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Ri CFP > Estate > Flashcards

Estate Flashcards

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1
Q

Survivorship Annuities - Inclusion in gross estate

A

full value: if decedent had the right to a lump sum

PV of future pmts: if right to periodic pmts

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2
Q

3 Yr Rule: Included

A

gift taxes paid out of pocket

specific LI transfers

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3
Q

Transfers w/ Retained Life Interest

A

property transferred during decedents life is included if decended enjoyed a right to income or use the property during their lifetime

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4
Q

Exclusions from gross estate

A

LCL

life insurance owned by someone else (even if decedent is insured)

completed gifts

life estate for decedents own life only (interest in property terminates after death different than retained life estate).

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5
Q

prior transfer credit

A

death within 10 years

credit for double taxation

credit % based on proportion of 10 years. estate tax due is credit % x first decedent tax paid

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6
Q

what are powers of appointment

A

interest/provision usually found in trusts or estates

allows the holder to determine who gets to use the property subject to the power

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7
Q

general power of apointment

A

entitles holder to transfer property to anyone

invade corpus

can lapse if not exercised within a certain time period

pretty much the same as outright ownership

gift and estate taxed

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8
Q

special power of appointment

A

holder can transfer property to specific people or in specific situations

no tax implications

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9
Q

5 or 5 power

A

general power can also have a 5 or 5. holder of a 5 or 5 says is the greater of 5k or 5% of fund

that amount is included in donees estate. keeps larger portion out of estate

no gift tax imp

estate tax on greater of 5% or 5k

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10
Q

ascertainable standards

A

HEMS = not a general power

necessities of life

no tax implications

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11
Q

gift strategy: highly appreciated property

A

charity

donee in low bracket

or keep in estate for step up

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12
Q

gift strategy: likely to appreciate

A

remove from donor estate

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13
Q

gift strategy: income producing property

A

to donee in lower tax bracket

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14
Q

gift strategy: loss property

A

sell and gift proceeds

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15
Q

gift strategy: depreciation property

A

keep until depreciated

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16
Q

gift strategy: life insurance

A

great to gift

tax based on replacement value & benefit on face value

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17
Q

annual gift tax exclusion

A

18k

10k indexed

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18
Q

gift of future interest - annual exclusion

A

NO ANNUAL ExcCLUSOIN

i.e. transfers to an irrev trust (recipient does not have current enjoyment)

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19
Q

future interest exceptions

A

think 529s: you can get the 90k exclusion even though the kid doesn’t get to enjoy right away

2503c
crummey
gifts in tr on behalf of minors

THESE ONES DO GET THE EXCLUSION EVEN THOUGH THEY’RE TECHNICALLY FUTURE INTEREST

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20
Q

gifts to noncitizen spouses

A

super annual exclusion

185k

100k indexed

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21
Q

gift basis of appreciated property

A

owners original basis

+ gift tax paid that is attributable to the appreciation ONLY IF BY DONOR

find appreciation (fmv - basis)
X 40% = estate tax attributable to the appreciation portion
add to basis

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22
Q

basis of depreciated gifts

A

use diagram - wherever sale price lands

gain
_____________owner basis

0
_____________fmv

loss

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23
Q

gifts subject to debt

A

net value subject to gift tax (property - debt)

if debt exceeds original cost: donor realizes taxable gain on excess of debt over basis

donee new basis: original + gain realized

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24
Q

gift taxes 3 years

A

gift taxes paid within 3 years of death are added to gross estate

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25
Q

when to file gift tax

A

gifts made over 18k
future interest gifts of any amount
gift splitting

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26
Q

gift splitting - over 36k

A

both need to file

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27
Q

gift splitting - under 36k

A

donative spouse files, non signs

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28
Q

gifts of property into JT or community

A

most: gift occurs when transfer of title executed

jt accounts: upon withdrawal of funds

ees: jt bond, gift when bond is redeemed

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29
Q

when is an immediate gift tax due

A

when you exceed the 13.61

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30
Q

exempt/fully deductible gifts

A

qualified pmt direct to dr or school
american political parties
qualified charities
spouse

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31
Q

medicaid

A

2k in countable assets
5 year lookback for gifting
certain amount of home equity
state must be named as annuity bene

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32
Q

OBRA Trust

A

payback trust
disabled under 65
stay eligible for medicaid by transferring assets to irrev obra tr
state gets funds upon death

