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CFP > Estate > Flashcards

Estate Flashcards

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1
Q

Efficient transfer - What is this?

A

When the assets are transferred to the transferred wishes

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2
Q

Effective transfer - What is this?

A

When the assets are transferred with the least amount of taxes

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3
Q

What can a CFP do and cant do with in regard of estate planning?

A

You can explain things to clients but you can’t draft legal documents (that is for attorneys) // CFP should refer clients to attorneys for legal advice

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4
Q

What is a decedent?

A

Deceasded person

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5
Q

What is a heir? Legatee?

A

Person who inherits property under state laws (Not a will) // Person who inherits property under a will

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6
Q

What is a donor? Donee?

A

Person who gives a gift to someone // Person who receives the gift

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7
Q

What is an abatement? Ademption?

A

When a bequest has been reduced ($100k portfolio reduced to a $20k portfolio) // A right has been extinguished (If a will has me given a mustang, but my mom sells it and buys a tesla, then dies - I don’t get the tesla)

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8
Q

Gift vs Bequest

A

Gift is when you give something while you are alive // Bequest is when you give something to someone when you are dead

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9
Q

What does a will avoid?

A

Avoids intestacy

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10
Q

What are the two requirements for a person who writes a will?

A

1) Age 18 2) Must have a sound mind

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11
Q

Durable power of Attorney - definition

A

To be able to act on a persons behalf even when the principal is incapacitated

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12
Q

Durable power of attorney for health care - definition

A

To be able to act on a persons health care decisions when the principal is incapacitated

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13
Q

Advance medical directive - Definition

A

this directions to the doctors if you are unable to communicate

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14
Q

Holographic will - definition

A

hand written will, must be sign and dated by testator

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15
Q

Noncupative will - definition & what does this only cover?

A

Oral will that covers tangible personalty only (Dying declarations with a witness)

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16
Q

Statutory will - definition

A

Drawn by an attorney (Best choice)

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17
Q

Survivorship clause - Definition + time limit for Unlimited maritial Deduction

A

Requires the beneficiary to survive the decedent for a specific amount of time (Cannot be longer than 6 months to qualify for Unlimited martial deduction)

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18
Q

Disclaimer clause - Definition

A

the heir can disclaim the bequest that is supposed to go them and it will be sent to someone else

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19
Q

Disclaimer clause - What are the 3 requirements?

A

1) disclaiming party can not benefit 2) To disclaim, you need to do this in writing within 9 months of decendent date of death 3) If you disclaim the property, you cannot direct where it goes

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20
Q

Power of attorney - What power is this?

A

This is the power to act on behalf of the principal

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21
Q

Power of attorney - What are the two types of POA?

A

General or limited

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22
Q

Power of attorney - What is limited POA? What is general POA?

A

You are able to act on behalf of the principal in certain areas of life (Ex - Real estate only) // General POA is when you are able to act on behalf of the principal in all areas

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23
Q

Power of attorney - When can this be revoked?

A

Anytime by principal

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24
Q

Power of attorney - When does this power end? (If it isn’t revoked by the principal)

A

When the principal dies

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25
Q

Power of appointment - What is this?

A

Giving someone the ability to transfer assets (attached on the POA document)

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26
Q

Power of appointment - What are the two forms of this?

A

General or limited

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27
Q

Power of appointment - What does general and limited allow you to do?

A

General - when you can appoint assets anywhere (To your creditors etc.) // Limited (Ascertainable standard) - You can use the assets for HEMS (Health, education, maintence, support)

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28
Q

Power of appointment - can this survive if the principal dies?

A

Yes if it’s a trust, No if not

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29
Q

Power of appointment - When can this be revoked?

A

Anytime by principal

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30
Q

Power of appointment - What is the downfall of this?

A

If the agent dies before the principal, the all of the assets are under the gross estate of the agent

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31
Q

Power of attorney - what if the agent wants to do harmful action request to the account?

A

The planner can refuse to take such action (You can protect the principal)

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32
Q

Power of appointment (Limited vs general) - What is used for a maritial Trust and non marital trust?

