Estate Planning Flashcards
(12 cards)
A trust may also be defective or tainted for estate tax purposes, if the grand tour retains the following:
1) a revisionary interest that exceeds 5% measured at the time of death.
2) a right to income or the right to use or enjoy the property (beneficial enjoyment)
Defective trusts are useful for income tax not, estate tax.
Tainting can be desirable for income tax purposes, but the client doesn’t want the irrevocable trust to be tainted for a state tax purposes
In a crummy, trust, how much can the beneficiary withdraw annually?
The crummy clause provides the right of withdraw equal to the lesser of the amount of the annual exclusion ($18,000) or the value of the gift transferred
What does having a general power of appointment mean?
It’s considered having outright ownership general powers are subject to state tax and give tax because the holder can appoint the property to themselves
Are special (limited) powers of appointment subject to gift tax or state tax?
No. Special powers are not subject to gift tax or estate tax because the holder cannot appoint the property to themselves
What is ascertainable standard?
When you see ascertainable standard think HEMS (health, education, maintenance, and support).
If a person’s right to exercise, a power is limited by the needs for HEMS, it is not a general power.
Distributions for as attainable standard are not subject to a state tax or gift tax
Describe the five or five power provision on a trust
The five or five power provides that property subject to a general power (outright ownership) will be included in a Donny decedent’s estate (or considered a taxable gift) only to the extent that the property exceeds the greater of $5000 or 5% of the total value of the fund subject to the power. * this withdraw is available only after crummy right is settled.*
What is a crummy trust?
Crummy is a provision on a trust. It can be a simple or a complex trust. A crummy trust is an irrevocable trust with demand rights. If the trust is properly structured, it can be used for a minor beneficiary. With a crummy withdrawal right each time a contribution is made to the trust, the beneficiary has a temporary right to demand a withdrawal from the trust.
- the annual rate of withdrawal is equal to the LESSER of the amount of the annual exclusion ($18,000) or the value of the gift transferred in that year. If the demand right is not exercise, the annual transfer for that year remains in the trust. If no gift is transferred for the year, the beneficiary cannot demand funds. But can continue to receive income only from the trust.
What is the acronym and keys of a QTIP trust?
QTIP is also called a current income interest trust or C trust. first spouse to die controls it.
The main advantage of the Q-tip is that it allows the decedent to have postmortem control over the property when the surviving spouse dies.
LAME:
Lifetime income interest for the Spouse
Annual payments to the spouse
Mandatory payments to the spouse
Exclusively for the spouse.
What are A, B and C trusts?
An A trust is a marital trust. Second spouse to die controls.
B trust is a bypass trust. First spouse to die controls. The intention of the bypass trust is to give the decedent postmortem control over the property. The amount of property transferred to the trust is usually an amount equal to the exemption $13,610,000
C trust is a QTIP trust. First spouse to dry controls, gives postmortem control over the property and required annual lifetime payments to the spouse.
What is a QDT or QDOT?
Qualified domestic trust.
Normally all property passing out right to the surviving spouse qualifies for the marital deduction unless that spouse is not a US citizen.
The trust is similar to a QTIP but it’s for non-citizen spouses
How much can a spouse gift a non-citizen spouse per year without incurring a taxable gift?
$185,000 (2024)
