Estate Planning

Question 1

Tenancy by Entirety can be severed how?

Answer 1

1) Mutual Consent of both spouses
2) Joint spouse’s creditors

Question 2

Deductible debts (subtracted from gross estate include what?

Answer 2

1) Gift taxes payable
2) Debts
3) Interest due, such as interest on credit cards

Question 3

If a trust has a 5 or 5 right, how much of trust is included in beneficiary’s estate?

Answer 3

None - the only thing that can be included in beneficiary’s estate is the value of the 5 or 5 right if not taken, the amount of 5 or 5 if taken but not spent (so in bank accounts, for ex), or balance of 5 or 5 not taken if part taken and spent

Question 4

Ho much can be given to any one individual (donee) without causing a federal gift tax?

Answer 4

$12,076,000 - $16,000 annual gift exclusion and lifetime exclusion of $12,060,000

Question 5

When gifting assets, who should receive income producing assets, municipal bonds, real estate, and growth stocks?

Answer 5

1) Income producing (corp bonds or hi-yield bonds) = older family (retired)
2) Municipal Bonds - kids subject to kiddie tax
3) Real estate - wealthier people (can use depreciation)
4) Growth Stocks - younger adults

Question 6

What trusts can be Simple Trusts?

Answer 6

1) 2503(c)
2) QTIP
3) Irrevocable trusts
4) Spray trusts

Question 7

DNI - Distributable Net Income

Answer 7

1) Advises beneficiaries of the amount of income the trust has earned that represents their interest
2) Amount of corresponding deduction for the trust for income paid out

Question 8

What if the assets in a QTIP trust are not producing income?

Answer 8

Surviving spouse is granted power to demand that all trust assets be income producing, and can take trustee to court

Question 9

Are all trust contributions eligible for the annual gift exclusion?

Answer 9

No - to be eligible, a trust must include the Crummey provision

Question 10

When gifting to charities, how do you determine charitable deduction?

Answer 10

1) Can use basis and deduct of to 50% AGI for 50% organizations (Public (5 letters))
2) Can use FMV and deduct up to 30% AGI for 30% organziations (Private) (FMV is 3 letters)
–If FMV > 30% AGI, can carry over difference to following year

Question 11

What is Req Min Distrib from CLUT to avoid payment of excise tax?

Answer 11

The trust’s annual income

Question 12

What intra-family techniques leave nothing in donor’s gross estate?

Answer 12

1) SCIN
2) Gift Leaseback

Question 13

What planning techniques are considered “freezing” techniques for transfer tax purposes?

Answer 13

1) GRAT
2) Preferred Stock Recap
3) QPRT
4) Private Annuity
5) SCIN

Question 14

How long do a GRAT or GRUT provide income?

Answer 14

A fixed # of years

Question 15

When is income of an ILIT taxable to the donor?

Answer 15

When the ILIT holds an investment that pays income, and that income is used to pay the premium of the life insurance

Question 16

Who has liability for payment of GSTT tax?

Answer 16

1) If transfer is a direct skip, the transferor pays the GSTT
2) If the transfer is a taxable termination, such as when the parent dies and trust pays out to next generation, GSTT is paid by the trustee
3) If the transfer is a taxable distribution, meaning parent is still alive, but trust pays out a lump sum to the next generation, the GSTT is paid by the transferee

Question 17

What are the duties of fiduciaries?

Answer 17

1) Loyalty to the beneficiaries
2) Duty not to self-deal
3) Duty to preserve property and make it productive
4) Duty to be impartial toward all beneficiaries

Question 18

Can JTWROS properties be disclaimed?

Answer 18

Yes. Tenants by Entirety properties CANNOT be disclaimed

Question 19

Capital Gains exclusion for selling a house

Answer 19

$500,000 MFJ and $250,000 MFS or single

Question 20

In the probate process, when is a testamentary trust funded?

Answer 20

After the assets go through probate, and the estate pay decedent’s expenses, including taxes and debts - remainder then goes into testamentary trust

Question 21

How long does a CRAT/CRUT make payments?

Answer 21

Payments for lifetime or term certain

Question 22

Can a life insurance policy that is owned by another be included in the decedent’s probate estate?

Answer 22

Yes, if the decedent’s estate is the beneficiary

Question 23

Do gifts to 2503(b) qualify for annual exclusion?

Answer 23

No - they are considered gifts of future interest