Chapter 16 - State Death Taxes and Estate Planning

Question 1

Only state estate tax qualifies for a federal deduction, not the state inheritance tax?

Answer 1

True

Question 2

Deduction order goes Marital deduction, then charitable deductions, then the state death tax deduction?

Answer 2

True

Question 3

Real Property is only taxed in the state in which it is attached?

Answer 3

True

Question 4

If a decedent’s estate does not have to file a federal estate tax return (Form 706), there is no deduction for state death taxes paid?

Answer 4

True

Question 5

At the present time, there are basically two types of state death taxes: state estate taxes and inheritance taxes?

Answer 5

True

Question 6

Real estate transferred at a decedent’s death is taxed only by the decedent’s state of domicile?

Answer 6

False
While the state of domicile has a claim against all the decedent’s property for state death tax purposes, the state in which the decedent’s real estate is situated may impose some form of transfer tax at death. The state of domicile will probably exempt any real estate owned by the decedent located outside its borders from taxation because it lacks the jurisdiction to tax that property.

Question 7

In many states, beneficiaries of different classes are taxed at different rates?

Answer 7

True

Question 8

A decedent-spouse’s one-half interest in community property is exempt from state death taxation in most of the community-property states?

Answer 8

False
A decedent-spouse’s one-half interest in community property is subject to death taxation in most of the community-property states.

Question 9

Decoupling refers to states that have both an inheritance tax and a state estate tax?

Answer 9

False
Decoupling is a relatively recent term that differentiates state estate tax laws from federal estate tax laws. Decoupled states no longer reference federal law for purposes of the state death tax credit and/or the basic exclusion amount.

Question 10

Life insurance proceeds payable to a named beneficiary other than the estate are specifically exempt from state death taxes in some states?

Answer 10

True

Question 11

Under current law, state death taxes are a deduction for the entire amount of state death taxes paid for federal estate tax purposes?

Answer 11

True

Question 12

Many states have adopted the time frame of 3 months from the date of the decedent’s death for filing and paying death taxes?

Answer 12

False
Many states have adopted the federal government’s time frame of 9 months from the date of the decedent’s death for filing and paying death taxes.