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Estate Flashcards

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1
Q

Whats included in Probate

A 
Comestic
Com = 1/2 of community property
Estate in beneficiary
S Singleey owned assets
TIC Tenants in common
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2
Q

Non community property interests (AKA separate property)

A

Income earned by spouses prior to marriage
Assets owned by either spouse prior to the marriage
Property received as a gift by one spouse
Property inherited by one spouse

All other property is community property

Main income tax advantage:
Property gets a full step up in basis (only LTCG property) in the entire property if at least one-half of the whole property is includible in the deceased spouse’s gross estate

Note: property enjoys a 100% step up in basis, but only 1/2 is included for estate tax purposes

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3
Q

Assets included in probate estate

A

Single owned assets (fee simple)
Prperty held by tenancy in common (TIC)
Community property (half at first death)
Assets designating beneficiary is as the “estate of the insured”

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4
Q

Estate tax - non spouse JTWROS

A

Unless the surviving non spouse can prove contribution, the entire amount wil be included in the decedent’s gross estate
Note: A gift of property is not deemed to be a contribution

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5
Q

TBE (Tenancy by the entirety)

A

can only occur with the mutual consent of both parties. — married individuals

Benefit: protected from the claims of one spouses separate creditors but are not protected from the claims of both spouses’ joint creditors
Note: TBE is not availabile in communicty property states

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6
Q

Will Substitues/Avoiding Probate

A 
Joint tenancy with rights of survivorship (JTWROS)
Tenancy by entirety (TBE)
Payable on death (POD)
Transfer on death (TOD)
Totten trust
Transfer by contract: Named beneficiaries for qualified/retirement plans, IRAs, life insurance and annuities
Deeds of title
Trusts: Revocable and/or Irrevocable
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7
Q

Estate, Gift and GST tax exemptions

A

3 totally separate taxes — are all $11,700,000

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8
Q

Gross Estate

A 
Includes:
All probate assets
-singly owned (fee simple) assets
-Tenancy in common
-Estate as beneficiary
-Community property
All non-probate assets:
JTWROS and TBE
Life Insurance
General powers of appointment
Gift taxes paid within 3 years of death

*GSTT paid within 3 years are NOT added back into the gross estate

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9
Q

Life Insurance

A

When life insurance to be included in the decedent’s estate:
Proceeds are paid to the exectuor of the decedent’s estate
Decedent at death possessed an incident of ownership in the policy
The insured transferred a policy with an incident of ownership within three years of death

**premium paying is NOT an incident of ownership

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10
Q

General power of appointment

A

-considered outright ownership

General powers are generally subject to estate tax and gift tax exposure

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11
Q

Special (limited) power of appointment

A

Special powers are not subject to gift tax or estate tax implications

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12
Q

Gross up rule

A

Any gift tax PAID (not the gift) out of pocket on gifts within three years of death is included in the estate of the transferor. Why? A large deathbed gift could reduce estate taxes

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13
Q

Transfers with retained life estate

A

Excpetion: 529

Property that is transferred during the decedent’s life is included in the decendent’s gross estate if he or she retained the right to use of enjoy the property or receive income from it during his or her lifetime.
Even retaining a right (alone or in conjunction with someone else) to designate who will possess or enjoy the transferred property or its income will cause the value of the property to be included in the decedent’s gross estate

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14
Q

Taxable Estate

A

AGE - marital and charitable deductions. Essentially, an “unlimited” amount of property passing to the surviving U.S. citizen spouse can pass estate tax free if these requirements are met:

  • Property must be included in the decedent’s gross estate
  • Property must actually pass to the surviving spouse (exception - the QTIP trust)
  • The recipient spouse must be a U.S. citizen

Outright transfers to QUALIFIED charities are 100% deductible for gift/estate tax purposes

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15
Q

Gift giving techniques and strategies

A

Highly appreciated property
Good to gift to a charity or donee in a lower tax bracket. May also want to keep property until death to get a step-up in basis (compare estate tax vs. capital gains rates)

Property LIKELY to appreciate
Good to gift to remove future growth from donor’s estate

Income-producing property
Good to gift only if donee is in a lower tax bracket

Loss property
Sell to take the loss and then gift the proceeds from the sale

Out-of-state property
Gift to avoid ancillary probate

Property subject to depriciation
Keep property until fully depriciated

Fully depriciated property
Excellent gift using the gift-leaseback technique

Life Insurance
Excellent to gift- valued at replacement value but “blossoms” to face value