A

Marital trust - General // Non-marital trust - Limited

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33
Q

Probate - Advantages

A

Clears title of assets, the process is a legal orderly process

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34
Q

Probate - disadvantages

A

Costly, delays, publicity

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35
Q

Testate vs Intestate - what is the difference between the two when they go through probate?

A

Testate - Will (a letter) to the judge that tells him where the assets go // Intestate - the state laws dictate where the assets go

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36
Q

Probabte - what does not avoid probate?

A

No survivorship feature, no beneficiary (Sole ownership property, community property, no beneficiaries)

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37
Q

Avoids probate - what does state contract law mean?

A

Named beneficiaries on LI, annuities, IRAs etc

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38
Q

Sole Ownership - # of owners

A

1

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39
Q

Sole Ownership - Does this have a survivorship feature?

A

No

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40
Q

Sole Ownership - Is this included in probate? (How much)

A

Yes (100%)

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41
Q

Sole Ownership - Is this included in gross estate?

A

Yes

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42
Q

Sole Ownership - Does this step to FMV at death?

A

Yes

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43
Q

Tenants in Common - # of owners

A

2 or more

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44
Q

Tenants in Common - Does this have a survivorship feature?

A

No

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45
Q

Tenants in Common - Is this included in probate? (How much)

A

Yes (% Owned)

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46
Q

Tenants in Common - Is this included in gross estate?

A

Yes

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47
Q

Tenants in Common - Does this step to FMV at death?

A

% of persons property gets stepped up

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48
Q

JTWROS - # of owners

A

2 or more

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49
Q

JTWROS - Does this have a survivorship feature?

A

Yes

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50
Q

JTWROS - Is this included in probate? (How much)

A

No

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51
Q

JTWROS - Is this included in gross estate?

A

Yes

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52
Q

JTWROS - Does this step to FMV at death?

A

%

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53
Q

Tenancy by the entirety - # of owners

A

2

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54
Q

Tenancy by the entirety - Does this have a survivorship feature?

A

Yes

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55
Q

Tenancy by the entirety - Is this included in probate? (How much)

A

No

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56
Q

Tenancy by the entirety - Is this included in gross estate?

A

Yes

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57
Q

Tenancy by the entirety - Does this step to FMV at death?

A

%

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58
Q

Community Property - # of owners

A

2

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59
Q

Community Property - Does this have a survivorship feature?

A

No

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60
Q

Community Property - Is this included in probate? (How much)

A

50%

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61
Q

Community Property - Is this included in gross estate?

A

50%

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62
Q

Community Property - Does this step to FMV at death?

A

Both halves get stepped up

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63
Q

Gifts - who normally is responsible to pay the gift tax? (Donor or donee)

A

Donor

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64
Q

Gifts - who pays the tax of the gift when it is a net gift?

A

Donee

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65
Q

Gifts - what is the annual amount?

A

$17,000

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66
Q

Gifts - what is gift splitting?

A

When you and your spouse split the gift ($34,000 together)

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67
Q

Split gifts - what tax return do you file and what happens to other gifts to that year?

A

Form 709 // all gifts for that year are now split gifts (No more individual gifts for that year)

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68
Q

Split gifts - what happens if one of the spouses die? What can a spouse do for gift splitting?

A

The surviving spouse can elect to split gifts made by the decedent in the final tax year (Executor can give consent for this) (Surviving spouse cannot remarry in that year)

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69
Q

Gifts - what is the “Super annual exclusion”

A

Gifts to Non-U.S. citizen spouse limited to $175,000 (2023) - this is because they do not qualify for the unlimited marital deduction

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70
Q

Gifts - What is present interest?

A

(can have annual exclusion of $17,000) When a gift to the donee is available to the immediate use of the property

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71
Q

Gifts - What is future interest?

A

(cant have annual exclusion of $17,000) When a gift to the donee is contingent to some sort of date or time (Gift to trust - Cole cannot receive the money until he reaches 30)

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72
Q

Crummey provision - what is the intent of this?

A

This provision is applicable to a trust and it creates a present interest for the recipient by being able to take the money out so it (Only for a limited time - then the power lapes). Since it creates a present interest, the annual exclusion applies to the trust

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73
Q

Marital deduction - what is so special about this?