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33
Q

Per Capita

A

equal shares to each party specified

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34
Q

Per Stirpes

A

equal share to first row of benes

one bene dead: their decendents get equal split of that single benes shares

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35
Q

Simple Trust

A

conduit

income MUST BE distributed

income taxed to bene

usually do not distribute corpus

no charitable gifts

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36
Q

Complex Trust

A

taxed as separate entity on earned income

complex trusts MUST be irrevocable, grantor no control

income accumulate (taxed to trust) or distribute (taxed to bene)

may make char gifts

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37
Q

revocable trust

A

grantor transfers property and reserves right to revoke power if they want

not a tax play

grantor trust for tax purposes

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38
Q

trust exemption

A

$300 personal exemption

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39
Q

Crummey Tr

A

for 30 days after contribution, person with crummey power can take out lesser of annual exemption 18k or contribution

irrev tr with demand rights

you get the annual exclusion 18k since crummey power has the right to current enjoyment (otherwise it would be classified as future)

40
Q

inter-vivos trust

A

revocable living trust

grantor trust rules

probate alternative

not a complete gift

41
Q

testamentary trust

A

created from a will

the trust does not go thru probate

42
Q

B Trust

A

Bypass trust, nonmarital, credit shelter, unified shelter, family trust

dead spouse controls. fill it with up to exemption amount. surviving spouse can get income

hems & 5 or 5 (no more than this)

bypasses 2nd spouse estate, @ death goes right to next benes

43
Q

A Trust

A

Marital Trust

power of appt trust, spousal trust

second spouse controls and decides who next benes are

right to invade corpus

included in gross estate of decedent (but not taxed), and ultimately in surviving spouse

44
Q

C Trust

A

QTIP

first to die controls

current income trust

marital deduction and stream of lifetime income

use when there are children involved

LAME
lifetime
annaul
mandatory
exclusively
for spouse!!

45
Q

estate trust

A

marital tr

no income stream

holds non income producing assets

46
Q

gifts to minors types

A

present interest

ugma, utma, 529, 2503c

future interest
2503b bad boy

47
Q

ugma

A

ugma = ugly no real estate

cash type assets

may be included in custodian estate

cannot be testamentary

usually distrubted at 18

48
Q

utma

A

can include RE

distribute at 21

can be testamentary

can be included in custodian estate

49
Q

2503b

A

provides stream of income

income is present interest
18k exclusion is a gift
income taxable to recipient

remainder interest is future interest

50
Q

2503c

A

any property not spent passes to donee at 21 (or given the option to do that)

51
Q

kiddie tax ages

A

18 and less than half support
19-23, less than half support and full time student

52
Q

sprinkling provisions

A

direct income at discretion of trustee to benes

53
Q

discretionary provision

A

trustee sees fit to distribute principal and income

54
Q

support trust

A

income only for support/essential needs or education

55
Q

rules against perpetuity

A

interest must vest no later than 21 years 9 months after youngest life at time of creation dies

includes babies in the womb

56
Q

Dynasty Trust

A

B trust fo multiple generations

free of estate, gift and gstt txes

life interest for as long as the state allows

57
Q

CLAT/CLUT

A

charity leads

income to charity first

income or estate tax deduction

priv foundation 5%
30% deduction

58
Q

CRAT

A

no additions (crap! restrictions!)

payments fixed

any charity

10% (of initial cont) ending value

income tax deduction based on pv of remainder

not subject to gift tax

corpus payout 5% per year

20 year term max

59
Q

CRUT

A

additions allowed (inflation protection)

payments variable (assessed annually)

any charity

10% ending value

income tax deduction based on pv of remainder

not subject to gift tax

corpus pay out 5% per year

60
Q

Pooled Income

A

additions allowed

specific charity

variable pmts

61
Q

Charitable Gift Annuity

A

no additions

fixed lifetime income

payable to specific charity

gift - annuity deduction

62
Q

NIMCRUT

A

non char bene gets lesser % of trust value or net income earned

if the amount is less, excess is forfeited

account accrues in the years when net income is less, then, yyou can take the makeup