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16
Q

Valuation of a gift

A

Gift FMV is greater than the donor’s adjusted basis (appreciated property)

  1. The value of the gift for gift tax purposes is its fair market value at the DATE OF THE GIFT
  2. If the gift FMV is greater than the donor’s adjusted basis (appreciated), then the donor’s adjusted basis applies for income tax purposes. This is carryover basis.
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17
Q

Deductible Gifts (also called exempt gifts or qualified transfer)

A

Four types of gifts are fully deductible for gift tax purposes, thereby reducing the taxable gift amount to ZERO:

  • Gifts to a U.S. citizen spouse
  • Gifts to qualified charities
  • Qualified payments in ANY amount made DIRECTLY to an educational institution for tuition (only) and payments in any amount made directly to a provider of medical care on behalf of ANY individual are fully deductible
  • Gifts to AMERICAN political parties (organizations) are fully deductible
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18
Q

Filing and payment requirements for gifts

A

Gifting tax form: Form 709

Must file a gift tax return by any individual donor who, in any calendar year, gave the following:

  • More than $15,000 to any non-spouse donee
  • A gift of a future interest in any amount
  • A gift for which spouses elect gift splitting
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19
Q

Present Interest Rule

A

When the donee’s enjoyment can start immediately whereas future interests, by the terms of the transfer, typically trusts, delay possession and enjoyment. Gifts of a future interest do NOT qualify for the annual exclusion

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20
Q

Federal gift taxation

A

Not a completed gift:
Revocable trusts
Disclaimer
Disclaimer trust

Completed gift

Present interest
2503(c) trust
Direct gift
Crummey trust
529 plans
UGMA/UTMA

Future Interest : doesn’t qualify for the $15,000 annual exclusion:
2503 (b) trust
Remainder interest
Trust in which income will be accumulated for a period of years

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21
Q

Life Insurance Gifts

A

A taxable gift of life insurance can arise either during the insured’s lifetime or at the insured’s death. If during lifetime an insured transfers his/her policy to someone else, the taxable gift is equal to the interpolated terminal reserve plus the unearned premium (replacement value) of the policy

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22
Q

Power of attorney

A

Non-durable power of attorney - ceases when principal is no longer legally competent
Durable power of attorney - not affected by the principal’s later incompetency
Springing POA - becomes effective when the principal becomes incompetent

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23
Q

Irrevocable grantor trusts

A

Specific sections of the IRC provide that a grantor of the trust (rather than the trust itself or the trust beneficiary) will be taxed on the income produced by the trust. THE IRC DEEMS THESE TO BE DFECTIVE OR TAINED TRUSTS. These may be intentionally tainted because the grantor’s income tax bracket may be lower than the trust’s tax rate.

Note: Tainting can be desirable for income tax purposes, but the client doesn’t want the irrevocable trust to be tainted for estate tax purposes

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24
Q

Simple trusts

A

Examples
2503(b), QTIP, QDT, Dynasty
Irrevocable can be simple or complex
Crummey trust can simple or complex

Income is distributed
Income is taxed to the beneficiary
Corpus distributed at termination
No charitable gifts

Distributed net income (DNI) limits the amount that trust (or estate) beneficiares must report as gross income for income tax purposes

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25
Q

Complex trusts

A

Example:
2503 (c)
Irrevocable can be simple or complex
Crummey trust can simple or complex

Income must or may be accumulated
Accumulated income is taxed to the trust. Income distributed is taxed to the beneficiary
Corpus distributed per trust terms
Charitable gifts are permitted

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26
Q

Crummey trust

A

Irrevocable trust with demand rights.
If properly structured, can be used for a minor beneficiary
With a Crummey withdrawal right, each time a contriburion is made to the trust, the beneficiary has a temporary right to demand a withdrawal from the trust
Annual withdrawal right is equal to lesser of the amount of the annual exclusion ($15,000) or the value of the gift transferred
Typical use of Crummey is in a life insurance trust

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27
Q

Ascertainable standard

A

Standard power limited by some unit of measurement. If the right to excercise a power is limited by the needs for funds for health, education, maintenance, and support, it is not a general power. Maintenance and support are synonymous and not limited to the necessities of life. The grantor can specify “support in reasonable comfort”,”support in his or her accustomed manner of living”,”maintenance in health and reasonable comfort,” as well as “medical, dental, hospital, nursing expenses, and expenses of invalidism”

