Ch4 - Estate Planning & Federal Taxation Flashcards
From an individual’s perspective, what are the FOUR non-tax drivers in making charitable gifts?
(a) achieving the public good and the joy of giving
(b) enlightened self-interest
(c) repaying a psychological debt
(d) “doing good” as a family tradition
Generation-Skipping Transfer Tax could result in substantial transfer taxes because this tax is unrelated and imposed in addition to…
gift taxation and estate taxation.
Because of the nature of the federal gift and estate tax system, estate and gift taxes are the ________ of taxable transfers an individual makes during lifetime or at death to avoid having to pay any gift and estate tax.
cumulative amount (eg - $11M and $22M for spouses)
What is the meaning of the “unified” system of estate and gift tax?
The current federal estate tax is part of an overall unified transfer tax system that includes gift taxes, estate taxes, and generation-skipping taxes whether given during life or at death.
Any form that purports to provide a power of attorney for medical decisions must be compliant with…
HIPAA
Name the TWO types of trust that are used to preserve federal estate marital deduction.
Qualified Domestic Trust (QDOTs)
and
Qualified Terminable Interest Property Trusts (QTIPs)
Loan forgiveness, a payment of another’s expenses, transfers by corporations, and life insurance transactions are considered what type of gift?
direct gift
indirect gift
indirect gift
What are the FOUR main requirements of a QTIP?
1) property is included in the decedent spouse’s gross estate, then deducted using the marital deduction
2) value of property is included in surviving spouse’s gross estate
3) spouse is enititled to all the income generated by the trust property for life
4) the first spouse to die is the only one able to control remainder interest
What is the difference between Sec. 2503(b) and a Sec. 2503(c)?
Sec. 2503(b) - requires the trustee to distribute income annually to the minor at any age.
Sec. 2503(c) - permits the trustee to accumulate income until the minor attains age 21 and still have present interest.
This form gives seriously-ill patients more control over their end-of-life care.
Physician Orders for Life-Sustaining Treatment (POLST)
What is federal estate tax?
A tax on the right of a decedent’s estate to transfer property or an interest in the property to others.
The new estate planning environment utilizes the advice from a ____________.
team of specialists
There is NO standard estate plan, but rather it is…
customized to suit the needs of each individual, couple or family.
If the alternate valuation date is chosen, all assets (except annuities) must be valued on this date unless sold or otherwise disposed of within this six-month period, in which case, their values are established as of…
the date of sale, exchange, distribution, or disposition
When can an executor elect the alternate valuation date?
Only if it will lower the overall gross and taxable estate. You CANNOT pick and choose which assets to apply the alternate valuation date.
What is a trust designed to do with the assets for the creator?
Place assets in a legal entity without giving the beneficiary control over the assets.
A trust can be structured by the grantor to be effective when?
During the clients lifetime or begin at the client’s death.
A trust is a relationship that divides the…
ownership of property.
Who holds the legal title of a trust?
By the trust to be managed by the trustee
What does a trust allow a grantor to prevent?
Used to prevent unfettered access to the assets by the beneficiaries for a certain length of time or under certain conditions.
What are TWO purposes for using a trust in estate planning?
a) to render control of the assets
b) to shield the assets from maximum taxation
A trustee has a fiduciary responsibility to transact the trust in accordance with…
the trust document.
Who makes the QTIP/QDOT elections on a decedents’s estate tax return?
the executor
______ are utilized for noncitizen spouses.
Qualified Terminable Interest Property Trusts (QTIPs)
or
Qualified Domestic Trust (QDOTs)
Qualified Domestic Trust (QDOTs)
What are the TWO possible property valuation dates?
date of death (annuities use this date too)
the alternate valuation date(6 months after death)
The alternate valuation date CANNOT be used for what type of assets?
wasting assets
