Estate

Question 1

In one’s gross estate what are examples of property owned at death

Answer 1

-liquid assets
-autos
-clothes
-medical insurance reimbursements
-awards for pain and suffering
-state income tax refunds
-cash surrender value of life insurance that you owned on someone else’s life.
-rental income accrued before death

Question 2

What are things where there’s a three year look back to include in gross estate

Answer 2

-any gift tax paid within three years
-gifts given within last three years if the gift was a transfer with a life estate, transfer taking effect at death, revocable transfer, transfer of life insurance on the life of the decedent.

Question 3

What are transfers with a retained interest

Answer 3

Property transferred where the decedent still receives some benefit from the property

Question 4

What is the alternative valuation date

Answer 4

Measuring of estate value is pushed to six months after death.

Question 5

What are deductions from gross estate

Answer 5

-funeral expenses
-last medical expenses
-administration expenses
-debts
-losses during administration

Question 6

Who pays the estate tax

Answer 6

The executor or the administrator. If they don’t pay or are late, they are held liable

Question 7

What are Totten trusts used for

Answer 7

Used to avoid probate. This doesn’t help you lower the gross estate value.

Question 8

Are gift taxes paid included in gross estate?

Answer 8

Yes- gift taxes paid over the three years before death

Question 9

If you gift life insurance to someone before you die, is it included in gross estate.

Answer 9

Yes if it was transferred in last three years. No if not.

Question 10

What is the definition of a gift

Answer 10

Voluntary transfer of property. Nothing was received in return.

Question 11

What are the types of gifts

Answer 11

direct
indirect
complete (you’ve completed given the gift, not getting it back)
incomplete (not a taxable gift at the current time)
Reversionary interests- a gift that could be returned to you
Net gifts

Question 12

How do you value a gift

Answer 12

Use FMV at the date of the gift. Real estate would need an appraisal. Publicly traded companies are valued at the average of the high and low trading price of the stock that day. Bonds would be the PV of the expected future returns.

Question 13

What’s the annual exclusion

Answer 13

All individuals may gift a certain amount tax free per donee each year. Gift must be a present interest. Use it or lose it. Non- US citizen spouses don’t qualify for the unlimited martial decduction, so instead you can give a “super annual exclusion”

Question 14

What are split gifts

Answer 14

Married spouses can elect to split gifts effectively doubling the annual exclusion. Must be elected for all gifts that year. No gift splitting for community property.

Question 15

What’s the gift tax exclusion for 2022?

Answer 15

$16,000/person

Question 16

What’s the Crummey provision

Answer 16

Allows the trust beneficiary to withdraw some or all of any contribution to a trust for a a limited period of time. Usually 30 days.

Question 17

What is a qualified transfer

Answer 17

A qualified transfer is a payment for someone else paid directly to a
-Qualified educational institution for tuition
-Medical care provider for qualifying medical expenses
Does not apply against the annual exclusion amount.

Question 18

What are the rules around payment for support

Answer 18

Payments for legal support are not gifts. Think special needs. Legal support does not necessarily stop at age 18.

Question 19

How are transfers in a business setting treated

Answer 19

Transfers in this situation are presumed to be compensation and not a gift.

Question 20

Gift to spouses

Answer 20

Unlimited martial deduction allows for unlimited transfers between married people without gift tax. Spouse must be a US citizen.

Question 21

sWhat’s a good multi party gifting strategy

Answer 21

Generally want to gift property with the greatest appreciation potential to the youngest donee. Gift appreciated property to charities to avoid the capital gain taxes. Never gift property in a loss position, sell it instead and take advantage of the loss.

Question 22

What is a charitable lead trust (CLT)

Answer 22

Provides immediate income to the trust and the estate tax advantage is that there is an unlimited charitable deduction at the estate level.

Question 23

What a charitable remainder annuity trust (CRAT)

Answer 23

This is less flexible than a CRUT
Provides a fixed annuity to the donor for an amount that is at least five percent (and no more than 50%) of the initial net fair market value of the property contributed to the trust. The term of the annuity may be for life, or if for a period certain no more than 20 years. Once established no more contributions are allowed. Trustee of the CRAT can be given right to make distributions to income beneficiaries as he desires. Donor does not have to notify the charity of its beneficial status, and reserves the right to change the charity if they want

Question 24

What is a charitable remainder unit trust (CRUT)

Answer 24

More flexible than a CRAT.
Yearly payout is a fixed percentage that is at least 5% and no more than 50% of the annual fair market value of the assets. Assets are revalued annually to determine payout. CRUT income can fluctuate. You can make additional principal contributions later on if you want to. Trustee can distribute income to beneficiaries as he desires, same as CRAT.

Question 25

What is a pooled income fund (PIF)

Answer 25

Basically a mutual fund provided by a charity. All donor contributions are pooled into a trust created and maintained by a single charity, and each donor receives an allocable share of the trusts income for life.

Question 26

What is general power of appointment

Answer 26

Can appoint money to pay for the persons needs. Can appoint money to the persons creditors. Also if you die before the person who’s money you were taking care of, that money is included in your estate

Question 27

What is a QDOT

Answer 27

Qualified Domestic Trust. For people who have a non U.S. citizen spouse, and the US citizen spouse passed away. Will allow the U.S. government to subject remaining assets to estate taxation upon the death of the non-U.S. citizen surviving spouse.