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Jing's CFP Review > Estate > Flashcards

Estate Flashcards

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1
Q

What are the Will Clauses?

A

Residuary Clause (check)
Disclaimer Clause
Codicil(amendment)
Living will

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2
Q

What is Post Mortem?

A

Post-mortem planning, also known as estate or legacy planning, is a technique that involves managing and distributing a deceased person’s assets and affairs. Planning does not stop with the death of the client

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3
Q

Living will also named as?

A

Advanced medical directive(need more than this)

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4
Q

What do we need that will allow somebody to make decisions on somebody else’s behalf when they are incapacitated?

A

Durable power of appointment

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5
Q

What is the characteristics of General power of appointment?

A

Own, if dies with the power, added to the gross estate power holder unless it is “ascertainable standard” = HEMS

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6
Q

Springing power of attorney

A

Incapacity= durable power of attorney

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7
Q

Fee Simple

A

Fee Simple, 100% ownership. 100% in Gross Estate/100% in Probate Estate

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8
Q

Tenants in common

A

TC share %, fractional share goes into Gross and Probate estate. Can convey piece without other’s permission

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9
Q

JTWROS

A

2 tenants: spousal/ non spousal tenant;
50/50 ownership;
Can convey piece without other’s permission

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10
Q

Tenancy by Entirety

A

Married only;
Cannot sever without spouse’s permission; Creditor protection is higher

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11
Q

Community Property

A

Married only, 50/50 ownership
Full step-up basis at first death
No survivorship, goes into probate.

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12
Q

Avoid probate - By Laws

A

By law includes JTWROS, Tenancy by Entirety, Trust.

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13
Q

Avoid probate - By Contract

A

By contract includes Beneficiary designations, retirement, life insurance, annuities, TOD, POD(Payable on Death).

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14
Q

SCIN - Self Canceling Installment Note

A

Note cancels at seller’s death.
No estate inclusion. Buyer owes no more.
“bet to die”.
Buyer pay a risk premium.
Always have a term.
Secured promise pay – have collateral.
Buyer’s basis = purchase price

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15
Q

Private Annuity

A

Buyer pays for the seller’s life.
Lifetime income. No term.
No collateral. No security.
Basis of the buyer is accumulated P+I.

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16
Q

FLP - Family Limited Partnership

A

GP(100%)+ LP(0%) goes into GP(1%)+LP(99%). Gifting arrangement, stay in control, utilizing discounts.
Lack of marketability, minority discount

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17
Q

CRAT

A

Grantor received fixed payment, remainder goes to charity;
Trust is tax exempt – trust generate income but not taxable;
term up to 20 yrs/life; 10% Rule – Remainder interest ;
Tax deduction to the grantor is PV of the remainder interest(Take the tax deduction by life insurance and name kids as beneficiaries); No new money; fixed payments;

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18
Q

CLAT

A

Deduction: PV of the future payment stream to the charity;
“Grantor trust for tax purposes” – income generated taxed to grantor;
Remainder could goes to grantor or kids.
Fixed payments to the charity.
Kids as remainder—Gift is the PV of the remainder interest

19
Q

GRAT

A

Estate reduction.
Fixed payments to grantor, remainder goes to kids.
Grantor must survive the trust term.
Gift value is the PV of the remainder interest.
At end of term – no step up basis.
No additional $. Fixed payment to the grantor.

20
Q

Assume you have 100k you bought in 1975, FMV 10M. Grantor survived the term, right now the FMV is $30M and transferred to the kids. What would be the basis when transfer to the kids?

A

$100k.

21
Q

Assume you have 100k you bought in 1975, FMV 10M. Grantor survived the term and died, right now the FMV is $30M and transferred to the kids. What would be the basis when transfer to the kids?

A

$30M

22
Q

Form 709

A

Gift tax return, due 4/15 plus extension.
Gross gift – reductions ( Annual exclusion, spouses, charity)

23
Q

Form 706

A

Gross estate return, due 9 months after death

24
Q

Mom and Dad gifted 20k to JR, split gift — need 709?

A

Yes, need 1 return.

25
Q

If Mom and dad give Jr 40k. – need 709?

A

Yes. Need 2, one for mom(3k), one for dad(3k).

26
Q

What is a way that grandparents can transfer an enormous amount of assets without gift tax?

A

Qualified transfer: payment directly to medical, education, political to the party( not deductible)

27
Q

Who pays the gift tax, donor or donee? Donor
What is the “net gift” ?

A

Donee pays for the gift tax

28
Q

Assets to add back to estate

A
  • Gift tax paid within 3 years of death;
  • Life insurance Proceeds(LIP) received by the estate (no beneficiary or estate is the beneficiary) ;
  • LIP on policies owned by the insured transferred within 3 years of death — how to correct – have ILIT own the insurance from day 1.
  • GPOA (no HEMs).
  • Failed GRAT/GRUT/QPRT
29
Q

Inherited property Characteristics

A

Step up basis; ALWAYS long term

30
Q

A Trust

A

Marital Trust;General POA
Marital Deduction,

31
Q

B Trust

A

Bypass Trust/Credit Shelter Trust. No Marital deduction

32
Q

C Trust

A

QTIP. Marital Deduction

33
Q

Which trust qualify for marital deduction?

A

A trust(martial trust), C trust (QTIP)

34
Q

Is gift splitting allowed for community property?

A

No

35
Q

Value of the house $10M, Debt 7M, if debt and house is on decedent, what is the martial deduction of the house?

A

3M

36
Q

Value of the house $10M, Debt 7M, debt is jointly held, what is the martial deduction of the house?

A

1.5M

37
Q

Types of Wills

A

• Statutory.
• Holographic (handwritten) -must be handwritten, dated and signed by a testator.
• Nuncupative dying declaration only covering tangible personal property).

38
Q

In terrorem clause

A

An in terrorem clause (no contest) will only be effective if the decedent has left the legatee in question enough of a legacy so as to not risk losing the contest.

39
Q

Per stripes vs per capita

A

The number of heirs per stirpes (by the root) is less than or equal to the number of heirs per capita (count the people),

40
Q

Property Ownership Key Features (Summary)

A
41
Q

Is bypass trust a non-marital trust?
Is the income beneficiary have inclusion of gross estate?

A

A bypass trust is always a non-marital trust.
The income beneficiary will not have inclusion and the trustee does not need to seek permission.

42
Q

Is QTIP assets included in the gross assets of the surviving spouse?

Is QTIP trust must payout all income?

What can QITP income beneficiary to trustee do?

A

QTIP assets are always included in the gross estate of the surviving spouse.

QTIP must pay out all income at least annually.

Income beneficiary (spouse) of the QTIP can force the trustee to invest the assets in income producing investments

43
Q

401(k) plan.
Profit sharing plan.
SIMPLE IRA.
SIMPLE 401(k) plan

Which plan allows EE to make pre-tax contributions and low cost?

A

SIMPLE IRA

Jing's CFP Review (6 decks)

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