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Estate Planning Flashcards

0
Q

If a Giftor gift to beneficiary but then the beneficiary dies within first year

A

Original basis is original donor basis

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1
Q

QDOT

3

A

1) Trustee must be US citizen or US corporation
2) all income annually must be distributed to surviving spouse
3) appropriate when surviving is a non US citizen

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2
Q

FLP

3

A

Family Limited Partnership

  • grantor retains General Partnership transferring limited partnership to family members
  • a discount for minority interest may be used for value
  • used for appreciating assets
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3
Q

How are dividends declared on death
706

4

A

After declaration date but before EX date =ignore

After EX date but before record date = dividend added to stock price on Date of Death

If after record date but before payout =. Declared separately on 706

If after payout =. You can ignore

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4
Q

RMD Due Date

A

If you turn 70.5 second half of year = use year end value for next year and report before April 1st using 70 calculation

If you turn 70.5 first half of year you can defer to next year 4-1 and use 71 calculation but must take two distributions that year.

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5
Q

What amount is considered a gift in a GRAT OR A GRUT

A

FMV - PV of retained interest by the Grantor

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6
Q

DNI

A

Distributable Net Income

Established amount taxable to beneficiaries

Capital gains are not included in DNI calculation

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7
Q

Calculating Gross estate to get to taxable estate

8

A

Funeral expenses

Administrative costs

Unpaid mortgages

Debts and unpaid taxes

Casualty losses

Charitable contributions(unlimited)

Transfer to surviving spouse

State death taxes.

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8
Q

Private Annuity

A

Transfer business and provides income to family

Deduction to donor

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9
Q

What is a Skip Person

3

A
  • grandchild
  • unrelated person breather than 37.5 years younger
  • trust with grandchild as beneficiary

NOT=spouse or former spouse if your child is deceased and money goes to grandchild

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10
Q

Section 303

A

Stock redemption

1- redeem stock as a capital Gain not a dividend

  • stock has to be greater than 35 percent of defendants gross estate
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11
Q

Section 6166

A

Deferred payment of estate tax

  • closely held business or Farm
  • greater than 35% percent of gross estate
  • can defer taxes from year 6-16(defer 5 years for 10 years)
  • interest penalties will be paid on deferral
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12
Q

2032A

A

Special Use Valuation

  • farm or closely held business reduce valuation
  • aggregate deduction can’t exceed 1,090,000
  • value of property must be greater than 50 %percent of gross estate
  • 5 of 8 years material participants
  • land must be for qualified use for at least 10 years after dependents death
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13
Q

Recapitalization

2

A
  • common stock traded for preferred stock and non voting stock
  • Senior member keeps the voting power
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14
Q

Private Foundation

4

A
  • tax exempt charitable organization
  • created by a family or coir portion

-taxes= 30% deduction for cash contributions
20% LTCG for donated property

-keep control

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15
Q

CLT

3

A

Charitable Lead Trust

  • income is transferred from the trust to the charity but leaving corpus to the family
  • PV of the interest is a deduction to the grantor
  • used for people with no income need
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16
Q

CRT

4

A

Charitable Remainder Trust

  • irrevocable
  • CRATS OR CRUTS
  • last for life of grantor for up to 20 year
  • payout must be 5-20 percent
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17
Q

Pooled Income Fund

5

A
  • irrevocable trust to a public charity
  • managed by charity
  • income for goes i donor and maybe 1 more beneficiary for life
  • can’t invest in munis
  • payment to donor based on earnings
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18
Q

GRAT

8

A

Income to Grantor for life

Gift is the FMV-PV of the income

Corpus passes to beneficiary(not charity)

Fixed payments annually that can’t exceed 120% of previous year

Used if grantor is suppose to outlive term

Taken out of grantors estate if he lives last terms

Gift of future interest so no annual exclusion

Irrevocable

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19
Q

QPRTS

8

A

Qualified Personal Residence Trust

Grantor lives in the residence for term

Only 1 resident

Family only

Income to term holder

Can covert to GRAT

Can be repurchased by donor

Used for appreciating assets

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20
Q

How is a trust taxed?

A

Beneficiary is taxed in distribution

Distribution deductions is the lesser of the net investment income or amount distributed to beneficiary

Income distributed keeps the same characteristics(example tax exempted)

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21
Q

Blind trust

A

Created to avoid conflicts of interest

Used by Government officials

Certified by the board of Government officials

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22
Q

Dynasty Trust

A

Avoids GSTT

Passes life insurance to granchildren

23
Q

Standby Trust

A

A springing trust based on an event(revocable)

