Estate

Question 1

Community Property: Basis

Answer 1

Wife has $1mm IRA

Husband has $500k in estate

If wife dies, full step up in basis to $1mm

Question 2

Estate Tax Form

Answer 2

706

“six feet under”

Question 3

Is premium paying an incident of ownership?

Answer 3

NO

EX: crummy trust

Question 4

Policies in ILITs in gross estate?

Answer 4

Policy issued to ILIT: not included

Policy transferred to ILIT: if transferred within 3 years of death it is included

Question 5

Gift Tax Form

Answer 5

709 must be filed if:
- more than $16k to non-spouse
- future interest
- split gifting (unless it comes from joint account)

Question 6

Completed Gift: Future Interest examples

Answer 6

• 2503(b)
• remainder interest
• a trust in which income will be accumulated for a period of years

Question 7

Completed Gift: Present Interest examples

Answer 7

• 2053(c)
• Direct gift
• Crummey trust
• 529
• UGMA/UTMA

Question 8

Powers that CANNOT be given to another

Answer 8

• to Execute or Revoke a will
• to Execute a living will

Question 9

Tainted Trusts

Answer 9

• reversionary interest that exceeds 5%
• right to income or right to use or enjoy property

Question 10

When does a trustee become a fiduciary?

Answer 10

when the trustee controls the assets

Question 11

Crummey Trust: right to withdrawal how much and for how long?

Answer 11

LESSOR of $16k or value of gift

30 days to withdrawal

Question 12

Are Ascertainable standards distributions taxed?

Answer 12

NO, not subject to estate tax or gift tax

Question 13

Wealth Replacement Trust

Answer 13

For donors who have serious concerns that their remaining assets may be insufficient to satisfy the financial needs of their heirs or for LIQUIDITY.

Question 14

Installment Sale

Answer 14

Client NOT WORRIED about estate taxes (do not choose if over estate exemption)

• PV of remaining payments is included in owner’s estate.
• Gain is capital gain.
• DO NOT USE if property is subject to RECAPTURE (1245 prop)

Question 15

SCIN

Answer 15

use if client IS WORRIED about estate taxes

• No value in owner’s estate
• This ADDS COST to buyer
• Higher payout than installment
• Capital gain
• Assets CAN be depreciated

Question 16

Private Annuity

Answer 16

sale of property in exchange for payments

-ALL the GAIN it taxed to seller in year PA is created
- Not included in estate
- transfer is a promise

Question 17

GRAT/GRUT

Answer 17

STRING: if you die during the term, included in your estate

APPRECIATED ASSET: best asset

• end of term corpus distributed to remainder person

Question 18

Partnership / S Corp

Answer 18

(Gifting Shares)

DO NOT choose if bene subject to Kiddie Tax

• family member receives conduit income
• business must be capital sensitive (not service related)

Question 19

FLP

Answer 19

Gift interest to limited partners to reduce estate

General partner MAINTAINS CONTROL

Valuation discounts

Question 20

QPRT

Answer 20

STRING: if you die during the term, included in your estate

after term residence is excluded from your estate

gift is discounted

Question 21

Section 303 stock redemption

Answer 21

ESTATE LIQUIDITY

Business must be incorporated

Stock must exceed 35% of decedent’s AGI

amount of stock redeemed cannot exceed the sum of estate taxes

Question 22

Installment Payment of Estate Taxes (6166)

Answer 22

ESTATE LIQUIDITY / SAFE ANSWER

property must be in a sole proprietorship, partnership, corp

Stock must exceed 35% of decedent’s AGI

Pay taxes over 14 years

Question 23

Special Use Valuation (2032A)

Answer 23

ESTATE REDUCTION

Family Farm / Real Estate

50% of estate real/personal prop. 25% is real prop

$750,000 ($1,230,000) reduction gross estate, then must be used for 5/8 years before death and 10 years after