Estate

Question 1

Who pays tax on GST gifts?
Direct Skip

Answer 1

Donor
Danko Says Don’t
(Direct Skip - Donor pays)

Question 2

Who pays tax on GST gifts?
Taxable Termination

Answer 2

Trustee
Talk Tennis w/ Thomas
(Taxable Termination - Trustee pays)

Question 3

Who pays tax on GST gifts?
Taxable Distribution

Answer 3

Recipient
Thomas Doesn’t Relent
(Taxable Distribution - Recipient pays)

Question 4

Skip person

Answer 4

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.

Question 5

CRAT

Answer 5

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

Question 6

CRUT

Answer 6

Charitable Remainder Uni Trust

Unlike the CRAT, the CRUT must payout a fixed percentage (not fixed dollar amount like the CRAT) annually

Question 7

Section 2503(b) income

Answer 7

Income must be distributed annually

Question 8

Section 2503(c) income

Answer 8

income may be distributed or left in the trust to accumulate.

Question 9

Ancillary probate

Answer 9

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.

Question 10

Is personal residence a countable asset for Medicaid?

Answer 10

If a client is married, the personal residence is NOT a countable asset. Real estate other than the couple’s primary residence is countable.

Question 11

Bargain sale

Answer 11

Generally between family members

Question 12

The best assets to transfer when trying to lower estate taxes at death.

Answer 12

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.

Question 13

Are tax free municipal bonds allowed in pooled income fund?

Answer 13

NO

Question 14

CLAT

Answer 14

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.

Question 15

CLUT

Answer 15

a CLUT pays a variable (not fixed) income interest to the charity, with the remainder to noncharitable beneficiaries.

Question 16

DNI does not include what?

Answer 16

Distributable net income (DNI) does not include capital gains.

Question 17

AVD

Answer 17

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.

Question 18

If the insured makes an absolute assignment of a paid up life insurance policy, the value of the gift equals:

Answer 18

The replacement cost of the policy

Question 19

holographic will

Answer 19

handwritten

Question 20

nuncupative will

Answer 20

oral

Question 21

statutory will

Answer 21

formal

Question 22

Who is a private annuity good for?

Answer 22

The private annuity does not allow collateral, is appropriate for someone who is in poor health, and will provide income on which to live.

Question 23

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?

Answer 23

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.

Question 24

Who is a SCIN good for?

Answer 24

The SCIN allows the use of collateral, is appropriate for someone who is in poor health, and will provide income on which to live.

Question 25

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.

Answer 25

10%

Question 26

Can a CRAT or CRUT be a revocable trust?

Answer 26

NO
they must be irrevocable

Question 27

Bypass Trust

Answer 27

‘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”

Question 28

Marital Trust

Answer 28

‘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

Question 29

Qualified Terminal Interest Property Trust

Answer 29

(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

Question 30

The current value of the gift in the case of a GRAT or GRUT

Answer 30

is the fair market value of the assets transferred less the present value of the income interest retained by the grantor.

Question 31

ISO’s Exercise

Answer 31

NEVER a tax upon exercise

Question 32

NSO Exercise

Answer 32

ALWAYS a tax upon exercise

Question 33

Are assets in a revocable trust included in the grantors estate?

Answer 33

YES

Question 34

When must a disclaimer be received by the decedent’s executor in order for it to be effective?

Answer 34

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.