Estate Planning

Question 1

testator

Answer 1

the person making a will

Question 2

testamentary trusts and probate

Answer 2

they do not go through probate, the will does and the will creates these trusts

Question 3

assets included in the probate estate

Answer 3

Singly owned assets (fee simple)
TIC
COmmunity property
“estate of the insured” as beneficiary

Question 4

ancillary probate (important note)

Answer 4

the maker of a will cannot avoid a double probate procedure: one in the state of the decedent’s residence and another in the state where the real property is located

Question 5

election against the will (elective share)

Answer 5

virtually all states
surviving spouse who has not inherited a certain min percent or amount of deceased spouse’s estate

Question 6

USDA

Answer 6

death within 120 hours of each other = predeceased

Question 7

Totten trust

Answer 7

revocable trust in a bank account
depositor retains the right of withdrawal until death
balance passes to the bene at death

Question 8

community property

Answer 8

9 states
each spouse owns a separate, undivided, and equal interest in the property

Question 9

survivorship rights with community property

Answer 9

trick question, there aren’t any
a will is needed and property is subject to probate

Question 10

separate property interests

Answer 10

Property received as a gift by one spouse
property inherited by one spouse
income earned by spouses prior to marriage
interest earned on separate assets held by one spouse as sole owner

Question 11

tax advantage of community property

Answer 11

full step up in basis in the entire property
one-half of the whole property must be included in the deceased spouse’s gross estate

Question 12

JTWROS

Answer 12

can be shared by several adult owners
income is spilt equally among all joint tenants
survivorship feature
excludes property from probate estate of a decedent

Question 13

non-spouse joint tenant (at death)

Answer 13

full value of jointly held property is included in the gross estate of the first tenant to die unless the survivor can establish ownership

Question 14

spousal gross tenant (at death)

Answer 14

when the first spouse dies gross estate must include one half of the property’s fair market value as of the date of death

Question 15

tenancy by the entirety

Answer 15

not subject to probate
cannot be disclaimed
ownership can ONLY be held by spouses

Question 16

tenancy in common

Answer 16

subject to probate
can be disclaimed
unequal
can be several owners

Question 17

revocable trust

Answer 17

continues after death (durable power of attorney expires at death)

Question 18

testamentary trust

Answer 18

created by a will
the trust itself doesn’t go through probate
Key feature: becomes effective only if the will creating the testamentary trust is admitted to probate

Question 19

Form 706

Answer 19

for estates exceeding the amount of the exemption for the year of death

Question 20

gross estate

Answer 20

total fair market value of all property and interest owned or held by the decedent at the time of death before subtracting deductions, debts, admin expenses, and credits

Question 21

three-year rules

Answer 21

if made within three years of death, the following transfers are included in the decedent’s gross estate:
-certain transfers of life insurance by the insured
-any gift tax paid out-of-pocket on gifts

Question 22

exclusions from the gross estate

Answer 22

life insurance owned by others
completed gifts
life estate for the decedent’s own life only

Question 23

taxable estate

Answer 23

adjusted gross estate less marital and charitable deductions

Question 24

marital deduciton

Answer 24

an unlimited amount of property passing to the surviving spouse can pass estate tax-free if:
-the property is included in the decedent’s gross estate
-property actually passes to the surviving spouse

Question 25

charitable deduction

Answer 25

transfers to qualified charities are 100% deductible for both estate and gift tax purposes

Question 26

tentative tax

Answer 26

subtract the exemption from the tax base and multiplying the excess by 40%

Question 27

general power of appointment

Answer 27

entitles the holder to transfer the property to anyone

Question 28

five or five power

Answer 28

general power is only included in a donee-decedent's estate only to the extent that the property exceeds the greater of: -$5,000 -5 percent of the total value of the fund subject to the power as measured at the time of lapse

Question 29

distributions for an ascertainable standard

Answer 29

power limited by some unit of measurement HEMS is not a general power (Health, Education, Maintenance, and Support)

Question 30

who should you give highly appreciated property to?

