Estate Planning Flashcards
What are types of property ownership
SO
TIC
JTWROS—no probate
TE (tenancy by entirety) souses. No probate
CP (community property)—spouses
What is amount included in gross estate for each property type
SO 100%
TIC. % owned by dead person
JTWROS. Sam as TIC except if spouse. Then 50%
TE and CP: 50%
For which property type: is the gross estate amount included in probable
SO
TIC
CP
Survivorship feature of fee simple
None so goes through probate
Do assets not movable go through probate
Yes
How long does durable POA last
Till death but good if someone is incapacitated or disabled (non-durable does not survivor incapacitaty)
What does a codicil do
Amends a will
Springing provision in a will does what
Springs into force at a certain time or event
Gifted property is separate or common property for a married couple
Separate
Gift tax exclusion
18k per donee per year (also means Sami can give 18k and I can give 18k to that donee
Don’t forget to reduce per person gifts by this amount when calc the total taxable gifts
Lifetime gift tax credit
13.61M approx
Do Future interest gifts qualify for 18k annual exclusion
No
What is Crummy provision and how it is used
Let’s a beneficiary withdraw some or all of a contribution to a trust for a limited period (usually 30 days) after contribution. Turns a future gift to a present gift so can get 18k gift tax allowance. (think of the life insurance example)
How to exclude gifts taxes from the gross estate
Give them more than 3 years before death
How do you get from gross estate to adjusted gross estate?
Deduct last medical, admin exp, funeral exp, debts
How to get from adjusted estate to taxable estate
Subtract state death tax deduction, charitable deduction, unlimited marital desuction
How to get from gross estate to federal tax liability ?
gross estate
- A, B, C, D EXPENSES
=Adjusted gross estate
- deductions (charity, marital, state death)
=Taxable estate
+ALL time previous taxable gifts
=TENTATIVE TAX BASS
- credits (unified credit, credit for previous gift taxes paid,
= FEDERAL ESTATE TAX LIABILITY
What is the threshold for a retained or reversionary interest in a trust gifted to someone else for it to come back to the gross estate if they die
5% or more
How are assets valued at death for inclusion in the gross estate
Fair market value (FMV)
What is a survivorship annuity
Provides payment to a first person and when they die, provides that payment stream to the second person. When the first person dies the value of the annuity is included in their gross estate
If Mario pays for a building outright, and gifts joint ownership to his son 6years ago, what portion will be included in Mario’s gross estate when he dies
The full portion since his son paid nothing (and is son is not a spouse which is 50% sharing). If his son paid a %, only Mario’s % of the FMV will be included in his estate
What is a general power of appointment and when is it included in the gross estate
The power to name who will enjoy or own the property and will be included in that persons estate. General means full power with no caveats. If there is a caveat like the ability to change (or use for a very specific purpose like education) or revert and more than 5% of value or $5k (5&5 rule), then it is not a general power and is not included in the persons estate
When is life insurance included in the gross estate
When the policy is owned by the dead person for themselves, unless it is designated as community property ownership, then only 50% is included in the gross estate (other 50% goes to wife)
gift taxes (for gifts) within X years of death are included in a gross estate or life insurance transferred with X years are included in a gross estate
3 years
how do you value financial securities at death if died in the middle of the day
average of the high and low trading prices on the day of death (if on weekend average of the averages on the last open trading day and next open trading day). Use this logic broadly for other situations and do not include weekends in counting days
How should wasting assets be valued and what is a wasting asset
A wasting asset is a asset that with certainty goes down in value over time. All wasting assests must be valued at date of death (not alternate valuation date which is the value 6 months later)
What is the tax due on a$1M gift
345k
what is the estate tax credit
It will exclude $13.61M cumulative over an individuals lifetime.
Does life insurance with named beneficiaries go through probate?
If the insurance was for the deceased and taken out by the deceased. Yes
If policy was paid for by the deceased to cover someone else, then no because it has a named beneficiary.
What do you need to consider with interest free loans
- Imputed interest from below market loans (if $100k+ loan, then Applicable fed rate; if 10-100k lesser of AFR or borrows net investment income if over $1k. If less than 1k, then 0 imputed interest
2) If interest is imputed it is considered a taxable gift and taxable on income tax return (and can deduct)
3)