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CFP - Review Cards > Estates Live Review > Flashcards

Estates Live Review Flashcards

(79 cards)

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1
Q

Community property basic defintion

A

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

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2
Q

community property survivorship rights

A

there are NO survivorship rights in community property; thus a will is deeded by each spouse, and the property will be subject to probate upon the death of either spouse

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3
Q

Name the two most common non community property interests

A
  1. income earned and assets owned by either spouse prior to marriage
  2. property received as a gift or inherited by one spouse
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4
Q

income tax advantage of community property

A

the property gets a full step up in basis (only LTCG property) in the entire property if at least one half of the whole proerpty is includible in the deceased spouse’s gross estate

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5
Q

estate tax of non spouse joint tenant property

A

FULL value of jointly held property is included in the gross estate of the first tenant to die unless the survivor can document that they contribted to the purchase price of the property

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6
Q

what type of property cannot be disclaimed

A

TBE

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7
Q

who can hold property TBE

A

spouses only

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8
Q

TIC basics

A

several tenants possible
undivided interest
income with respect to their interest
TICs can transfer their shares to others
NO survivorship rights

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9
Q

4 types of assets that are subject to probate

A

fee simple
TIC
the beneficiary is the estate
community property

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10
Q

federal estate form (the number)

A

706

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11
Q

what’s included in the gross estate

A

all probate and nonprobate assets

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12
Q

how do you calculate the AGE

A

gross estate, then subtract funeral expenses, admin expenses, debts, taxes, and casualty losses

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13
Q

how do you calculate the taxable estate

A

take the AGE (aka the net estate)
Subtract the marital and charitable deductions

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14
Q

what is the tax base (for estates)

A

taxable estate
Then add back adjusted taxable gifts

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15
Q

estate tax calculation from tax base

A

tax base
-estate tax deduction
–
then multiply by 40%
–
tentative tax
-gift taxes paid
–
net estate tax

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16
Q

when are gift taxes paid added to the estate

A

gift taxes paid on any gifts within three years of death are added to the gross estate

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17
Q

when would life insurance be included in the decedent’s estate

A
  1. the proceeds are paid to the executor of the decedent’s estate
  2. decedent at death possessed an incident of ownership in the policy
  3. the insured transferred a policy with an incident of ownership within three years of death
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18
Q

if you own a life insurance policy on yourself and die, is this included in your estate

A

yes.

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19
Q

what happens at your death (estate tax wise) if your spouse owns a policy on your life

A

If you gift it to them and die within three years of transfer, the DB is included in your estate
if you gifted it to them and your estate is your bene. the DB is included in your probate estate

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20
Q

what happens if you sell your life insurance policy to someone else and then die?

A

nothing is included in your estate (no three year rule)

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21
Q

incidents of ownership

A

right to assign, terminate, to borrow against the cash reserves, to name benes, and to change beneficiaries

NOT premium paying

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22
Q

what happens estate tax wise if you own a policy on your spouse and you die

A

replacement cost is included in your probate estate (no three year rule)

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23
Q

what happens if you have a life insurance on your spouse, you gift it to your kid, and then you die

A

nothing is included in your gross estate, there is no three year rule

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24
Q

see general power of appointment, think what?

