beneficiaries hold equitable title

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Simple trust keys

Income is distributed

Income taxed to beneficiary

No distribution of corpus

No charitable gifts

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Complex trust keys

Income must or may be accumulated

Income accumulated is taxed to trust

Income distributed is taxed to beneficiaries

Corpus may be distributed until trust terminates

May make charitable gifts

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What is Distributable Net Income (DNI)

The accounting rule that limits the amount that trust (or estate) beneficiaries must report as gross income for income tax purposes

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What are the purposes of DNI

Provide trust with deduction to beneficiaries

Limit the portion of distribution that is taxable

Ensure character of distributions remain the same

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To be taxed as a separate entity a trust must meet what requirements?

Irrevocable

Grantor has not retained control

Income is accumulated

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What is a spendthrift provision

Prohibits the transfer of the beneficiaries interest and stipulates that it is not subject to the claims of the beneficiaries creditors

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What are the other names for a bypass trust

Nonmarital trust
B trust
Nonmarital b trust
Family trust
Unified credit trust
Applicable credit amount trust
Applicable credit amount shelter trust

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Other names for a marital trust

Power of appointment trust
Spousal trust
Marital “A” trust

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Other names for QTIP trust

Qualified terminal interest trust
C trust
Current income interest trust

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QTIP KEYS

QTIP is LAME Lifetime income interest for spouse Annual payments to the spouse Mandatory payments to the spouse Exclusively for the spouse

What is an estate trust

Marital trust that does not provide surviving spouse with income stream

What kind of property can be held in a UTMA that cannot be included in a UGMA?

``` Real estate Partnership interests Patents Royalty interests Intellectual property ```

Sprinkling/spray provision

The power to direct/distribute INCOME at the DISCRETION of the trustee Can be a provision in an estate or trust

What is a dynasty trust

B trust that benefits multiple future generations

Uniform statutory rule

Trust can violate the rule against perpetuities by stating the number of years

Is an irrevocable trust a gift of present interest

No, must have crummey provisions

Can Simple trusts be irrevocable

Yes

Required minimum gifting amount under a CLUT

None

Who controls and funds a donor advised fund

Controlled by sponsoring organization Funded by individual donor

What is the typical use of a CLAT for?

Large donation

Is there a required minimum distribution for a CLUT?

What is the catch up provision for SIMPLE plans?

$3000

Other names for a 403B

Tax deferred annuity (TDA) Tax sheltered annuity (TSA)

Is premium paying an incident of ownership?

No!!!

What is a reverse gift

Wealthier spouse makes a gift of a low basis asset to the dying spouse

For a reverse gift to work, how long must the I’ll spouse live after gift

At least a year

Is being the insured an incident of ownership

No!!

Can an s corp issue preferred stock

When is a child no longer eligible for kiddie tax

The year in which they turn 24

What are the duties of fiduciaries

Loyalty to beneficiaries Duty to not self deal Duty to preserve property and make it productive Duty to be impartial toward all beneficiaries

Example of self dealing

Trustee sells trusts assets to himself below FMV

Taxable distribution

Trust has beneficiaries in 2 or more generations and the trustee makes a distribution to a skip person

Taxable termination

Termination of a non skip persons interest in income or principal of a trust with the rest is the skip person becoming the only remaining beneficiary

What qualifies as closely held?

Sole proprietorship Partnership Corporation

Are taxable gifts included in a gross estate

NO-only gift taxes paid

If on the exam the question says there is a QTIP trust that they want to go to their GRANDCHILDREN what is the answer?

Reverse QTIP

If alternative valuation date was elected, can assets be valued at something other than the 6 month valuation?

Yes-wasting assets may not be valued at AVD

Can contingent beneficiaries be listed for a disclaimer?

- can have contingent beneficiaries if wanting to disclaim property - property with contingent beneficiaries cannot be listed for a disclaimer trust to work

Causa Mortis

Gift conditional upon the donors dying

What is added to the taxable estate to determine the tentative tax base

Taxable gifts

Co-ownership discount

Is for real estate ownership with another person

Key person discount

May be allowed for a business that lost a key employee who was responsible for its good will, administrative or management skills

When is a reversionary interest tainted for income tax purposes?

When the interest exceeds 5% of the trust value at the time of creation

Do TIC assets get a set up in basis?

Only a 1/2 step up *this can be troublesome with spouses

What operates under the conduit principle?

Simple trusts NOT complex trusts Certain business entities (ex:LLC, sole proprietorship)

Is a 2503C trust included in the trustees estate?

Yes! | *bc of this grandparents should not be trustees

The RULE AGAINST PERPETUITIES allows a trust to last as long as what?

Lives of being plus 21 years and 9 months

Examples of Income in Respect to the Decedent

Insurance renewal commissions Monthly IRA payments Taxable distributions from qualified plan Partnership income of deceased partner Gain still to be recognized on installment sale S corp income of deceased shareholder Business accounts receivable (not booked) Dividends declared but not received

Following the death of a grantor, what would reduce GSTT?

Reverse QTIP *key here is the reverse QTIP can be used AFTER death

What kind of property is land for a charitable contribution

Always considered use related

Besides a qualified plan what else could a QDRO pertain to?

Child support Alimony payments Marital property rights

What happens if you have a QPRT and die during the retained interest term?

It leaves the grantors estate with no greater tax liability than had the QPRT not been established

In a taxable termination, who is liable for the GSTT due?

Trustee from the trust property

What is an IRS section 2518

Disclaimer or disclaimer trust

Are not-for-profits public or private charities?

Neither. They would need to obtain IRS approval to receive tax deductible contributions

When can you file as a qualifying widower?

The year after your spouse died *in the year the spouse passes: can only file as MFJ and MFS

What must you have if your are going to file as a qualifying widower

Must meet at least 1 of 4 tests: - maintains a home - has a dependent child - filed a joint return the prior year - did not remarry

Can you file head of household the year your spouse dies?

Only if there are children actually living in the home

Estate Flashcards

(73 cards)