Estate Planning Flashcards
How long does a survivorship period last and why would you use a survivorship clause?
If you don’t want your estate passing through probate twice in a short period of time, and it ranges from 5 to 60 days.
What are the 4 invalid will provisions?
1) Fraud
2) The testator is being subject to undue influences by someone benefitting from the will
3) Mistakes in will clauses
4) The will is not properly executed/signed/witnessed according to state law
What is testamentary capacity?
It means anyone over the age of 18 can make a will. To execute it, you need to 1) know that you are executing a will
2) must be aware of the assets you own 3) You must know and remember your relationship to beneficiaries
What are the advantages of probate?
- A court-supervised distribution of property to heirs
-Protects creditors by ensuring that estate debts are paid
-Bars future creditor claims against the estate
-Documents the title and the transfer of property to others
Disadvantages of probate
-Time: Delay in probating the estate typically ranges from 9 months to 2 years
-CostS: attorney and court fees, and the executor fee if not waived
-Privacy: Probate is a public proceeding
Name 3 of the following types of property transferred via a will that is subject to probate:
-Solely owned personal or real property
-Tenancy-in-common
-Community property
-Property passing from the will into a testamentary trust
-Property transferred by a pour-over-will into a trust
-Life insurance policy owned by the decedent who was not the insured
What are 3 types of property not transferred by will that is subject to probate
-Intestate property
-Life insurance policy proceeds or annuities payable to the decedent’s estate
-Homestead and exempt property allowances
If the AVD is made, ALL assets must be valued as of the AVD date even if they have increased. What the the 4 exceptions?
1) Cars
2) Patents
3) Life estates
4) Remainder interests
What are the three signs when to use a qualified disclaimer?
1) Transfer involving large gifts
2) tax-free gift to a contingent beneficiary
3) Spouse is the donee, but does not need/want the gift
What are the 4 requirements for a qualified disclaimer?
1) Refusal or rejection must be in writing
2) The writing must be received no later than 9 months after the later of a) the date on which the transfer creating the interest is made or b) the date the person disclaiming reaches age 21
3) The Person disclaiming must not have accepted the property interest or any benefits of the property
4) Someone other than the disclaimant receives the disclaimed property interest. The person making the disclaimer cannot in any way influence the potential recipient of the property.
Property gifted within 3 years of the death of the donor is generally NOT included in the gross estate. What are the 4 exceptions?
1) Transfers with retained life estates
2) Reversionary interests
3) Revocable life estates (gifts into revocable trusts that are made irrevocable)
4) Life insurance policies in which the decedent was the insured
Gross estate minus what 4 elements make up adjusted gross estate?
hint: these are all deductions
Expenses, debts, taxes, and losses
What is the 65 day rule?
It allows fiduciaries to make distributions within 65 days of the new tax year (or between January 1st and March 6th) and that distribution will count for the previous year.
What is the section 645 election?
The section 645 election allows the trust to have an extended payment deadline
What are 3 other words for grantor?
Settlor, trustmaker, or trustor
In an irrevocable trust, is the beneficiary taxed on income or on principle?
Income
Gift-tax exposure is reduced in a GRAT if the value of the retained annuity is _ and the value of the remainder interest is_.
increased and decreased
Explain the purpose of a GRAT
- Transfer property in a trust at a reduced (or zero) gift tax value
- Pass appreciation in the GRAT to beneficiaries without incurring additional gift tax
- Reduce the value of the grantor’s gross estate
What are the ways to reduce a remainder interest in a GRAT?
- Increase the value of the retained annuity
- Extend the trust term
-Use a lower interest rate to make the PV calculation of the retained annuity
When beneficiaries receive property in a QPRT, do they take over the original basis or the FMV? What does this mean if they go to sell the house?
They take the basis, increased by any gift taxes paid. Therefore, it is probably not best to set up a QPRT because the beneficiary doesn’t get the. step up in basis.
A marital deduction is not available for TIP unless there is an exception. What are the 2 exceptions?
- Spouse is given general power of appointment 2. The donor spouse qualifies the terminable interest property (QTIP election)
What are 3 example of terminable interest property going to a spouse?
- Spouse receives an income interest in trust for life
- Spouse receives trust income for a term of years
- Spouse receives a life estate in real property
When a decedent receives a charitable deduction for property passing to a qualified charity, what form is used in the calculation?
Form 706
What are the gifting limits to a private foundation and how much must the foundation pay out to public charities each year?
Family members who make gifts to the foundation may make gifts of 30% for cash and 20% for LTCG property. The foundation must distribute 5% of the assets to public charities every year.