24
Complex Trust
Anything that is not a simple trust Simple trust pays income annually and is not charitable and can't distribute corpus
25
What options does an Alien spouse have at decadent spouse death? 3
- no marital deduction allowed - if become a citizen before date 706 is filed you can get deduction - if asset are in a QDOT qualified domestic trust you can get martial deduction
26
Rules against perpetuity | 4
- trust can't have infinite life - can't last longer than 21 year longer than the death of the youngest beneficiary - creation date if different for irrevocable and revocable Irrevocable creation date is date created Revocable creation date is date it becomes irrevocable -charitable trust are exempt from perpetuity
27
Testementary trust 4
Springing at death from will Not subject to gift tax because created at death Subject to probate Advantages Revocable at life can make changes Can provide income and distribute corpus Can have different GP of appointment to control assets
28
Qualified Disclaimers 3
Must be in writing Asset pass to next beneficiary with no benefits from assets Must be filed by time 706 is filed
29
How do you calculate stock price on date of death 2
If the stock didn't trade = get trade day before and day after and average by how many days away from date of death.. Then divide by total number of days If stock did trade that day you take the average of the high and the low
30
2503C | 4
Income is discretionary Must be distributed by age 21 of child Trust pays income tax on I distributed gifts at trust rates Trust doesn't meet present interest gift rules
31
Included in Gross Estate | 10
``` Annuities Gift taxes paid in last three years Assets owned by descendent Transfer on death Transfer with retained life interest Revocable transfers Joint property Life insurance proceeds Powers of interest ```
32
Transfer not subject to gift tax | 3
Divorce Qualified transfer directly to medical or educational facility Asset under annual exclusion 14/28
33
Section 303
Used by C Corp if greater than 35 percent of gross estate IRS gives you favorable tax treatment C Corps only
34
2503 B
Educational trust Required income annually trustee has no discretion Not required to end at 21 Interest eligible for annual gift exclusion Remainder interest not eligible for annual exclusion
35
Plans integrated with Social Security
DBenfit plans Profit Sharing Sep Keogh
36
709
- gift tax form - greater than annual exclusion 14/28 - gift spitting needs to file(not in community property state)
37
When do you have to file a 706
9 months You can ask for a 6 month extension
38
When is a joint bank account or saving bind considered gifted?
Gifted when withdrawn or redeems respectively
39
Holographic Will
A written will which is witnessed and hand written and signed and dated Not recognized in all states
40
AVD
Alternative Valuation Date Can use DOd value or AvD which is value 6 months after DOD If AVD lower both gross estate and taxable estate the higher basis can be used. Must be chosen on the 706 form Property sold after DOD but before AvD is date is sale. IRD assets not able to use AVD- annuities, retirement plans, installment notes, patents Can only be used is estate tax base is > 5,340,000
41
Nuncupative Will
Oral Will not recognized in all states. Used for Personal property not real property
42
Gross Up Approach
Gift taxes paid in last three years that is added back to gross estate
43
IRD Assets 6
Annuities Retirement plans Installment notes Patents Copyrights Cash
44
Bypass trust
- assets in trust take advantage of the marital applicable credit amount because they do not qualify for marital deduction and are not included in surviving spouses gross estate. - surviving spouse gets income from trust for HEMS (Health, education, maintains cd, support) - when second spouse dies trust control goes to beneficiaries
45
Crummy trust
Irrevocable But gives BeBe dictators the right to withdraw a small amount for a small time period annually
46
CRAT payments 3
Upon death of last income beneficiary or end of term not greater than 20 years the remained interest must be held for or paid to a qualified charitable organization The amount must be paid annually to a non charitable beneficiary The trust provides a fixed annuity worth not less that 5% of the INITIAL FMV(remember initial CRUTS pay off of FMV because they keep up with inflation)
47
What does a "pour over" provision accomplish in a will?
Allows for transfer of assets intones trust created before the will. Asset are subject to estate tax, probate, and not permitted to transfer to another persons estate
48
Property in estate planning can be 4
Real property is land or anything permanently attached or affixed to it Real property is anything other than personal property Personal property is either intangible or tangible Property interest can be present interest or future interest
49
DNI and capital gains
Does NOT include capital gains. Capital gains are recognized as additions to corpus of the trust rather than income
50
What is gift exclusion maximum to a non US citizen
145k
51
Special use valuation
Decedent must be a US citizen The combine real and personal property of the farm or closely held business must be at least 50% of the gross estate less certain expenses Must pass to qualified heirs Must be used as a farm or closely held business 5 out of last 8 years
52
Crummy trust 3
Gift taxes to beneficiaries of the right to withdraw lapses and the amount exceeds the greater of 5% of corpus or $5000 Must received notification to withdraw Withdrawal right is usually the lesser of annual exclusion amount or value of property
53
A second to Die allows
Second to die allows one insured to be uninsurable
54
If a person inherits property and then dies more than 2 years after the transferor's death the credit for tax on prior transfer is
Reduced by 20% for each two year period in excess of two years
55
What is a Totten Trust
When a bank account has an "in trust for"= beneficiary

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