Estate Planning Flashcards
Sole Ownership
- Transfers via Probate
- FMV owned as fee simple is FULLY included in decedent’s gross estate
- If transferred to surviving spouse, FMV eligible for unlimited marital deduction
- 100% included in owner’s gross estate and probate estate
Tenancy in Common (TIC)
- Joint interest between 2 or more people
- Owner’s do not need consent of one another to partition their interest
- Each person owns an undivided but not necessarily equal interest in property
- FMV of decedent’s ownership interest is included in decedent’s gross estate
- Decedent’s interest passes through probate
Joint Tenancy with Rights of Survivorship (JTWROS)
- Interest held by 2 or more related or unrelated parties
- Each owns undivided EQUAL interest
- Each shares in income and expenses in proportion to ownership
- At death, ownership automatically passes to surviving owners
- Therefore, NOT included in decedent’s PROBATE estate
- ACTUAL CONTRIBUTION RULE-Property included in decedent’s gross estate to extent of original contribution
- UNLIMITED MARITAL DEDUCTION-Applies for spouses
Tenancy by the Entirety
- Joint ownership ONLY between spouses and cannot be partitioned without consent of other spouse
- At death, property automatically transfers to surviving spouse
- NO PROBATE
- 50% of FMV is included in decedent’s gross estate
- Eligible for UNLIMITED MARITAL DEDUCTION
Community Property
- Available only to spouses
* each spouse deemed to have contributed 50%
The 1040
the decedent’s file Federal tax filing
The 1041
the estate tax return
The 706
the estate tax is used to figure the estate tax due
Use of an Irrevocable Life Insurance Trust can accomplish which of the following
Create a vehicle to avoid Generation Skipping Transfer Tax.
Make proceeds available to the surviving spouse.
Ensure that proceeds will be excluded from the probate of both spouses.
Shelters cash contributed for premiums from gift taxation up to the annual exclusion amount.
characteristics of a private annuity
Title to the property is conveyed to the individual responsible for making annuity payments at the time of the transaction.
Each payment received by the annuitant is divided into gain, interest income, and a non-taxable recovery of basis.
Crummey Power Characteristics
It permits a donor to contribute $15,000 each year to a trust and utilize the annual exclusion.
Gifts must be of a present interest to qualify for the annual exclusion and utilizing the Crummey power can create the present interest.
For withdrawal purposes, Crummey powers are commonly used within an Irrevocable Life Insurance Trusts.
GRAT Characteristics
The trust must be irrevocable.
The trustee has no discretion to withhold annuity payments from the grantor.
The value of the assets in a GRAT will be included in the grantor’s gross estate if the grantor dies prior to the end of the trust term.
QTIP Characteristics Qualified Terminable Interest Property Trust)
A QTIP trust qualifies for the unlimited marital deduction.
It does not give the spouse an unlimited general power.
A QTIP trust must distribute income annually only to the surviving spouse.
Only one beneficiary is permitted in a QTIP trust in order to qualify for the marital deduction.
The trustee may have the power to invade for the HEMS of the spouse only.
SCIN-Self Cancelling Installment Note
a note with a self cancelling premium payment attached so that the note will cancel at the transferor’s death
Result is NO Taxable gift by grantor
Testamentary Trust
Is created under a last will and testament.
The assets are included in the gross estate
It is included in probate.
