Estate Planning

Question 1

Per Capita

Answer 1

Defined as “by the head,” share and share alike,” or “according to the number of individuals.”

• Used when assets are to be distributed equally amongst ALL survivors.
• Distribution is based on the surviving family members

Question 2

Per Stirpes

Answer 2

Defined as either “by the trunk,” “by the roots,” or “by right of representation.”

• Used when a share of the decedent’s assets is to be transferred to a deceased beneficiary’s children and split evenly.
• Distribution follows the family tree.

Question 3

Per Capita by Generation

Answer 3

Used when the 2nd generation is set to receive their specified % share, with all heirs in the 3rd generation receiving an evenly-split % of the remainder.

These asset distribution strategies are also used when an individual dies without a will, also known as intestate.

State law determines the beneficiaries for property in the absence of a will or will substitutes.

Question 4

2503(b) Trust

Answer 4

(AKA, Qualifying Minor’s Trust or Mandatory Income Trust) is an irrevocable trust which requires distribution of income on an annual basis. Most often, distributed funds are placed into a custodial bank account until the child reaches legal age.

Income:
- Must be distributed not less frequently than annually

Principal:
- May be withheld from the beneficiary until his or her death

Amount Eligible for Annual Exclusion:
- Actuarial value of the income interest

Question 5

2503(c) Trust

Answer 5

Enables a grantor to make a gift to a minor in trust and still obtain the annual gift tax exclusion.

Income:
- No requirement for current income distributions

Principal:
- Must be distributed (along with accumulated income) no later than upon beneficiary attaining age 21

Amount Eligible for Annual Exclusion:
- Entire gift to the trust