Health
Education
Maintenance
Support

DISTRIBUTIONS FOR ASCERTAINABLE STANDARDS ARE NOT SUBJECT TO ESTATE TAX OR GIFT TAX IMPLICATIONS

28
Q

Bypas trust

(bypass,non-marital, “B”, non marital “B”, family, applicable credit amount, applicable credit amount shelter trust

A

First spouse to die controls
Purpose is to give decedent postmortem control over the property.
The amount of the property transferred to the trust is USUALLY an amount equal to the exemption ($11,700,000)
Can be simple or complex
Can be structured to provide a stream of income to the surviving spouse only, or can be split among spouse and other individuals if the decedent chooses
As long as the spouse is not given more than a 5 or 5 or HEMS withdrawal right, bypass trust will NOT be included in surviving spouse’s estate
At surviving spouse’s death or terminatin of the trust, the remaining assets pass estate tax free to the remainder beneficiary

29
Q

Marital Trust

“A” Trust or the “marital A” trust

A

Second spouse to die controls
General operates as a “power of appointment” trust
Surviving spouse has transfer control over the property in this trust
Surviving spouse has right to all income and right to invade entire amount of the corpus of the trust
The property placed in the marital trust qualifies for the marital deduction in the gross estate of the decedent

30
Q

QTIP Trust (simple trust)

Qualified terminal interest property trust
Current income interet
“C” Trust

A

First spouse to die controls
Used when decedent wishes to provide surviving spouse with stream of income for life yet also wishes to qualify the property for the marital deduction
Main advantage of a QTIP is that is allows the decdent to have postmortem control over the property when the surviving spouse dies. The property can qualify for the marital deduction in the estate of the decedent and must be included as an asset in the gross estate of surviving spouse

Keys for QTIP trust are the following
L lifetime income interest for the spouse
A annual payments to the spouse
M mandatory payments to the spouse
E exclusively for the spouse
31
Q

Reverse QTIP election

A

GSTT exemption is not lost if a reverse QTIP is elected

32
Q

QDT/QDOT (simple trust)

Qualified domestic trust

A

To qualify for marital deduction for a NON US citizen spouse, assets must be passed through QDT. It is a QTIP for non citizen spouses

Limitations imposed on transfer to non-citizen spouses are the following:
There is no estate tax marital deduction
Exemption amount is available if the spouse is a resident alien
Jointly-held property between spouses is NOT considered one half owned (ownership is based on consideration)
There is a limited (non-taxed) gift between spouses of only $100,000 per year. It is called a “super” annual gift exclusion. It is $159,000 in 2021

33
Q

Section 2503 (b) trust (simple trust)

A

Gift has two parts:

  1. The income interest
  2. Reversionary interest

Law considers the INCOME to be a gift of present interet (qualifying for annual exclusion) and the remainder interest (corpus) to be a gift of a future interest (no annual exclusion)

This trust can be used for minors (disadvantage because of kiddie tax)
May have a better application for an adult child (bad boy)
Only income MUST be distributed, rather than principal or corpus

34
Q

Section 2503(c) trust (complex trust) (children’s trust/minor’s trust)

A

Enabled a grantor to make a gift to a minor in trust and stil obtain the annuall gift tax exclusion. Conditions must be met:

  • The trust must provide that the property and income may be expected by or for the benefit of the donee before the donee attains age 21
  • Any portion of the property not so expended will pass to the donee at age 21
  • If the donee dies before age 21, the property must be payabel to the donee’s estate
35
Q

529 College Savings Plan/Qualified Tuition Plan (QTP)

A

Donor can contribute $75,000 in one year for each beneficiary or $150,000 if married without gift tax consequence
If donor dies within the 5 year period, the portion of the gift that would have been allocated in ensuing years will be included in the estate.
With 529, donor retains control of the 529 and has the option of taking the money back at any time.

