Estate Flashcards
Revocable trust for incapacity planning
Advantages
1) trustees authority to act in managing assets may be recognized and enforced while a DPOA may not be.
2) revocable trust funded, grantor can write provisions that specify management by trustee in event of grantor’s incompetency while continuing after death.
Living Wills
living will or advanced medical directive directs your doctor to discontinue life sustaining procedures if you’re in a terminal condition or permanently unconscious state
Guardianship or Conservatorship
healthcare and other personal decisions
guardianship - life & care affairs
conservatorship - property & financial affairs (think Brittney Spears dad)
assigned by court
Irrevocable Grantor Trusts
Grantor of trust will be taxed on income produced by the trust if too much control/strings over trusts. Could be intentionally done if grantor income tax bracket lower than trust tax rates
2503b Trust
Gift of future interest, simple
income distributions only
must use $11,580,000 exemption to find
income payout can be subject to kiddie tax
used for “bad” boys b/c only income pays out
2503c Trust
Complex trust
allows grantor to gift to minor in trust but count for annual gift tax exclusion
*must be expended by/for donee before age 21
*any portion still there will pass to donee at 21
*donee dies before 21, added to donee’s estate
Dynasty Trust
“B” Trust that benefits multiple gens
free of estate/gift/GST taxes
can last for lives being 21 + 9 months (to combat rule against perpetuity)
Installment Sale vs SCIN
Installment Sale
- spread out & defer taxable gain
- remove appreciating asset from estate & substitute installment payments
- seller dies->added back to estate
- if note forgiven, any gain will be added to estate
- if sale triggers recapture of depre, added to year of sale
SCIN
- balance of payments due at death to be cancelled
- buyer pays a premium, and seller pays more income tax
GSTT
40% , 2 generations or 37.5 years younger = skip person
AVD
Alternate valuation date
- Using it must cause a reduction in total value of gross estate
- amount of federal tax liability must be reduced as a result of the file
HEMS
Health, Education, Maintenance, and Support
Election Against the Will/Premarital Agreement
Surviving spouse who hasn’t inherited a minimum % by state law, can demand it
Medicaid Planning
Must have both income/assets below certain limits (means test) which varies state to state.
Will not qualify for most states with >$2k in assets
5 year look back
Special Needs Trust (SNT)
Trust protects disabled persons from being exploited due to trustee duties. Allows beneficiary to continue receiving public benefits. Trust can only pay for supplemental needs not covered by the programs.
Ex-private duty nursing care, furniture, supplemental housing, piano lessons, swimming lessons
Distributable Net Income (DNI)
accounting rule that limits the amount that trust or estate beneficiaries must report as gross income for income tax purposes
