CFP Estate Flashcards
ILIT Taxation
Grantor trust - taxed to grantor, even if income pays life insurance policy premiums
Unearned income SSI limits
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)
Earned income SSI limi
$1,767 per month single
$2,607 per month couple
Standby Trust
Used to manage a person’s assets if they become incapacitated
Grantor is trustee and beneficiary
Simple Trust
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
Not available for AVD
depreciating assets: cars, patents, life estates, remainder interests, copyrights, intellectual property
Estate Tax Formula
Gross Estate
- Minus: expenses, debts. taxes, losses
Adjusted Gross Estate
- Minus: marital and charitable deductions
Taxable Estate
Used when principal needs agent to complete a specific form on their behalf
non-durable poa
Section 303 Redemption
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
Section 303 Redemption Requirements
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
Section 2032A
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
Section 2032A Requirements
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
Section 6166
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
If using Section 6166…
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
Payment of Section 6166
First of 10 annual payments must be made by the 5th anniverary of the due date of the estate tax liability