A

Unlimited transfers from spouses without using gift tax (US spouses only)

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74
Q

Charitable deduction - what is so special about this>

A

The donor gets unlimited charitable deductions to qualified charities

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75
Q

Applicable exclusion amount - What is the amount up to (And credits)

A

$12,920,000 // $5,113,800

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76
Q

Form 709 - what is this return called?

A

Gift tax return

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77
Q

Form 709 - when should this be filed?

A

April 15 of the following year (You can extend this by extending the income tax return)

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78
Q

What is the gift tax for gifts above 1 millon? (Must know this number)

A

$345,800 plus 40% of the excess amount over $1,000,000

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79
Q

Gifting Strategies - Why should the donor give the appreciating asset away?

A

Because it will leave the gross estate

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80
Q

Gifting Strategies - Why should you not gift a property that is in a loss position?

A

You should sell it instead so you can capture the loss and then give the cash to the donee

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81
Q

Gifting Strategies - What asset should you give to the youngest donee?

A

the greatest appreciation potential asset

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82
Q

Gifting Strategies - What aseet should you give to charity?

A

the biggest appreciated property (to avoid capital gain taxes)

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83
Q

Gifting Strategies - What asset should you give to the lowest marginal income tax bracket donee?

A

the highest income-producing asset so the income gets taxed at a lower rate

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84
Q

Per Stirpes vs Per Capita

A

Per Stirpes - by the root // Per capita - everyone is the same (Not capitalism)

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85
Q

Gift vs Bequest - Differences?

A

Gifts - made while the donor is alive (can use annual exclusion) // Bequest - gifts done when the donor has pass away (Cannot use the annual exclusion)

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86
Q

Gross estate - Life insurance are in the gross estate when - time limit

A

transferred within 3 years

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87
Q

Gross estate - Life insurance are in the gross estate when - Owned on another person

A

IF: 1) Premum pay status - interpolated terminal reserve (Cash value + Accruals) 2) Paid up - replacement value

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88
Q

Gross estate - Life insurance are in the gross estate when - Owned on Decedent

A

Death benefit (Face Value)

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89
Q

Gross estate - Gift taxes are in the gross estate when…

A

they are paid under 3 years before death

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90
Q

Reversionary Interest

A

The grantor will get back the interest from the interest of the beneficiary’s term or death occurs - [Includeable in gross estate]

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91
Q

Retained Interest

A

The grantor gets some sort of interest benefit despite the gift going to a beneficiary (Ie Grantor gives the house to his kid but reserves the right to live in it whenever he wants) - [Includeable in gross estate]

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92
Q

General or limited power of appointment - which one is includes gross estate?

A

General power of appointment

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93
Q

How far out is the “Alternated valuation date”

A

6 moths after date of death

94
Q

Ascertainable standard - what is this?

A

When you have power of appointment and you are limited to HEMS (Health, Education, Maintenance, Support) and this does not create inclusion in gross estate

95
Q

Closely held business - What are the 4 Valuation discounts

A

1) Minority Discounts 2) Lack of Marketability Discount 3) Blockage discount 4) Key Person Discount

96
Q

Valuation Discount - Minority Discount

A

When you have a small portion in the company (Less than 50%)

97
Q

Valuation Discount - Lack of Marketability Discount

A

There is not a lot of of demand for this so it is hard to sell

98
Q

Valuation Discount - Blockage discount Discount

A

You have so much that if you sell it, the demand will go down (therefore the price will too)

99
Q

Valuation Discount - Key Person Discount

A

The business relies on this person and the company suffers without them

100
Q

Valuation of Financial securities - If it is on a trading day

A

you will find the average of the high and low FMW on the trading day

101
Q

Valuation of Financial securities - If it is a stock that is not actively traded

A

((Trading price AFTER decedent DOD X # of days between DOD and the FIRST preceding trade) + (Trading price BEFORE decedent DOD X # of days between DOD and the NEXT preceding trade)) DIVIDED BY (Sum of days before and after death)

102
Q

Incidents of ownership for life insurance policy- what are some examples

A

Name or change of beneficiary, surrender or cancel the policy, receive dividends, borrow from the cash value, assign/revoke rights

103
Q

When is the 709 Gift tax return due by?

