Estate Planning Basics

Question 1

Act of 2014 created the opportunity for persons with a disabililty starting before age 26 to be the beneficiary of an ABLE Account, with that account acting as protected assets for Medicaid up to a point. Contribution limits to avoid taxation, state determined account limits and Medicaid Pay Back rules apply to these accounts

Answer 1

ABLE Saving Account

The ABLE Act of 2014

Question 2

Pertinent to calculating estate taxes. It is the gross estate of the deceased minus administrative expenses to settle the estate, funeral expenses, debts of the decedent, unisured theft and casualty losses to estate property, and claims against the estate.

Answer 2

Adjusted Gross Estate

Question 3

Person who settles the probate estate when an individual dies intestate (without a will)

Answer 3

Administrator

Question 4

An additional probate action required for real estate located in a state other than a decedent’s state of domicile.

Answer 4

Ancillary Probate

Question 5

Allows a donor to give up to $15,000 (2019) of gifts per year per individual

Answer 5

Annual Exclusion

Question 6

Pertains to federal gift and estate taxation. It is a dollar-for-dollar tax credit offset against the tentative tax generated when calculating the federal gift or estate tax payable The amount of the tax credit offsets any taxes that would have been due on the first $11.4 million (Total of both taxable gifts and adjusted gross)

Answer 6

Applicable Credit Amount

Question 7

The dollar value of taxable transferred property on which federal gift or estate tax does not have to be paid out of pocket because of the gift and estate tax applicable credit amounts. The exclusion for both gift and estate tax in 2019 is $11.4 million.

Answer 7

Applicable exclusion amount

Question 8

Insurance policies, bank and retirement accounts: The person or persons who will receive either the insurance policy or account proceeds. They can also be an entity, such as a charity. Trusts: The person whom the trust is to benefit.

Answer 8

Beneficiary

Question 9

The act of transferring property by a will

Answer 9

Bequest

Question 10

Pertains to estate planning for a small business owner, It is a written agreement providing for the sale of one business owners interest to other owners (cross purchase) or to the business entity in the event of his or her disability or death. This ensures that the business owner’s heirs are paid.

Answer 10

By-sell Agreement

Question 11

A separate, supplementary written document that amends or supplements an existing will.

Answer 11

Codicil

Question 12

A state that does not allow husbands and wives to own property as community property

Answer 12

Common Law State

Question 13

Property that is acquired by either or both spouses during marriage is classified as ________ if the couple lives in a ________state, and the property is not titled in some other acceptable form of co-ownership

Answer 13

Community Property

Question 14

A state in which community property laws apply. These include Alaska, Arizona, California, Idaho, Louisanna, Nevada, New Mexico, Texas, Washington and Wisconsin

Answer 14

Community Property state

Question 15

A person who stands next in line to receive an estate distribution or insurance or retirement benefits if the primary beneficiary predeceases the decedent/owner/insured or disclaims the estate property/benefits. Can also be called a secondary beneficiary

Answer 15

Contingent Beneficiary

Question 16

A mutual agreement between two or more competent parties concerning a specified subject, such as life insurance or property

Answer 16

Contract

Question 17

A special type of nondeductible IRA to which qualified taxpayers can contribute up to $2000 per year until the designated beneficiary turns 18. Interest and earnings on the account accumulates income tax free. To be considered tax free upon withdrawal from the account, earnings my be allocated for qualified education expenses (K-12 and postsecondary). If not used for this purpose, earnings can be withdrawn are included in the gross income of the recipient and are also subject to a ten percent penalty.

Answer 17

Coverdell Education Savings Account (ESA)

Question 18

Pertains to estate planning for small busines owners. A type of buy-sell agreement in which each partner purchases insurance on the life (lives) of the other partner(s) to buy a deceased partner’s interest in the business

Answer 18

Cross-Purchase Agreement

Question 19

Another name sometimes given to estate taxes. Less than 0.2% of estates pay any estate taxes

Answer 19

Death taxes

Question 20

A person who has died

Answer 20

Decedent

Question 21

Pertains to estate planning for small businesses. An _________ is a buy-sell agreement in which (1) the business agrees to purchase the interest of each owner in the event of death, and (2) the business is applicant, owner, premium payer, and the beneficiary of policies on the lives of each other.

