CFP Estate Flashcards

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1
Q

ILIT Taxation

A

Grantor trust - taxed to grantor, even if income pays life insurance policy premiums

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2
Q

Unearned income SSI limits

A

must be lower than $861… income distributions from trusts to disabled beneficiaries could disqualify someone from SSI (this is why Special Needs Trusts are so important)

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3
Q

Earned income SSI limi

A

$1,767 per month single
$2,607 per month couple

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4
Q

Standby Trust

A

Used to manage a person’s assets if they become incapacitated
Grantor is trustee and beneficiary

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5
Q

Simple Trust

A

All income must be distributed currently
Funds cannot be paid, permanently set aside, or used for charitable purposes
Amounts allocated to the corpus cannot be distributed

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6
Q

Not available for AVD

A

depreciating assets: cars, patents, life estates, remainder interests, copyrights, intellectual property

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7
Q

Estate Tax Formula

A

Gross Estate
- Minus: expenses, debts. taxes, losses
Adjusted Gross Estate
- Minus: marital and charitable deductions
Taxable Estate

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8
Q

Used when principal needs agent to complete a specific form on their behalf

A

non-durable poa

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9
Q

Section 303 Redemption

A

Allows the purchase of a portion of a decedent shareholder’s stock by the shareholder corporation to be treated as a sale or exchange rather than a dividend

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10
Q

Section 303 Redemption Requirements

A

Redeemed stock must be included in decedent’s gross estate
Value for federal estate tax of all stock of the corporation that is included in determining the value of the decedent’s gross estate must be more than 35% of the excess of…
the value of the gross estate over [(estate expense, indebtedness, taxes) + losses)]

VALUE OF STOCK MUST EXCEED 35% OF GROSS ESTATE

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11
Q

Section 2032A

A

An executor may elect to value qualifying real property based on its ACTUAL SPECIAL USE rather than its HIGHEST AND BEST USE

Max reduction in estate is $1,230,000

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12
Q

Section 2032A Requirements

A

On date of death, property must be involved in qualified use
Value of property must be at least 50% of gross estate
At least 25% of the gross estate must be closely held business real property (commonly farm)
Property must pass to a qualified heir
Property must have been owned and used by biz for 5 out of 8 years

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13
Q

Section 6166

A

A personal representative may defer payment of estate taxes if the interest in a closely held business exceeds 35% of the decedent’s adjusted gross estate

Created to alleviate estate liquidity problems

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14
Q

If using Section 6166…

A

Executor may use installment payments to pay the federal estate tax attributable to the decedent’s interest in a closely held business

up to 10 equal, annual installments

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15
Q

Payment of Section 6166

A

First of 10 annual payments must be made by the 5th anniverary of the due date of the estate tax liability

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16
Q

3 Year Rule

A

When interest in a property is pulled back into gross estate if not outlived for 3 years

17
Q

What qualifies for 3 year rule?

A

Life estate relinquished within 3 years of death
Reversionary interest given up within 3 years of death
Transfer of a life insurance policy into an ILIT within 3 years of death (DOES NOT APPLY IF OWNER OF THE POLICY IS NOT THE INSURED)
Gift tax liability paid within 3 years of death (not the gift itself)