Estate Planning

Question 1

A decedent who has a valid will is said to die…

Answer 1

Testate

Question 2

Per Stripes

Answer 2

Grandchildren stand in for deceased parent and get their share of inheritance to split evenly

Question 3

Per Capita

Answer 3

Equal shares based upon the number of living beneficiaries

Question 4

Per Capita at Each Generation

Answer 4

Heirs of the same generation always get an equal share

Question 5

Tentative Tax for Gifts over $1M

Answer 5

$345,800 PLUS 40% of the excess of such amount over $1M

Question 6

Failure-to-file penalty on estate taxes

Answer 6

Five percent per month up to a max penalty of 25%

Question 7

Reverse Gift Characteristics

Answer 7

If an heir receives property from a decedent that was acquired by the decedent through a gift from the same heir within one year of the decedent’s death, the heir/donor takes the decedent’s basis

Question 8

Attribute of the unified gift and estate tax

Answer 8

Gift and estate taxes have the same exemptions

Question 9

How are publicly traded companies valued for the day of a gift?

Answer 9

The average of the high and the low trading price for the day of the gift

Question 10

For a deed to effectively act as a “will substitute” what would be required?

Answer 10

Competent grantor’s signature

There must be delivery of deed during the grantor’s lifetime with an intent to gift

Question 11

What is required for a gift to occur?

Answer 11

Intent, delivery, acceptance and relinquishment

Question 12

What type of gift would meet the requirements for the annual exclusion under the gift tax rules?

Answer 12

A gift with present interest

Question 13

What is the maximum dollar amount which would have ordinarily been transferred to a credit-shelter trust in 2023 upon death?

Answer 13

$12,920,000 (applicable exclusion amount)

Question 14

What’s the meaning of tax inclusive and tax exclusive?

Answer 14

Estate tax payments include tax on the tax payment, while gift tax payments do not.

Question 15

Buyer’s Adjusted Basis in SCIN

Answer 15

The fair market value of the property at the date of the sale regardless of the number of payments made by the seller

Question 16

Intervivos Trust

Answer 16

Trust created during the grantor’s life

Question 17

All bequests

Answer 17

Included in gross estate

Question 18

Adjusted gross estate

Answer 18

Net worth of a deceased person’s estate after deducting the cost of any outstanding debts and administrative costs

Question 19

Taxable estate

Answer 19

Total value of a deceased person’s assets that are subject to taxation. Person’s total assets minus liabilities and minus the prescribed tax-deductible portion of assets left behind by the deceased person

Question 20

What is the difference between the adjusted gross estate and the taxable estate?

Answer 20

Marital deduction plus charitable contributions

Question 21

Taxation of life insurance:

Answer 21

Proceeds generally tax free
The proceeds are are subject to estate taxes in the estate of the insured if the insured is the owner
The proceeds may be subject to income taxes if the policy was sold to a third party

Question 22

Reversionary Interests

Answer 22

One that reverts back to the donor after some time or event

Question 23

Where can unpaid medical expenses of the decedent be deducted?

Answer 23

Form 1040 or the 706

Question 24

Where can executor fees be deducted?

Answer 24

On Form 706 and 1041

Question 25

Terminable interest

Answer 25

An interest which will terminate or fail on the lapse of time or on the occurrence or the failure to occur of some contingency

Question 26

Why might a company issue both ISOs and NQSOs?

Answer 26

The company wants to provide the NQSOs to assist the individual in purchasing the ISOs

Question 27

Will substitute

Answer 27

Property passes outside of probate

Question 28

Abatement

Answer 28

Reduction in an estate when there is insufficient assets to satisfy all legatee provisions

Question 29

Ademption

Answer 29

Extinction of a testamentary gift because the bequeathed assets no longer belong to the testator at the time of death

Question 30

Section 303 redemptions

Answer 30

Redemption amounts determined by the payment of death taxes and estate administration taxes and costs

35% of gross estate

Stock must be closely held, common it preferred

Question 31

Rule for calculating tentative tax base for estate tax purposes

Answer 31

Any gift that used any of the lifetime exclusion (gifts above the annual gift tax exclusion where gift tax was not paid) needs to be pulled back in to calculate the remaining amount for the estate

Question 32

Characteristics of a 2503(c) trust

Answer 32

Irrevocable, grantor must relinquish control

Can only have one beneficiary

Have expenses involved in filing tax returns and estimated quarterly tax payments