Answer 21

Entity Agreement

Question 22

A beneficial interest in property. For example, a trust beneficiary has an equitable interest in property held in trust.

Answer 22

Equitable Interest

Question 23

All the property interests a person owns, including property over which the person exercises decisive control.

Answer 23

Estate

Question 24

The ability of an estate to meet cash claims and taxes against it.

Answer 24

Estate Liquidity

Question 25

The process of acquiring, conserving, and distributing a person's property interests in the most effective and efficient manner.

Answer 25

Estate Planning

Question 26

A tax levied by the federal government and some states on the value of one's assets upon death. Very few estates pay any federal estate tax

Answer 26

Estate tax

Question 27

A representative responsible for distributing property when an individual dies with a valid will. Also known as a personal representative (PR) in some states.

Answer 27

Executor

Question 28

A tax levied upon the donor of a lifetime transfer of property for which the donor receives less than full value, and over which the donor gives up control. Taxable gifts of up to $11.4 million may be given before the donor actually has to pay any taxes.

Answer 28

Federal Gift Tax

Question 29

Trusts in general. A trust to whom assets have been transferred. Life insurance trusts. A trust that owns assets other than life insurance policies.

Answer 29

Funded Trust

Question 30

Possession, use, or the enjoyment of a specified property is time or the postponed until some future time or the occurrence of a specified event.

Answer 30

Future Interest

Question 31

A power of appointment in which the donee (or holder) has the unlimited power to appoint another person's property to anyone, including himself or herself, his or her estate, or his or her creditors. Property subject to such a power at the donee's death is included in the donee's gross estate for federal estate taxation purposes.

Answer 31

General Power of Appointment

Question 32

A tax imposed on property transferred to someone who is deemed to be two or more generations below the person who made the transfer. The first $11.4 million excluded from taxation.

Answer 32

Generation-skipping Transfer Tax

Question 33

Allows spouses in a marriage to treat a gift to a third person by one spouse as if each gave one-half of the gift. Example: a gift of $30,000 would be considered a gift of $15,000 from each spouse, thereby enabling each spouse to take advantage of the $15,000 annual exclusion amount.

Answer 33

Gift Splitting

Question 34

A transfer tax imposed on the gratuitous shifting of property ownership during life. first $11.4 tax excluded from taxation

Answer 34

Gift tax

Question 35

Enables an individual to gift up to $15,000 per year of present interest gifts to as many recipients as he or she chooses without incurring a federal gift tax

Answer 35

Gift Tax Annual Exclusion

Question 36

Pertains to a trust. The grantor is the individual who creates and usually provides initial funding to the trust for the benefit of himself, herself, or others

Answer 36

Grantor

Question 37

The _____ is the starting point for calculating the estate tax. Includes: all property in the probate estate; property over which the decedent held a general power of appointment at death.

Answer 37

Gross Estate

Question 38

Important in estate planning. the term refers to ownership rights such as (in the case of insurance) the right to change the beneficiary designations, borrow against the policy, surrender or assign the policy, elect a settlement option, or receive policy dividends and other benefits.

Answer 38

Incidents of ownership

Question 39

A state tax levied on an heir upon his or her receipt of property from a decedents estate.

Answer 39

Inheritance tax

Question 40

A trust that contains life insurance policies during an insured's lifetime and contains life insurance proceeds after the insured's death

Answer 40

Insurance Trust

Question 41

Transfers that take place during a transferor's lifetime

Answer 41

Inter Vivos Transfers

Question 42

The payment for the use of money

Answer 42

Interest

Question 43

When a person dies with probate property, but without a valid will in place, he or she is said to have died "_____". Partial ______ can occur when a decedent had a defective will that does not dispose of probate property. ______property is distributed in accordance with state law.

