Estate

Question 1

Disclaimer clause:

Answer 1

functions to remind any heirs that they can disclaim a bequest, while still allowing the testator to direct the distribution of disclaimed property

Question 2

Power of Attorney:

Answer 2

a standalone document that allows an agent to act for the principal and may include the power to appoint assets. Power to act. End at the death of the principal.

Question 3

Power of Appointment:

Answer 3

a power, usually included in a trust or power of attorney, allowing the power holder to direct assets to another. Power to transfer assets. May survive death of the grantor

Question 4

When the power of attorney is “durable”:

Answer 4

the agents power does not expire upon the principals incapacity or disability but rather expires only at the principals death

Question 5

When the power of attorney has a springing power:

Answer 5

the agent’s power “springs” into existence upon some disability of the principal.

Question 6

Tenancy in common:

Answer 6

each person holds an undivided, but not necessarily equal, interest in the whole property. FMV of a decedents ownership interest is included in the decedent’s gross estate.

Question 7

Joint tenants with right of survivorship (JTWROS)

Answer 7

each person owns an undivided, equal interest in the whole. Property is included in the decedent’s gross estate to the extent that of the decedent’s original contribution percentage (actual contribution rule).

Question 8

Tenancy by the entirety:

Answer 8

joint ownership of property only between a husband and wife that cannot be partitioned w/out consent of the other spouse. At death of the first spouse, the property automatically transfers to the surviving spouse and, therefore, does not go through probate. 50% of the FMV is included in the decedent’s gross estate.

Question 9

Never gift property with:

Answer 9

FMV < adjusted basis. Rather, sell the property and let the donor recognize a capital loss for income tax.

Question 10

Consider gifting property with the greatest appreciation potential:

Answer 10

to the youngest donee available who has the most time for the asset to appreciate.

Question 11

When making gifts to charities:

Answer 11

always gift appreciated property to avoid the capital gains taxes on the difference between the FMV and the donor’s adjustable basis.

Question 12

IRC Section 2035 requires a decedents gross estate to include:

Answer 12

1. any gift tax paid within 3 years of DOD
2. the value of any property gifted within 3 years of DOD if decedent retained an interest
3. the death proceeds of any life insurance policy insuring the decedents life that was gifted within 3 years of DOD

Question 13

Valuation of financial securities at death:

Answer 13

the FMV is the average of the high and low trading price for the decedents DOD

Question 14

If the client does not outlive the term of the QPRT,

Answer 14

the entire value of the house on the DOD is included in the gross estate