A

April 15th

104
Q

When is the 706 estate tax return due by?

A

9 months from DOD (you can get an extention for an additional 6 months to file BUT not to pay)

105
Q

Who makes the election to do the alternate valuation date?

A

Executor

106
Q

Alternate valuation date - what are the two requirements in order to use this?

A

1)Lower gross estate 2) Lower estate tax due

107
Q

Alternate valuation date - what are wasting assets (what is special about them)

A

Assets that have there value attached to a term - (Notes, patents, annuities) // When calculating them for the alternate valuation date, you only use the DOD value

108
Q

Alternate valuation date - What happens when assets are disposed?

A

Instead of using the 6mo revaluation date, you use the sales price

109
Q

What are examples of deductions from the gross estate? (To get adjusted estate)

A

Funeral expenses, Casualty losses, Debts, Admin expenses, last medical expenses

110
Q

How do you get taxable estate?

A

Adjusted gross estate - (Charitable deduction + Marital deduction) = Taxable estate

111
Q

What are the advantages to the unlimited marital deduction? (2)

A

1)You can fund the other spouse’s gross estate 2) Defer estate tax payments

112
Q

To be eligible for the unlimited marital deduction, there are 2 requirements -

A

1) Us citizen spouse 2) Married at the time of death or gift

113
Q

Qualifications for the martial deduction are: (There are 3!)

A

1)must be in the decedent’s gross estate 2)Has to only be transferred to the spouse, no one else 3)Terminal interest rule (Surviving spouse’s interest cannot terminate at the future date)

114
Q

Terminal interest rule - Example that would NOT work?

A

I leave the house to my surviving spouse but after 10 years, the children will take it over

115
Q

Terminal interest rule - exceptions (you can take the marital deduction still)

A

1) 6 Month survival contingency 2) A trust (Spouse has GPOA and have terminal interest) 3) QTIP trust 4)CRT where the spouse is the only noncharitable beneficiary

116
Q

Non-Citizen Spouse - 2 remedies to get unlimited marital deduction

A

1)Have the surviving spouse become a citizen before the due date of the 706 tax return (9 months) 2) Utilize Qdot

117
Q

What is a QDOT? Qualified domestic trust

A

Post mortem election where there is 1 US trustee where the trust has the right to withhold taxes and the executor can elect maritial deduction

118
Q

What is the applicable estate tax credit?

A

$5,113,800 - 2023 ($12,920,000 election)

119
Q

What is “Prior transfer credit”?

A

This is credit that you can get if you have paid estate taxes in the last 10 years

120
Q

What is “Foreign death taxes credit”?

A

credit for the tax you paid on property that is located outside of the US

121
Q

Estate Taxes - Penalties

A

Failure to file: 5% per month up to 25% // Failure to pay 0.5% per month up to 25% (Concurrent months are reduced by failure to pay)

122
Q

Portability - What is this and how form is this elected on?

A

(Election in 706 )This is a donation of unused exemption to the surviving spouse. (You use the last deceased spouses unused exemption) (Max of $12.92 mil)

123
Q

IRD - what is this?

A

Incomes that was assigned to the decedent and entitled to be paid but died before paid

124
Q

IRD - what is a big downside to this? 2 things

A

No step up to fair basis AND included in the gross estate

125
Q

IRD - Examples

A

All IRAs and qualified retirement account (Excluding all Roth accounts), annuity payments, unpaid debt from installment note

126
Q

Transfers not subject to gift tax - what are they?

A

Legal support, qualified transfers (Direct payment to medical/educational institutions, below-market rate loans, unlimited marital deduction

127
Q

Partial Sale-gift transactions - What is the amount that is subject to a gift?

A

the gift is the difference between the FMV and the sale price

128
Q

Private Annuities/SCIN - what condition is the seller usually in?

A

when the seller in poor health

129
Q

Private Annuities - what is the risk for the buyer?

A

that the seller will live longer than initial thought of

130
Q

SCIN - What is the term of payments?

A

determined by seller

131
Q

SCIN - is there deductibility on the interest?