Answer 30

charity or a donee in a lower tax bracket (might want to keep this property until death for a step up in basis)

Question 31

who should you give property that is likely to appreciate

Answer 31

good to gift to remove future value for donor's estate

Question 32

who should you give income producing property

Answer 32

good to gift only if donee is in a lower tax bracket

Question 33

who should you give loss property

Answer 33

you should actually sell it to take the loss and then gift the cash proceeds from the sale

Question 34

who should you gift property subject to depreciation

Answer 34

you should keep it until it is fully depreciated

Question 35

who should you gift out of state property to

Answer 35

gift to avoid ancillary probate

Question 36

who should you gift life insurance

Answer 36

excellent to gift - tax based on replacement value; benefit based on face value

Question 37

gifts to non citizen spouses

Answer 37

$185k/year because they don't get unlimited marital gift exclusion

Question 38

basis of appreciated gifts

Answer 38

FMV at the date of the gift

Question 39

basis of depreciated gifts

Answer 39

If FMV on the date of the gift is less than the donor's adjusted basis, then a loss is measured using the FMV on the date of the gift, but a gain is measured using the donor's basis

Question 40

form 709

Answer 40

filed by any individual donor who, in any calendar year, gives any more than: -$18k to any non spouse -gift of future interest in any amount -a gift for which spouses elect gift splitting

Question 41

gift splitting

Answer 41

if married, consent of the non-donor spouse is required

Question 42

deductible gifts

Answer 42

directly to an educational institution for tuition directly to a provider of medical care gifts to a spouse qualified charity political org president of the US

Question 43

DPOAHC

Answer 43

durable power of attorney for health care medical decisions only springing power separate from DPOA

Question 44

powers that cannot be given to another

Answer 44

execute or revoke a will power to execute a living will (right to die)

Question 45

durable feature

Answer 45

enables a principal to grant powers that remain in effect throughout the principal's incapacity

Question 46

advance medical directive (living will)

Answer 46

legal document which directs the client's physician to discontinue life-sustaining procedures if the client is in a terminal condition or permanently unconscious

Question 47

Medicaid and annuities

Answer 47

medicaid recipients who have annuities and wish to remain eligible must name the state as a remainder beneficiary to cover the stat incurred expenses

Question 48

special needs trust (SNT)

Answer 48

allows beneficiary to continue to receive public benefits (like Medicaid), section 8, and SSI can only pay for supplemental needs

Question 49

OBRA trust

Answer 49

omnibus budget reconciliation act of 1993 assets go into a trust recipient qualifies for Medicaid when they die, the funds Medicaid paid are reimbursed

Question 50

per capita

Answer 50

by the head

Question 51

simple trust

Answer 51

operates as a conduit for forwarding income to the beneficiaries beneficiaries pay taxes on the income at their own marginal tax brackets

Question 52

complex trust

Answer 52

taxed as a separate tax entity requires: 1. irrevocable and the grantor has not retained any control 2. income is accumulated

Question 53

property in a revocable trust

Answer 53

includible in the gross estate of the grantor

Question 54

Crummey trust

Answer 54

irrevocable trust with demand rights each time a new contribution is made the beneficiary can demand a withdrawal the right of the withdrawal amount is equal to the lesser of the amount of the annual exclusion or the value of the current year contribution

Question 55

bypass trust

Answer 55

first spouse to die controls the property generally gives the decedent postmortem control over the transferred property the amount of property transferred to the trust equals the federal estate tax exemption structured to provide a stream of income to the surviving spouse only

Question 56

portability of unused exemption

Answer 56

the executor of a deceased spouse's estate can transfer any amount of the unused exemption to the surviving spouse

Question 57

marital trust aka "A trust"

Answer 57

the second spouse to die controls the property of the trust surviving spouse has postmortem control over the property in the trust

Question 58

Qualified Terminal Interest Property (QTIP)

Answer 58

first spouse to die control the property of the trust "c trust" income stream for surviving spouse for life surviving spouse may be given a limited power of invasion over the corpus and income of a QTIP trust

Question 59

gifts to minors (present interest)

Answer 59

ugma utma 2503c 529

Question 60

gifts of future interest (minors)

Answer 60

2503(b) aka bad boy trust

Question 61

2503(b) trust

Answer 61

"bad boy" trust two parts of the gift: 1. income interest 2. remainder interest income is a gift of present interest corpus is a gift of future interest only the income needs to be distributed, not the principal

Question 62

2503(c) trust

Answer 62

allows grantor to make a gift to a minor in trust and still obtain the annual gift tax exclusion gift will not be considered a gift of future interest if these conditions are met: 1. the trust must provide that the property and income may be expended by or for the benefit of the donee before the donee atttains age 21 2. any portion of the property not so expended will pass at age 21 3. if the donee dies before age 21, the property must be payable to the donee's estate

Question 63

dynasty trust

Answer 63

essentially a B trust that benefits multiple future generations

Question 64

when is a CRAT appropriate

Answer 64

when the donor wishes to provide a noncharitable beneficiary with a stream of income to last, usually for the life of the income recipient or for a stated term of years

Question 65

CRAT key features

Answer 65

donor receives an income tax deduction for the present value of the remainder interest if term of years, can't be more than 20 years remainder interest must be at least 10% of the initially contributed amount