Estate Flashcards
Who pays tax on GST gifts?
Direct Skip
Donor
Danko Says Don’t
(Direct Skip - Donor pays)
Who pays tax on GST gifts?
Taxable Termination
Trustee
Talk Tennis w/ Thomas
(Taxable Termination - Trustee pays)
Who pays tax on GST gifts?
Taxable Distribution
Recipient
Thomas Doesn’t Relent
(Taxable Distribution - Recipient pays)
Skip person
A beneficiary (related person) who is at least two generations younger than the transferor. Most skip persons are grandchildren.
Unrelated persons who are more than 37 1/2 years younger than the transferor are also skip persons.
CRAT
Charitable Remainder Annuity Trust
Donor places property (assets) into the trust; charity sells it and pays no tax on gain
Use CRAT when the lead beneficiary needs to know exactly the dollar amount they will receive annually
CRUT
Charitable Remainder Uni Trust
Unlike the CRAT, the CRUT must payout a fixed percentage (not fixed dollar amount like the CRAT) annually
Section 2503(b) income
Income must be distributed annually
Section 2503(c) income
income may be distributed or left in the trust to accumulate.
Ancillary probate
Ancillary probate is a secondary probate process that occurs in a state other than the state where the deceased lived, if the deceased owned property in multiple states.
Is personal residence a countable asset for Medicaid?
If a client is married, the personal residence is NOT a countable asset. Real estate other than the couple’s primary residence is countable.
Bargain sale
Generally between family members
The best assets to transfer when trying to lower estate taxes at death.
The best assets to transfer when trying to lower estate taxes at death are those most likely to appreciate significantly. This strategy removes future appreciation from the estate.
Are tax free municipal bonds allowed in pooled income fund?
NO
CLAT
A charitable lead annuity trust (CLAT) pays a fixed annuity to the charitable beneficiary for the term of the trust, with the remainder passing to noncharitable beneficiaries.
CLUT
a CLUT pays a variable (not fixed) income interest to the charity, with the remainder to noncharitable beneficiaries.
DNI does not include what?
Distributable net income (DNI) does not include capital gains.
AVD
Alternative Valuation Date
The executor or personal representative may file an election to have the assets in the decedents gross estate value at an alternative value, which is 6 months after death.
If the insured makes an absolute assignment of a paid up life insurance policy, the value of the gift equals:
The replacement cost of the policy
holographic will
handwritten
nuncupative will
oral
statutory will
formal
Who is a private annuity good for?
The private annuity does not allow collateral, is appropriate for someone who is in poor health, and will provide income on which to live.
What happens If the estate elects to use the alternate valuation date and property is disposed of within the 6-month period after the decedent’s death?
If the estate elects to use the alternate valuation date and property is disposed of within the 6-month period after the decedent’s death, the valuation date is the date of disposition.
Who is a SCIN good for?
The SCIN allows the use of collateral, is appropriate for someone who is in poor health, and will provide income on which to live.
For a CRAT to be valid, the present value of the remainder interest must be at least ___ of the initial fair market value of the assets transferred to the trust.
10%
Can a CRAT or CRUT be a revocable trust?
NO
they must be irrevocable
Bypass Trust
‘B’ Trust; Credit Shelter Trust; Unified Credit Trust
Ultimate goal is to get the corpus to the children
One of the main points of a bypass trust is to avoid the marital deduction.
First spouse who dies controls the terms of the trust - who gets the money and how; like “ruling from the grave”
Marital Trust
‘A’ Trust; Power of Appointment Trust; Spousal Trust
Surviving spouse has full control and unrestricted use of corpus and income
Included in the Gross Estate of the surviving spouse when they die
Qualified Terminal Interest Property Trust
(QTIP; ‘C’ Trust)
Used so that if there is a second marriage, the kids (from first marriage) don’t get disinherited
LAME
Lifetime income interest for surviving spouse
Annual income payments to surviving spouse
Mandatory payments to surviving spouse
Exclusively for the surviving spouse
The current value of the gift in the case of a GRAT or GRUT
is the fair market value of the assets transferred less the present value of the income interest retained by the grantor.
ISO’s Exercise
NEVER a tax upon exercise
NSO Exercise
ALWAYS a tax upon exercise
Are assets in a revocable trust included in the grantors estate?
YES
When must a disclaimer be received by the decedent’s executor in order for it to be effective?
To be effective, a qualified disclaimer must be received by the decedent’s executor within 9 months after the later of the date on which the date creating the interest was made or the day on which the person disclaiming the interest reaches age 21.