A

Depends on the property (Business property - yes)

132
Q

SCIN - What is the buyer’s adjusted tax basis?

A

Purchase price of the property

133
Q

SCIN - is ther collateral interest that the buyer must pay the seller? (To make it secure)

A

Yes

134
Q

Private Annuity - What is the term of payments?

A

Life of annuitant

135
Q

Private Annuity - is there deductibility on the interest?

A

none

136
Q

Private Annuity - What is the buyer’s adjusted tax basis?

A

sum of annuity payments

137
Q

Private Annuity - is ther collateral interest that the buyer must pay the seller? (To make it secure)

A

No

138
Q

Family Limited Partnership (FLP) - what is this?

A

Partnership created to give assets to the younger generation through gifts of the annual exclusion. Where the general partner (parent) has 1% and the (limited partners) children have 99% by using discounts

139
Q

Family Limited Partnership (FLP) - what are the two discounts that FLPs use?

A

Lack of marketability discounts and minority shares

140
Q

The trustee is held by acting as a _____ to the beneficiaries.

A

Fiduciary

141
Q

Why use a trust - management

A

some people are not capable to manage the assets

142
Q

Why use a trust - creditor protection (Spendthrift clause)

A

The beneficiary cannot promise to give assets that are in the trust to anyone and if a promise is made, it is void

143
Q

Why use a trust - split interest in property

A

You are able allocate assets without splitting everything up or selling (Gifting the farm to 5 kids where only 2 of them will run it)

144
Q

Why use a trust - avoid taxes (Irrevocable trusts)

A

You can transfer future appreciation assets and reduce the gross estate (Does not apply to revocable trusts)

145
Q

Why use a trust - avoid probate

A

Takes precedent and the state will oblige to whatever the trust says

146
Q

Revocable vs irrevocable trust - which is a completed gift?

A

irrevocable trust

147
Q

What could cause a non completed gift in an irrevocable trust?

A

Retained interest (i still get to choose where this goes…)

148
Q

Grantor trust - who gets taxed

A

income taxed to grantor

149
Q

Non Grantor trust - who gets taxed? 1) Distribution 2) accumulation

A

1) distribution - taxed to the beneficiaries 2) accumulation - taxed at the trust rates

150
Q

Simple trust

A

Any income that comes in the trust must be distributed

151
Q

Complex trust

A

this allows for income to be accumulated in the trust

152
Q

What makes a grantor trust?

A

(Inter vivos trust) the person who put the money into the trust and the income is payable/paid to that person or the spouse // the person has rights to borrow, dispose, or return back to the grantor

153
Q

Revocable vs irrevocable trust - which can be revoked by the grantor?

A

the revocable

154
Q

Inter vivos trust vs testamentary trust - what is the main difference?

A

Inter vivos - created during life // Testamentary - created at death

155
Q

Standby trust

A

this trust is waiting for something to trigger and then this will be filled

156
Q

Pourover trust

A

this trust receives assets from another source (Can be from a pourover will)

157
Q

Inter vivos trust - revocable vs irrevocable for gifts

A

Irrevocable can do a gift and can use the annual exclusion (If it has crummy powers) // Revocable - not a completed gift

158
Q

GRAT - how does it pay?

A

Fixed annuity

159
Q

GRAT & GRUT - what is the gift amount made?

A

present value of the remaineder interest

160
Q

GRUT - how does it pay?

A

Variable annuity

161
Q

GRAT & GRUT - what assets would be good to put in each of them?

A

GRAT - hard to value assets // GRUT - easy to value assets

162
Q

GRAT & GRUT - which one has to be revalued every year?

A

GRUT

163
Q

QPRT - what asset is this for?

A

Personal residence

164
Q

QPRT - what is the income?

A

being able to rent the property for free

165
Q

QPRT/GRAT/GRUT etc - what is the biggest risk to this?

A

the grantor dying within the term and the FMV is included in the FMV

166
Q

ILIT - what is the 2 main reasons for this?

A

1) Keeping it out of the gross estate (If no incidence of ownership) 2) Providing liquidity to beneficiaries

167
Q

ILIT - what provision is usually included in this?

