Estate Planning Flashcards

Question

Springing Power

Answer 1

Not in effect until incapacity of the principal

Answer 2

General grants power to deal with all assets Special power is limited to certain acts or assets.

Answer 3

Guardianship is for a person Conservator is for financial decisions Both are court appointed

Answer 4

Income and assets must be below a certain limit. $2k for assets and income varies by state Subject to 5 yr look back for gifts. Annuities must name the state as remainder beneficiary to cover expenses

Answer 5

SNT is funded by a parent or someone else and OBRA is is funded asset owner. OBRA trust pays the state back first if asset remain at death where SNT can pass to remained beneficiary.

Answer 6

Equal shares are created for all living decedents. Ex: 5 children of your own and one child has 5 kids (grandkids). If child with kid dies before you. There 5 kids get equal share of whole estate Can also say that “survive me” then it would be split between 4 living kids.

Answer 7

Estate divided into equal share and if one child dies before you there % will be split by their heirs.

Answer 8

Income is distributed Income taxed to beneficiary No distribution of corpus No charitable gifts

Answer 9

Irrevocable Income must or may be accumulated Income accumulated is taxed to the trust Income distributed is taxed to beneficiary Corpus can be distributed Can make charitable gifts.

Answer 10

Gives decedent postmortem control over property. Can provide a stream of income for surviving spouse only. Can invaded corpus with 5 or 5 provision or HEMS At spouses death assets pass estate tax free to other beneficiaries.

Answer 11

2nd spouse to die controls. Can invade corpus Also called A trust Passed through unlimited marital deduction Included in gross estate of surviving spouse.

Answer 12

C trust - for spouses only Provides surviving spouse income stream for their life Qualified the property for marital deduction ``` Keywords: LAME lifetime income Annual pmts to spouse Mandatory pmts to spouse Exclusively for spouse ```

Answer 13

Provision used to capture assets the client owns but aren’t controlled by the revocable trust at death. Helps avoid probate

Answer 14

Must be funded with cash type assets: EE bonds, securities, life insurance, and annuities Distributed at 18 No real estate

Answer 15

Allows for Real Estate, partnership interests, royalty interests to be deposited Distributed at age 21 or 25

Answer 16

Usually established for adult children Kiddie tax can be an issue if under 24 Provides income stream that is subject to income tax - present interest Corpus is future interest that can be retained in the trust

Answer 17

Transfer are made into a B trust and can benefit many future beneficiaries. Free from gift, estate, GST taxes for beneficiary lives plus 21 yrs and 9 months.

Answer 18

Must payout at least 5% of income for the year No additions Fixed pmts Pay to any charity Remainder must be at least 10% or in total contribution

Answer 19

Must distribute at least 5% of income Payments can vary Payable to any charity Must at 10% remainder left Raw land not useful to deposit

Answer 20

Additions allowed Variable pmts Payable to a specific charity Commingled property with other donors No tax exempt securities allowed as investment No 5% distribution rule Still considered a charitable remainder trust

Answer 21

No additions Fixed income for life Payable to specific charity Charitable deduction based on gift less annuity. Not subject to 5% distribution rule

Answer 22

No minimum distribution is required Tax deduction for income to charity Future income and gains are taxable to you

Answer 23

1. Proceeds paid to the executor of your estate 2. There was incident of ownership at death 3. Gifted policy within 3 years

Answer 24

Defendant must be the insured for rule to apply Only apples if gifted to wife, ex-wife, or trust This includes ilit with no Crummey provisions

Answer 25

Allows owner to keep control of company After recap, they will own a combination of common and preferred stock Preferred produce divd for owner income and locks in value for estate Common shares go to younger generation Ex: $10m business recaps $1m common and $9m preferred shares. $1m goes to younger generation and preferred shares are frozen at $9m for estate calculation.

Answer 26

This is for a non-us citizen spouse Max gift is $152k not $11,180,000 Jointly owned property is not considered 1/2 owned.

Answer 27

Adv: seller can remove appreciating asset from their estate Disadvantages: If seller does, remaining pmts are included in estate If not is forgiven, debt is confident paid to the estate and estate must report the gain. If cancelled, must recognize gain to the extent of fmv on that date minus basis If sold to related party who sell within 2 yrs seller is deemed to have been paid in full Recapture must be recognized in year of the sale.

Answer 28

Pmts cancelled at sellers death Buyer pays a premium Attractive to very wealthy clients Cancellation triggers recognition of entire remaining gain.

Answer 29

Donor retains control Shifts income from parents to kids Income and tax benefits must be distributed or allocated based on % ownership Must be material producing Discounts for lack of marketability and control. Basis value is not discounted

Answer 30

Used by business owning parent that wants to gift but has lack of assets besides business Give fully depreciated assets and lease back to company. Kids gets income from lease and pmts are deductible to the company. Subject to kiddie tax - if kid is over 24 this is better than FLP.

Answer 31

Irrevocable trust that the grantor transfers appreciating or income producing property in exchange for fixed annuity. When term ends asset is transferred to beneficiaries tax free. If grantor doesn’t outlive term then all property is brought back into grantors estate valued at the date of death

Answer 32

Grantor received fixed percent of net fair mkt value - must be revalued each year. Best asset is appreciating asset

Answer 33

Irrevocable trust to transfer personal residence into Grantor lives in property for period of time then it is passed to the beneficiaries outright. Can hold up to two properties. Rental property can only be used for 14 days or 10% of number of days rented. Gift rental first before primary residence If owner dies before term it is added back into gross estate and gift amt is voided

Answer 34

$11,180,000 exemption is elective Tax can be due now or later Annual exclusions are allowed Not integrated with federal estate tax system. It is a separate tax.