529> UGMA/UTMA

  1. No annual $15,000 annual gift limit
  2. No age 21 rules
  3. No retained interest throwback

529s can now be used for K-12 tuition expenses up to $10,000/year and can be used to pay student loans $10,000/lifetime/student

36
Q

Dynasty Trust (simple trust)

A

B trust that benefits multiple future generations
Dynasty trust, free of estate, gift, and GST taxes, can last for the lives in being plus 21 years and 9 months (rule against perpetuities) OR as long as local law allows. Beneficiary interests are limited to life estates

37
Q

CRAT

Charitable Remainder Annuity Trust

A

Payabe to any charity
Enables donor to provide non-charitable beneficiary with a stream of income to last for the life of the income recipient or for a term of up to twenty years
Donor receives an income tax deduction from the present value of the presumed remainder interest
The donor can make only ONE (initial) transfer of preoprty to the trust, no additions or increases

Once trust is established, corpus must pay out a specific amount of income each year (at least 5%) This remains fixed once initial payments are calculated

38
Q

CRUT

Charitable Remainder Unitrust

A

Differences between CRAT and CRUT

The donor can make multiple transfers of property into CRUT
Once the trust is established, corpus must pay out a specified amount of income (a fixed PERCENTAGE) each year (at least 5%) of the REAPPRIASED VALUE of the corpus

39
Q

PIF

Pooled income fund

A

Arrangement in which the donor places property into a common trut fund operated by the charity
Donor’s property is commingled with the property of other donors so that there is one common fund into which all deposits have been placed (no municipals)
Once placed in the PIF, public charity controls and manages the assets
Donor cannot change which charity gets the remainder.
No specific amount of income and therefore NO 5% rule.
Donor does not need to establish a trust

40
Q

Charitable gift annuity

A

Differences between charitable gift annuity and CRAT

  1. There is no specified amount of income required (therefore no 5% rule)
  2. Property is transferred to the charitable organizaion, not to a trust
  3. Value of the property transferred to the charitable organization EXCEEDS the value of the annuity guaranteed by the charity. Donor intends to make a charitable contribution in the amount of the EXCESS, and the amount so contributed is an allowable deduction. Thus, the transaction is both an acquisition of an annuity AND a charitable contribution
41
Q

CLAT or CLUT

Charitable leaad trust

A

Esabished while living is not effective under current tax law
Established at death will be effective. Estate can take the then-present value of the payment stream as an estate tax deduction.

42
Q

Private foundation

Family foundation

A

Created, funded, and usually controlled by single wealthy donor or by members of donors family
An excise tax is generally levied on a private foundation that fails to distribute at least 5% of it’s investment assets annually for charitable purposes
Major difference between private foundation and CLUT — 5% rule

A private foundation can also make a grant to an individual who is a non-charitable beneficiary. The grant must be made for study, be for a scholarship, fellowship, prize, or award, or be intended to improve or enhance a literary, musical, scientific, teaaching, or other similar skill or talen of the grantee

43
Q

DAF

Donor advised Funds

A

Charitable plan where a donor makes a gift to public charity or community foundation. Then the public chairty sets up a sub-account or FUND inthe donor’s name. Donor can make recommendations of grants to be paid form the fund to select eligible charitable beneficiaries at any time. Think of it as a “poor man’s private foundation”.
A DAF does not provide an income stream to the donor or other non-charitable beneficiaries

44
Q

Wealth replacement trust

A

Charitable donors may have serious concerns that their remaining assets may be insufficient to satisfy the financial needs of their heirs or provide enough estate liquidity. Such donors can alleviate their concerns by using a wealth replacement trust (an ILIT)

45
Q

Installment Sale

A

PIGS

Seller can remove an appreciating asset from his/her estate and subsitute installment payments (advantage)
If the seler dies during the installment sale period, remaining payments (PV) are included in his/her estate (disadvantage)
If installment note is forgiven in the seller’s will, debt is considered paid to the estate, and estate must report all the remaining gain (disadvantage)
If installment sale triggers recapture of depriciation, all recapture must be recognized in the year of the sale (disadvantage)

46
Q

Self-cancelling installment note (SCIN)

A

PIGS
Variation of an installment sale

Note provides that the balance of any payments due at date of death is automatically cancelled (advantage over Installment Sale)
SCIN is appropriate where the seller desires to retain a payment stream which will not continue beyond his/her death and may end at an earlier date. It is still an installment sale
The SCIN balance is removed from the estate, but to accomplish that, the buyer pays a premium and the seller pays more income tax while living (increases the installment payment)

47
Q

Private annuity

A

Proposed regulatory changes may half using private annuities

IRS/Department of Treasury issued new proposed regulations providing that all the gain which would have been recognized over the life of the annuity payments now will be taxed in the year in which the private annuity transaction is established

48
Q

GRAT/GRUT

A

PIGS

Irrevocable trust into which the grantors transfers appreciating or income producing property in exchange for the right to receive a fixed annuity for a number of years
When the term of the trust ends, remaining balance in the GRAT is transferred tax free to beneficiaries
If grantor does not live the term out, all property is brought back into the grantor’s estate. Property has a “string”

