Estate Planning

Question 1

Mutual Will

Answer 1

Each testator has her/his own will, though the contents of the wills may deal with more than one testator. Mutual wills express the same intention by 2 differ testators. They are made in a particular form, are contractual, irrevocable, and the surviving party must have intended for his/her will to reflect the agreement.

Question 2

Double will

Answer 2

Two wills created by one testator, but the secondary will deals with shares of a private company run by family members.

Question 3

Nuncupative Wills

Answer 3

Deals only with personal property

Question 4

Special use valuation

Answer 4

The net value of real and personal property used in a family farming operation must be at least 50% of the adjusted value of the decedent’s gross estate to qualify for special use valuation or Section 2032A.

Question 5

Financial Aid Annual Maximums

Answer 5

Pell Grants = $6,895 (‘22 - ‘23)
Fed Supplemental Edu Oppty Grant (FSEOG) = $4k
Direct Subsidized Loans = $5,500
Federal Work Study = None!

Question 6

Estate Tax Process Flow

Answer 6

“DADCA” -> dad always handling family member estates

Determine value of gross estate
Arrive adjusted gross estate
Determine taxable estate
Calc fed estate tax payable before credits
Apply allowable credits to arrive at net fed estate tax

Question 7

Unified exemption amount

Answer 7

$12.06M

Question 8

Unified credit amount

Answer 8

$4.769M

Question 9

Annual tax installment payments related to Section 6166 - decedent’s estate - are made over how many years?

Answer 9

10

Section 6166 is meant to decrease the burden that estate taxes can place on business owners and their families. During the first 4 years (the deferral period) only the interest is required to be paid, and for the following 10 years, payments on the interest and principal must be made.

Question 10

Legal document executed by an individual directing the physician to administer (or not) life support?

Answer 10

Living will

Aka healthcare directive

Question 11

Community property state

Answer 11

All property and assets that are acquired during a marriage are owned jointly by both spouses.

Question 12

Trust that escapes kiddie tax rules and is taxed at the trust’s tax bracket?

Answer 12

2503(c)

Question 13

Payable on Death account is also known as what type of trust?

Answer 13

Totten trust

Question 14

Gift taxes paid are included in the donor’s gross estate for any taxable gifts made within how many years of death?

Answer 14

3 years

Question 15

In terms of community property, how is basis treated at death?

Answer 15

Full step-up in basis

Question 16

Appreciation Factor Formula (used when “tacking on” basis)

Answer 16

(FMV - Basis) / (FMV - $16k) = Appreciation factor * Gift Tax Paid = Amount + Basis = New Basis

Or…

Gains / FMV - $16 = Appreciation factor * Gift Tax Paid = Amount + Basis = New Basis

Question 17

Simple Trust

Answer 17

Req’d to distro all accounting income to the bene’s in the year earned
May not have a charitable bene’
Cannot distro principal during the tax year
Have a personal exemption of $300 (‘22)

Question 18

Complex Trusts

Answer 18

Are not req’d to make distro’s
Can accumulate income
May have a charitable bene’
May distro principal during the tax year
Have a personal exemption of $100 (‘22)

Question 19

Grantor Trust

Answer 19

Revocable trust w/ all income taxed to the grantor
Any trust that allows the grantor, grantor’s spouse, or 3rd party w/o a bene’ interest, any rights or powers as specified in the grantor trust rules, will be taxed as a grantor trust

Question 20

Types of Trusts

Answer 20

Living
Testamentary
Revocable
Irrevocable

Question 21

Property in an irrevocable trust is ______ included in the gross estate?

Answer 21

Not

Question 22

If you make a revocable trust irrevocable, then die within ____ years, the trust property is brought back into the gross estate.

Answer 22

3

Question 23

Trustees hold ____ title

Answer 23

Legal

Question 24

Beneficiaries hold ____________ title

Answer 24

Equitable

Question 25

Purpose of a spendthrift clause

Answer 25

Restrict bene’s ability to transfer rights to future payments to a current or future creditor

Question 26

Pour-over will

Answer 26

Directs all of a person’s assets to be deposited into a trust upon death. Trust should either be already in existence when will executed or executed at the same time of will creation.

Question 27

Residuary clause within wills

Answer 27

Serves as a way of ensuring that the testator’s estate goes to whomever he/she wishes, even if the heirs are deceased

Question 28

Crummy power

Answer 28

Allows a person to receive a gift that is not eligible to be excluded from the gift tax and change it to one that is eligible. Used to create present interests from what would otherwise be future interest.

Question 29

Complex trust characteristics

Answer 29

Are NOT required to make distros
Can accumulate income
May have a charitable bene’
May distro principal during the tax year
Have a personal exemption of $100 (2022)

Question 30

When there is a large tax deduction available in the year that a trust is created, it makes is a ______ trust.

Answer 30

Grantor

Question 31

Ways to reduce remainder interest in a trust.

Answer 31

Increase the value of the retained annuity
Extend the trust term
Use a lower interest rate to make the PV calc of the retained annuity

Question 32

If the grantor survives the QPRT term, there is ____ step-up in basis

Answer 32

No