Estate Planning Flashcards
Mutual Will
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.
Double will
Two wills created by one testator, but the secondary will deals with shares of a private company run by family members.
Nuncupative Wills
Deals only with personal property
Special use valuation
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.
Financial Aid Annual Maximums
Pell Grants = $6,895 (‘22 - ‘23)
Fed Supplemental Edu Oppty Grant (FSEOG) = $4k
Direct Subsidized Loans = $5,500
Federal Work Study = None!
Estate Tax Process Flow
“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
Unified exemption amount
$12.06M
Unified credit amount
$4.769M
Annual tax installment payments related to Section 6166 - decedent’s estate - are made over how many years?
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.
Legal document executed by an individual directing the physician to administer (or not) life support?
Living will
Aka healthcare directive
Community property state
All property and assets that are acquired during a marriage are owned jointly by both spouses.
Trust that escapes kiddie tax rules and is taxed at the trust’s tax bracket?
2503(c)
Payable on Death account is also known as what type of trust?
Totten trust
Gift taxes paid are included in the donor’s gross estate for any taxable gifts made within how many years of death?
3 years
In terms of community property, how is basis treated at death?
Full step-up in basis
Appreciation Factor Formula (used when “tacking on” basis)
(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
Simple Trust
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)
Complex Trusts
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)
Grantor Trust
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
Types of Trusts
Living
Testamentary
Revocable
Irrevocable
Property in an irrevocable trust is ______ included in the gross estate?
Not
If you make a revocable trust irrevocable, then die within ____ years, the trust property is brought back into the gross estate.
3
Trustees hold ____ title
Legal
Beneficiaries hold ____________ title
Equitable
Purpose of a spendthrift clause
Restrict bene’s ability to transfer rights to future payments to a current or future creditor
Pour-over will
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.
Residuary clause within wills
Serves as a way of ensuring that the testator’s estate goes to whomever he/she wishes, even if the heirs are deceased
Crummy power
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.
Complex trust characteristics
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)
When there is a large tax deduction available in the year that a trust is created, it makes is a ______ trust.
Grantor
Ways to reduce remainder interest in a trust.
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
If the grantor survives the QPRT term, there is ____ step-up in basis
No