Difference between GRAT and GRUT?
In a GRUT the payout percentage, while fixed, is based on the assets revalued each year

Want to put assets that are expected to appreciate into a GRAT/GRUT

49
Q

GRIT

Grantor retained income trust

A

PIGS

Client transfers property into an irrevocable trust, retaining a right to income for a period of years. Why isn’t a GRIT effective like a GRAT or GRUT? At the creation of the trust, the value of property transferred into the trust is reduced by the retained interest (normally zero)

50
Q

S Corporation

A

Property owner wants to gift assets and/or income to family members

Income passes through to it’s shareholders (making it attractive)
S Corp must be capital sensitive, including a manufacturing plant, a warehouse, X-Ray equipment, ect.
Under assignment of income prohibitions, a service related business cannot shift income (tax trap). Example of service related businesses are financial planners, CPAs, attorneys, consultants

Ineffective is a child is under age 24 (kiddie tax)

51
Q

FLP (Family limited Partnership)

A

Property owner wants to gift assets and/or income to family members

Used as a means to shift income from parents to children or other family members. FLPs must meet certain requirements:

  • Income and tax benefits must be distributed or allocated according to each owner’s percentage of the partnership
  • The general partner(s) may be paid for personal service to the partnership
  • Captial must be “a material income-producing factor”; income cannot come from personal services of the general partner

Why create it? Gifts can qualify for various valuation discounts. ( A gift of $15,000 MAY be discounted by 50%; this would allow a $30,000 tax-free gift under the annual exclusion)

52
Q

Gift-leaseback

A

Property owner wants to gift assets and/or income to family members

Occurs when business owning parents wishes to gift assets but only own business assets
Parent gives fully depriciated business assets outright or in trust to a lower-bracket family member then leases the assets back for use in his/her business.
Parent’s business can continue using that asset, can take a deduction for the lease payment, and can still enjoy all the other advantages inherent in gifting

53
Q

Qualified personal residence trust (QPRT)

A

Property owner wants to gift assets and/or income to family members

Irrevocable trust into which a grantor transfers his/her personal residence, retaining an interest for his/her personal occupancy for a period of years. After the term, residence passes to the beneficiaries of the trust, either outright or in trust

Up to two residences may be transferred into the residence trust, but one must be primary residence. The other residence, usually a vacation home may be rented by the grantor a portion of the time, but the grantor must live in the vacation home for more than greater or 14 days or 10% of the number of days rented
Home has a “stirng” on it if donor dies before term

Would recommend QPRT when:
Large residence valued at $1,000,000 or more
Reasonable life expectancy (at least 10 years, longer is preferable)
Donor continues to live in the residence
A large estate (at least 11.7M$ single, 23.4M$ married but larger is preferable)

54
Q

Skip person

A 
A beneficiary (related person) who is at least two generations younger than the transferor (typically a grandchild)
UNRELATED persons who are more than 37.5 years younger than the transferor are skip persons
55
Q

GSTT lifetime exemption

Generation-skipping transfer tax

A

For each individual donor, first $11,700,000 in property transferred by direct or indirect lifetime or death time skips to all skip persons combined can be declared exempt from GSTT. Similar to gift tax, a $15,000 annual exclusion per donee is available under the GSTT for LIFETIME generation skipping DIRECT transfers only. A spouse can consent to splitting the annual exclusions only

56
Q

Three types of transfers to skip persons

A

Direct Skip - only one with $15,000 annual exclusion
Can use the $15,000 exclusion, then anything above is a taxable gift

Taxable termination (Indirect skip) - no $15,000 exclusion
Termination of non-skip person’s interest in income or principal of a trust with the result that skip persons become the only remaining trust beneficiary
GST tax of $15,000 after using the $11,700,000 exemption. There is a taxable gift of $11,715,000)

Taxable distribution- no $15,000 annual exclusion
Any distribution of property out of a trust to a skip person (other than a direct skip or taxable termination)
When trust has beneficiaries in two or more generations and the trustee makes a distribution to a skip person, it is a taxable distribution

Transfers in trust are generally not present interest gifts

57
Q

Summary of liability for payment of the GST tax

A

If the transfer is a direct skip, the transferor (donor or estate) pays the GST
If the transfer is a taxable termination, the GST is paid by the trustee
If the transfer is a taxable distribution, the GST is paid by the transferee