DEFER INCOME

choose this if you dont want the income every year

63
Q

Wealth Rep Trust

A

ILIT

face value of policy can be equal to or less than value of property transferred to charity

no incidents of ownership, therefore stays out of estate

64
Q

CLT

A

upfront deduction for pv of income to charity

no deductions for annual dist

65
Q

charitable gift annuity

A

transfer cash or property to charity and org pays donor an annuity stream

property transferred exceeds guaranteed value of annuity

charitable contribution = excess amount

excess amt contributed = char deduction

66
Q

PIF

A

transfer property into common trust

single public charity manages the assets

no term of years. life

prorated share of income from trust

income tax deduction for present value of remainder interest

gift tax deduction of pv fremainder interest

67
Q

private foundation

A

wealthy person, family charitable purposes

distribute min 5% each year

excise taxes

68
Q

DAF

A

fund held by community foundation

donor may recommend recipies

no qcds

69
Q

charitable stock bailout

A

gifting closely held stock

charity tenders stock for cash redemption

no contract for a specific time

deduction = gift amount

stock redemption in future, business value drops 3mm

70
Q

bargain sales charitable

A

sale must be allocated proportionally to the gift and sale parts

basis must be proportional

gain on sale part

71
Q

incidents of ownership

A

LI proceeds/value included in gross estate of insured

72
Q

LI in gross estate

A

proceeds paid to estate
decedent had incidents of ownership at death
policy gifted within 3 years

73
Q

sold policy - amt in gross estate of insured

A

none. no 3 yr rule

74
Q

i own policy on my spouse, i die - gross estate inclusion

A

replacement cost

75
Q

my spouse insured and i gift to my daugher - gross estate inclusion

A

not included - no 3 year rule

76
Q

gifting life insurance during life

A

interpolated terminal reserve + unearned premium = gift amount (replacement value)

subtract annual exlcusion amt

77
Q

taxable gift triggered by death

A

i purchase LI on my spouse and name my son primary bene.

spouse dies. i give a gift of the db to my son (because i could’ve named myself bene)

ILIT is better here

78
Q

corporate recapitalization

A

reduce value of busines interest through stock recap

controlling interest of voting common stock&raquo_space; after recap: limited or no voting shares. all preferred or nonvoting shares (w/ div)

future appreciation shifted to younger generation

79
Q

terminal interest rule

A

cannot be included in marital deduction

what is it - interest that terminates on contingency of an event ocurring

exceptions: transfer w/ life estate, annual payout, general power of appt

qtip
qdot

80
Q

QDOT

A

pass property to noncitizen spouse to qualify for marital deduction

81
Q

Net gift

A

after you use up exemption
donee pays gift tax
gross estate includes gift taxes paid within 3 years

calc: donee pays og gift tax amount/1.4

adjusted taxable gift = gift amount - annual exclusion - tax calc

dead in 3 years: tax added back to estate and gift tax credit

82
Q

reverse gift

A

wealthy spouse makes gift of low basis to less wealthy spouse with low life expectancy

works if spouse lives more than 1 year

83
Q

Installment sale

A

pv of remaining payments in estate
secured property
capital gain. dont use if subject to depreciation

84
Q

scin

A

no value included in estate

higher payout than installment

gain is capital gain, shows up on income tax return

higher premium for cancellation feature, more income tax while living

85
Q

private annuity

A

no value included in estate

property transferred for promise

taxation to seller

86
Q

grat/grut

A

irrev trust: grantor makes gifts of property and retains income interest

owner must outlive term or asset is brought back into estate

corpus distributed to remainder benes

grut: valued annually

BEST: APPRECIATING ASSETS

87
Q

partnership/s corp

A

gift shares

family receives conduit income

not for service related biz (i.e. good if you have equipment and own capital. not a cpa/attorney)

88
Q

FLP

A

gift interest to lp to reduce estate

shift income to other family members

capital, material income producing

take advantage of valuation discounts

gp can still control

89
Q

gift leaseback

A

fully dep property

not if kid is under 24

biz deduction

lack of available money

90
Q

qprt

A

end of term, residence out of estate
owner must outlive
value of gift is discounted

use when 10+ life expectancy
donor lives there
13.6 estate
residence is large

91
Q

grit

A

retain right to income

92
Q

skip persons

A

2 gens younger. if one gen dead, everyone moves up one

unrelated people : 37.5 years younger

93
Q

exemptions and exclusions

A

18k annual exclusion for direct skip gifts

13.61mm lifetime exemption. SEPARATE FROM GIFT AND ESTATE

94
Q

direct skip

A

gstt imposed at time of direct skips

transferor is liable

95
Q

taxable terminations

A

termination of nonskip person income interest that results in a skip person being the remainin benes

gift of future interest

tax paid by trust

96
Q

taxable dist

A

dist out of trust

Ri CFP (18 decks)

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