A

OUTRIGHT OWNERSHIP

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25
special vs general powers of appointment with estate and gift tax
general powers ARE subject to estate and gift tax Special powers are NOT subject to gift or estate tax
26
when is gift tax paid included in your estate?
gift tax PAID (not the gift) on gifts within three years of death are included in the estate of the transferor
27
transfers with retained life estates
included in the decedent's gross estate IF they retain the right to use or enjoy the property or receive income from it
28
valuation of a gift if FMV is greater than the donor's adjusted basis
1.appreciated property the value of the gift for gift tax purposes is its FMV at the date of the gift 2. If FM is greater than the donor's adjusted basis, then the donor's adjusted basis applies for income tax purposes this is carryover basis
29
what happens if a gift is less than donor's adjusted basis
this is loss property dual basis rules apply when the property is transferred
30
Types of gifts that are fully deductible for gift tax purposes (hint: there are 4)
gifts to us citizen spouse gifts to qualified charities direct payments to a medical provider or educational institution gifts to American political parties
31
when do you have to file a form 709
1. if you gave more than $18k to any non spouse 2.a gift of future interest in any amount 3. a gift from a noncommunity/individal account for which spouses elect gift splitting
32
primary rule for gifts of future interest
terms of the transfer, typically trusts, delay posession and enjoyment DO NOT qualify for the annual exclusion
33
examples of NON completed gifts
1. revocable trusts 2. disclaimer 3. disclaimer trusts
34
gifts of future interest
do NOT qualify for the annual exclusion, must use exemption
35
examples of future interest gifts (Hint: there are three)
2503b trusts remainder interests a trust in which income will be accumulated for a period of years
36
examples of gifts of present interest
2503c tursts direct gift crummey trust 529 plans UGMA/UTMA
37
taxable gift of life insurance
insured transfers their policy to someone else taxable gift is equal to the interpolated terminal reserve, plus the unearned premium (replacement value)
38
what's better for incapacity planning; revocable trust or durable power of attorney
Revocable trust continutes after death
39
who appoints guardians?
the court! and they supervise.
40
why would a grantor do a defective trust?
they may be intentionally tainted because the grantor's income tax bracket may be lower than the trust's tax rate
41
crummey rights
lesser of the amount of the annual exclusion ($18k) or the value of the gift transferred
42
estate and gift tax with respect to ascertainable standards
think HEMS NOT subject to estate or gift tax
43
five or five power
included in the donee-decedent's estate (or considered a taxable gift) only to the extent that property exceeds the greater of $5k or 5% of the total value of the fund subject to the power
44
bypass trust
Simple or complex first spouse to die controls "B" trust goal is to give the decedent postmortem control over the property usually equal to the exemption $13,610,000
45
marital trust
second spouse to die controls the trust "power of appointment" trust "A trust" surviving spouse has transfer control over the property
46
QTIP trust
qualified terminable interest simple trust "C trust"
47
QTIP Trust "Keys"
Lifetime income Annual payments Mandatory payments Exclusively for spouse
48
QDT/QDOT
simple trust qualified domestic trust similar to QTIP, but used for noncitizen spouses
49
UGMA vs UTMA
UTMA allows any property interest to be transferred UGMA generally can only include securities, life insurance, and annuities
50
Section 2503(b)
Two parts 1. income interest 2. remainder/reversionary interest income = present interest corpus is a gift of future interest
51
2503(c)
-trust must provide the property or income expended by age 21 -anything remaining passes outright at 21 -if the donee dies before age 21, it's payable to their estate
52
dynasty trust
beneficiary interests are limited to life estates
53
CRAT
Charitable remainder annuity trust income tax deduction from the present value of the presumed remainder interest only ONE initial transfer up to 20 years remainder interest passes to a qualified charity at least 5% must go each year fixed payments based on initial distribution
54
CRUT
Charitable remainder unitrust multiple transfers to the trust are allowed reappraised values
55
pooled income fund (PIF)
donor places property into a common trust fund operated by the charity one common fund with commingled property public charity receives the remainder interest
56
Charitable gift annuity
no specified amount of income required property is transferred TO the charitable org charity receives income NOW
57
CLAT and CLUT
established at death estate can take a present value of the payment stream as an estate tax deduction
58
private foundation
distributes 5% of investment assets
59
installment sale
FMV in exchange for payments PV of remaining payments INCLUDED in owner's estate gain is a capital gain
60
what happens if the seller dies during the installment sale repayment
the remaining payments are included in his/her estate which is a disadvantage
61
SCIN
self canceling installment note balance of any payments due at the date of death are automatically cancelled no value included in the owern's estate higher payout than installment
62
intrafamily transfers if the property owner needs income
"PIGS" need income Private Annuity Installment Sale Grantor Retained Aunnuity Trust SCIN
63
what if the property owner wants to gift assets and/or income to family members
Partnerhip/S corp (gifting shares) FLP Gift leaseback QPRT
64
GRAT/GRUT
irrevocable trust into which the grantor transfers appreciating or income producing property in exchange for the right to receive a fixed annuity for a number of years at the end of the term, corpus is distributed to a remainderperson owner must outlive term of the asset is brought back into the estate
65
Gifting partnership/S corporation shares
family member receives conduit income ineffective if a child is under age 24 (kiddie tax) Not available if business is service related
66
Family Limited Partnership (FLP) - gifting shares
gift interest to limited partners to reduce the estate qualifies for various valuation discounts general partner maintains control
67
gift leaseback
lease payments are a business deduction, income to family member do NOT use if child is under 24 gifts fully depreciated assets
68
QPRT
qualified personal residence trust (QPRT) irrevocable trust grantor transfers their personal residence retaining an interest for personal occupancy for a period of years
69
what happens if donor of QPRT dies before the initial term is complete?
FMV at date of death is included in the donor's estate as if the trust never existed home as a "string" on it
70
skip persons if not related
37 1/2 years younger than the transferor
71
AVD
alternate valuation date must reduce total value of the gross estate
72
qualified disclaimer
generally a refusal by a primary benef to accept property
73
Section 303
allows a corporation to make a distribution of a portion of stock of a decedent that will not be taxed as a dividend
74
requirements for section 303
business must be a regular corp or an S corp Value must be more than 35% of the adjusted gross estate only an amount equal to a total of all estate taxes and admin expenses can be redeemed
75
6166
installment payment of estate taxes
76
6166 keys
estate tax attributable to the closely held business interest can be paid in 10 equal nstallments beginning 4 years after death
77
2302A
special use valuation for real estate used for farming or a closely held business
78
2302A keys
at least 50% of the estate real property must constitute at least 25% of the gross estate qualifeid use property
79
estate planning for non traditional relationships
guardianship for children jtwros can be dangerous revocable tursts or TIC is best

CFP - Review Cards (17 decks)

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