Estate tax - can only happen when you’re dead
Gift - only happen when you’re alive
GSTT - can happen when you’re alive or dead

58
Q

Alternate valuation date (AVD)

A

Exectuor of decedent’s estate may file an election to have assets included in the decendent’s gross estate valued at their alternate value which is the FMV 6 months after the decendent’s death

Both outcomes must occur before AVD method can be elected:
Using it must cause a reduction in the total value of the gross estate
The amount of fedeal tax liability must be reduced as a result of filing the election

Cannot elect AVD if:
Assets pass to the spouse using the unlimited marital deduction
Assets passing to other family members/friends that are less than $11,700,000

59
Q

Exceptions to the 6-month AVD rule

A

Wasting assets
Since some assets experience a reduction in value by the mere lapse of time (Examples: annuity payouts, pension/IRA payouts, mortgage payouts, or notes receivable) - AVD wouldnt apply
The value used would be date of death, but remaining assets can qulify for AVD
Assets sold or distributed before the AVD are valued as of the date of sale or distribution

60
Q

Disclaimer

A

Following requirements must be met for a “qualified disclaimer”
Disclaimer must be irrevocable refusal to accept the interest
Refusal must be in writing
Refusal generally must be received within nine months of death
The intended donee cannoy have accepted any interests in the benefit AND
As a result of refusal, the interest will pass, without the disclaiming person’s direction, to someone else

Note: The property may still be subject to gift, estate, or GST tax. The original donor or the decedend’s estate is responsible for the tax, not the disclaiming person (disclaimant)

61
Q

Titles that can be disclaimed

A

JTWROS - No probate/can be disclaimed
TBE - No probate/ can NOT be disclaimed
TIC - Subject to probate/can be disclaimed

62
Q

Disclaimer trust (simple trust)

A

With disclaimer trust, it is possible for the spouse to disclaim the property yet receive a stream of income from the disclaimed bequest. Usually included as a clause in the decendent’s will, making it testamentary in nature. If surviving spouse disclaims, it is transferred to the irrevocable trust and income is paid to the surviving spouse. The spouse may retain a life estate in the trust’s assets. However, the surviving spouse generally cannot retain any power to invade the corpus. The corpus may be invaded using HEMS but no 5 or 5 are allowed

63
Q

Post Mortem Planning

Section 303 stock redemption

A

Postmortem elections for Estate Liquidity

  1. Business MUST be incorporated (closely held stock)
  2. Value of stock must exceed 35% of decedent’s adjusted gross estate
  3. Amount of stock redeemed as capital gain CANNOT EXCEED THE SUM OF THE ESTATE TAXES PLUS ADMINISTRATIONS EXPENESES
64
Q

Post Mortem Planning

Installment payment of estate taxes 6166

A

Postmortem elections for Estate Liquidity
Installment payment of the estate taxes (6166)
1. Property must be in a sole proprietorship, partnership, or corporation (Aggregation is allowed if more than 20% interest in each business)
2. Interest must be carried on as the day of death
3. VALUE OF BUSINESS(ES) MUST EXCEED 35% OF DECEDENT’S ADJUSTED GROSS ESTATE
4.During the first 4 years (of 14 years) can pay interest only on taxes due
5. The interest rate will be 2% on the first $1,000,000(indexed to $1,590,000)
6. The 2% is non deductible

65
Q

Post Mortem Planning

Special Use Valuation (2032A)

A

Estate Tax Reduction
Special Use Valuation (2032A)
1. Real estate used for farming or a closely held business
2. Several rules to qualify:
-50% of the gross estate must consist of real and personal property
-25% OF THE GROSS ESTATE MUST CONSIST OF REAL PROPERTY
3.$750,000 reduction in the decedent’s gross estate ($1,190,000 in 2021)
4. Must be qualified use: 5-out-of-8 rule before death / 10 years after death

66
Q

Estate Planning for nonraditional relationships

Children of another relationship/Cohabitation/Adoptions

A

A revocable trust or possibly tenancy in common are the best answers for the exam

  • Being unmarried, parents will not be entitled to advantages such as elective share or unlimited marital deduction
  • If parents do not have children in common, guardianship may be undermined

Nontraditional family members (non-related) can benefit from a GRIT for estate planning purposes. GRIT is treated like a GRAT (Discounting allowed)

Will is usually a wrong answer because family members can contest

CFP (7 decks)

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