A

cummey provision

168
Q

Trusts for minors 2503(b) - 1) what is this 2) who is this for?

A

1) can hold assets for lifetime of beneficiaries but must distribute income annually 2) bad boys (Not trusted)

169
Q

Trusts for minors 2503(c) - 1) what is this 2) who is this for?

A

1) Allows the accumlation of assets but when the child gets to be 21, it can be fully available to child 2) choir boys (trusted)

170
Q

Trusts for minors 2503(b) & 2503(c) - Annual exclusion for each othem?

A

(b) - annual exclusion available for the income interest to child (c) - annual exclusion available for the contribution

171
Q

ABC trust arrangement (A trust) - what power does the surviving spouse have?

A

GPOA and qualifies for maritial deduction

172
Q

ABC trust arrangement (A trust) - does it qualify for marital deduction?

A

Yes

173
Q

ABC trust arrangement (B trust) - what is the point of this trust?

A

to use the applicable credit amount for nonspousal beneficiaries & no inclusion of gross estate to surviving spouse estate

174
Q

ABC trust arrangement (B trust) - can the spouse have any access to this?

A

Spouse can get income (HEMS) “5-and5”

175
Q

ABC trust arrangement (C trust) - What power does the survivng spouse have?

A

LPOA

176
Q

ABC trust arrangement (C trust) - who is the beneficiary?

A

Annual income for the spouse only

177
Q

ABC trust arrangement (C trust) - What can the surviving spouse demand of the trustee to do?

A

Invest more into income producing assets

178
Q

ABC trust arrangement (C trust) - Who is in control of where the assets go?

A

the decedent

179
Q

QTIP Trust - how long does the executor have to elect the QTIP trust? What tax form?

A

1) 9 Months plus 6 months (Extension) - 15 months 2) 706

180
Q

QDOT - what is this?

A

(Post mortem election) Trust which includes a domestic trustee that allows noncitizen spouse to qualify for the marital deduction

181
Q

Pooled income funds (PIF) - what is this?

A

Small gifts that are contributed into a trust that the charity manages. Provides income to the donor

182
Q

CRAT - Length life or term - what is the length of the term can’t be longer than?

A

Cannot be more than 20 years

183
Q

CRAT - can there be additional contributions after inception?

A

No

184
Q

CRAT - can you change the beneficiary?

A

Yes

185
Q

CRAT/CRUT - which can invade corpus if income is insufficient for payment?

A

CRAT

186
Q

CRAT/CRUT - what is more flexible?

A

CRUT

187
Q

CRAT - what should the amount atleast be to the grantor?

A

5% or more to the initial FMV

188
Q

CRAT - what should the remainder interest be?

A

10% or more to the initial FMV

189
Q

CRUT - what should the amount atleast be to the grantor?

A

5% or more to the “revalued” FMV

190
Q

CRUT - can there be additional contributions after inception?

A

Yes

191
Q

CRUT - what should the remainder interest be?

A

10% or more to the initial FMV

192
Q

CRUT - when is this valued?

A

Every year

193
Q

CRAT - when is this valued?

A

at inception

194
Q

Non-Trust Interest Charitable gift

A

Donate the property to charity (Personal residence or a farm) - you get to live there rent free. When you die, they get the property. (Similar to a QPRT)

195
Q

Charitable Lead trusts - what is this

A

the charity is getting income every year (Grantor gets income tax deduction) and the remainder is to a NONcharitable beneficiary

196
Q

Testamentary (At death) - giving to charities - is there a deduction for 1) income tax 2) estate deduction

A

1) income tax - no deduction 2) Estate tax - must be mandatory (Already documented)

197
Q

IRC section 6166 - who is this for and what is this?

A

1) Closely held business 2) Able to extend estate taxes over a 14 year period (4 years are interest only / 10 years are payments) up to $1,750,000

198
Q

IRC section 6166 - how much of the value of the business interest must be of the gross estate of the decedent?

A

at least 35%

199
Q

IRC section 6166 - what types of closely held business?

A

Sole proprietorship, partnership (at least 20% of capital interest), Corporation (20% of voting stock)

200
Q

IRC Section 2032A - what is this for?

