Estate Flashcards
Quasi property
Property that would have been community property except that it was acquired while the couple was living in a non community property state
Who can own community property
Only spouses
Can creditors sever tenancy by the entirety?
Yes, but only joint creditors
What techniques can be used to avoid ancillary probate
JTWROS
Revocable living trust
Tenancy by the entirety
What kind of property does not go through probate?
JTWROS
TBE
revocable trust
When are survivorship annuities included in gross estate
Annuities full value is included if survivor has right to a lump sum
Present value of future payments is included if the survivor receives periodic payments
What is a life estate
Gives the owner the absolute right to possess, enjoy, or derive income from the property for life
Are life estates included in a gross estate
No, only a retained life estate is included
Why is our transfer tax system considered cumulative
The calculation is based on cumulative transfers
When will a general power subject the holder to gift tax liability
When there is a lapse
What is form 709
Gift tax form
How do you calculate a taxable gift?
FMV-annual exclusion
What are deductible/exempt gifts
Qualified payment to an education institution for tuition Qualified payment for medical care Gift to spouse Gift to qualified charity Gift to political organization Gift to president of USA
In tax year 2022, what is the max amount you can gift someone and not pay federal gift taxes?
12,076,000
In an inter vivos trust, who has legal title and who had equitable title?
Trustee holds legal title
Beneficiaries hold equitable title
Simple trust keys
Income is distributed
Income taxed to beneficiary
No distribution of corpus
No charitable gifts
Complex trust keys
Income must or may be accumulated
Income accumulated is taxed to trust
Income distributed is taxed to beneficiaries
Corpus may be distributed until trust terminates
May make charitable gifts
What is Distributable Net Income (DNI)
The accounting rule that limits the amount that trust (or estate) beneficiaries must report as gross income for income tax purposes
What are the purposes of DNI
Provide trust with deduction to beneficiaries
Limit the portion of distribution that is taxable
Ensure character of distributions remain the same
To be taxed as a separate entity a trust must meet what requirements?
Irrevocable
Grantor has not retained control
Income is accumulated
What is a spendthrift provision
Prohibits the transfer of the beneficiaries interest and stipulates that it is not subject to the claims of the beneficiaries creditors
What are the other names for a bypass trust
Nonmarital trust B trust Nonmarital b trust Family trust Unified credit trust Applicable credit amount trust Applicable credit amount shelter trust
Other names for a marital trust
Power of appointment trust
Spousal trust
Marital “A” trust
Other names for QTIP trust
Qualified terminal interest trust
C trust
Current income interest trust
QTIP KEYS
QTIP is LAME
Lifetime income interest for spouse
Annual payments to the spouse
Mandatory payments to the spouse
Exclusively for the spouse
What is an estate trust
Marital trust that does not provide surviving spouse with income stream
What kind of property can be held in a UTMA that cannot be included in a UGMA?
Real estate Partnership interests Patents Royalty interests Intellectual property
Sprinkling/spray provision
The power to direct/distribute INCOME at the DISCRETION of the trustee
Can be a provision in an estate or trust
What is a dynasty trust
B trust that benefits multiple future generations
Uniform statutory rule
Trust can violate the rule against perpetuities by stating the number of years
Is an irrevocable trust a gift of present interest
No, must have crummey provisions
Can Simple trusts be irrevocable
Yes
Required minimum gifting amount under a CLUT
None
Who controls and funds a donor advised fund
Controlled by sponsoring organization
Funded by individual donor
What is the typical use of a CLAT for?
Large donation
Is there a required minimum distribution for a CLUT?
No
What is the catch up provision for SIMPLE plans?
$3000
Other names for a 403B
Tax deferred annuity (TDA)
Tax sheltered annuity (TSA)
Is premium paying an incident of ownership?
No!!!
What is a reverse gift
Wealthier spouse makes a gift of a low basis asset to the dying spouse
For a reverse gift to work, how long must the I’ll spouse live after gift
At least a year
Is being the insured an incident of ownership
No!!
Can an s corp issue preferred stock
No
When is a child no longer eligible for kiddie tax
The year in which they turn 24
What are the duties of fiduciaries
Loyalty to beneficiaries
Duty to not self deal
Duty to preserve property and make it productive
Duty to be impartial toward all beneficiaries
Example of self dealing
Trustee sells trusts assets to himself below FMV
Taxable distribution
Trust has beneficiaries in 2 or more generations and the trustee makes a distribution to a skip person
Taxable termination
Termination of a non skip persons interest in income or principal of a trust with the rest is the skip person becoming the only remaining beneficiary
What qualifies as closely held?
Sole proprietorship
Partnership
Corporation
Are taxable gifts included in a gross estate
NO-only gift taxes paid
If on the exam the question says there is a QTIP trust that they want to go to their GRANDCHILDREN what is the answer?
Reverse QTIP
If alternative valuation date was elected, can assets be valued at something other than the 6 month valuation?
Yes-wasting assets may not be valued at AVD
Can contingent beneficiaries be listed for a disclaimer?
- can have contingent beneficiaries if wanting to disclaim property
- property with contingent beneficiaries cannot be listed for a disclaimer trust to work
Causa Mortis
Gift conditional upon the donors dying
What is added to the taxable estate to determine the tentative tax base
Taxable gifts
Co-ownership discount
Is for real estate ownership with another person
Key person discount
May be allowed for a business that lost a key employee who was responsible for its good will, administrative or management skills
When is a reversionary interest tainted for income tax purposes?
When the interest exceeds 5% of the trust value at the time of creation
Do TIC assets get a set up in basis?
Only a 1/2 step up
*this can be troublesome with spouses
What operates under the conduit principle?
Simple trusts NOT complex trusts
Certain business entities (ex:LLC, sole proprietorship)
Is a 2503C trust included in the trustees estate?
Yes!
*bc of this grandparents should not be trustees
The RULE AGAINST PERPETUITIES allows a trust to last as long as what?
Lives of being plus 21 years and 9 months
Examples of Income in Respect to the Decedent
Insurance renewal commissions
Monthly IRA payments
Taxable distributions from qualified plan
Partnership income of deceased partner
Gain still to be recognized on installment sale
S corp income of deceased shareholder
Business accounts receivable (not booked)
Dividends declared but not received
Following the death of a grantor, what would reduce GSTT?
Reverse QTIP
*key here is the reverse QTIP can be used AFTER death
What kind of property is land for a charitable contribution
Always considered use related
Besides a qualified plan what else could a QDRO pertain to?
Child support
Alimony payments
Marital property rights
What happens if you have a QPRT and die during the retained interest term?
It leaves the grantors estate with no greater tax liability than had the QPRT not been established
In a taxable termination, who is liable for the GSTT due?
Trustee from the trust property
What is an IRS section 2518
Disclaimer or disclaimer trust
Are not-for-profits public or private charities?
Neither. They would need to obtain IRS approval to receive tax deductible contributions
When can you file as a qualifying widower?
The year after your spouse died
*in the year the spouse passes: can only file as MFJ and MFS
What must you have if your are going to file as a qualifying widower
Must meet at least 1 of 4 tests:
- maintains a home
- has a dependent child
- filed a joint return the prior year
- did not remarry
Can you file head of household the year your spouse dies?
Only if there are children actually living in the home