A

FMV implies that it is used at its best use. If a family owned a farm, they are able to decrease the FMV by $1,310,000 to lower estate taxes

201
Q

IRC Section 2032A - what are the requirements?

A

Must be actively managed by family after decedent 5 out 8 years, Real/personal property 50% of gross estate, real property 25% of gross estate, use of property must be at least 10 years

202
Q

Section 303 - what is this for?

A

you can redeem stock from an estate up to: the estate/inheritance taxes, estate admin costs, funeral costs

203
Q

Section 303 - 1) Who is this only applicable to? 2) how much of the this stock must be of the gross estate?

A

1) Corporations 2) Must be more than 35% of decedents gross estate

204
Q

Skip person - Lineal decendent

A

two or more generations younger than the transferor

205
Q

Skip person - Unrelated transfees

A

37 1/2 years younger than the transferor

206
Q

When is a trust a skip person?

A

if all interests are by skip persons // if distributions are only made to skip persons

207
Q

Predeceased ancestor rule

A

If the child of a transferor dies, the grandchild moves up in line. (No GST)

208
Q

What are the 3 types of transfers that are subject to GSTT

A

Direct skips, taxable terminations, taxable distributions

209
Q

Direct skip - What is this? Who is paying taxes?

A

outright gift to skip person, (person giving) is generally liable for the GSTT on a direct skip. If the gift was given from a trust, then trustee is liable

210
Q

Direct skip - what if it is to the great grandchildren? How many skips are there?

A

it will still only be taxed once no matter how many skips there are

211
Q

Direct skip - who usually pays the GSTT?

A

Transferor

212
Q

Taxable termination - what is this?

A

the remainder beneficiary when the trust is being terminated

213
Q

Taxable termination - who is responsible for the GSTT

A

Trustee

214
Q

Taxable distribution - what is this? Who is taxed?

A

the trust does not end and the money go directly to the skip person BUT money leaves the account. Transferee (Receiving) is liable for the GSTT

215
Q

Taxable distribution - Who is responsible for the GSTT

A

Transferee (Person receiving the money)

216
Q

GST Exlusions - Annual exclusion and lifetime exemption

A

$17k and 12,920,000

217
Q

GST Exemptions - What does it mean if the transferor wants to elect out?

A

They can elect out of paying GSTT until they pay and then they can have it be allocated at death (Direct skips are allocated first)

218
Q

1) Revocable 2) Irrevocable trusts - Income tax

A

1)Income taxed to grantor 2)Income taxed to beneficiaries / income to trust is retained - taxed to trust (unless it’s a grantor trust, which all income is taxed to grantor)

219
Q

1) Revocable 2) Irrevocable trusts - gift tax

A

1)not a gift because the person can take the property back 2)completed gift and subject to gift tax

220
Q

1) Revocable 2) Irrevocable trusts - Estate tax - gross estate

A

1) FMV included in gross estate 2)Not included in gross estate UNLESS: retained an interest as of DOD OR grantor released his interest within 3 years OR funding the trust generated gift tax within 3 years

221
Q

1) Revocable 2) Irrevocable trusts - Generation skipping tax

A

1)not an issue because assets are includeable in grantor’s estate 2)Can be an issue depending on the beneficiaries of people

222
Q

Life insurance - Transfer for value rule exceptions

A

1)the insured 2)partner of the insured 3) partnership where the insured is a partner 4)corporation where the insured is a shareholder or officer 5) transferee who takes the transferor basis in the contract

223
Q

1040 - Deduction for Unpaid expenses

A

yes

224
Q

1040 - Deduction for casualty losses

A

no

225
Q

1040 - Deduction for executor fees

A

no

226
Q

1041 - Deduction for Unpaid expenses

A

no

227
Q

1041 - Deduction for casualty losses

A

yes

228
Q

1041 - Deduction for executor fees

A

yes

229
Q

706 - Deduction for Unpaid expenses

A

Yes

230
Q

706 - Deduction for casualty losses

A

Yes

231
Q

706 - Deduction for executor fees

A

yes

232
Q

What is the GSTT rate

A

40%

CFP (7 decks)

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