Answer 43

Intestate

Question 44

Pertains to life insurance. The policy owner names a beneficiary but does not retain the right to change the named.

Answer 44

Irrevocable Beneficiary Designation

Question 45

A trust that the grantor cannot unilaterally revoke.

Answer 45

Irrevocable Trust

Question 46

A form of property ownership by any two or more individuals. If an owner dies, his or her interest in the property passes automatically to the surviving joint owner(s) so it avoids probate.

Answer 46

Joint Tenancy with Right of Survivorship (JTWROS)

Question 47

An interest held by the legal owner of a property, such as a trustee of a trust

Answer 47

Legal Interest

Question 48

Entitles the holder to the income from a property or to the use of the property, or a portion of the property, during his or her lifetime

Answer 48

Life Interest

Question 49

A trust that is created during the grantor's lifetime and that is to be operative during his or her lifetime

Answer 49

Living Trust

Question 50

Pertains to gift and estate taxation. The _____ _____enables an individual to give or bequeath an unlimited amount of qualifying property to a US citizen spouse without incurring a gift or estate tax liability

Answer 50

Marital deduction

Question 51

The estate value that is available for distribution to heirs after taxes, debts and administrative expenses have been paid

Answer 51

Net Estate

Question 52

The right to use, posses, enjoy, and dispose of property

Answer 52

Ownership

Question 53

is titled in only one individuals name.

Answer 53

Ownership in fee simple

Question 54

The person appointed by a court to administer and distribute a decedent's estate, also can be called an executor

Answer 54

Personal representative

Question 55

A right given to a person to appoint title to property owned by another

Answer 55

Power of Appointment

Question 56

A written document executed by one person who authorizes another person to act on his or her behalf.

Answer 56

Power of Attorney

Question 57

An unrestricted and immediate right to possess, use, or enjoy property

Answer 57

Present Interest

Question 58

The legal process of administering and distributing the probate estate. Assets not distributed by the will do not have to go through probate, such as property held JTWROS, TBE, or property passed on to beneficiaries of retirement accounts

Answer 58

Probate

Question 59

Property handled and distributed by a personal representative or administrator upon a person's death that is not held in some sort of will bypass form, such as JTWROS; property is disposed of according to the decedent's will, or if there is no will then according to the state's intestacy laws.

Answer 59

Probate Estate

Question 60

The rights and liabilities that come from ownership of a specific property

Answer 60

Property Interest

Question 61

An interest in which the individual is entitled to the property after a specified period of time or after a life interest has ended.

Answer 61

Remainder Interest

Question 62

A trust in which the terms may be altered or the trust revoked after creation.

Answer 62

Revocable Trust

Question 63

Pertains to property ownership between spouses in a community property state. Ownership of property belongs exclusively to the spouse that held it prior to marriage, inherited etc

Answer 63

Separate property

Question 64

State Statutes that allow a surviving spouse to elect to receive a certain amount of a deceased spouse's estate to prevent the surviving spouse from being completely disinherited. Children can be disinherited, but not a surviving spouse.

Answer 64

Spousal Elective Share

Question 65

The beneficiary's basis for property received from an estate. This value is usually the asset's fair market value on the date of death.

Answer 65

Taxable Estate

Question 66

A form of property ownership that exists between two or more individuals. This form of property ownership acts as a will substitute, and thus avoids probate

Answer 66

Tenancy by the entirety (TBE)

Question 67

A form of property ownership that exists between two or more individuals. There are no rights of survivorship, so upon death property passes to the tenant's heirs through probate.

Answer 67

Tenancy in common

Question 68

Transfers that take place at or after the transferor's death

Answer 68

Testamentary Transfers

Question 69

A trust that is created under a will or inter vivos trust provision and does not become operative unitl after the creator's death

Answer 69

Testamentary Trust

Question 70

Dying with a valid will in place

Answer 70

Testate

Question 71

An individual who creates a will by signing and executing a last will and testament

Answer 71

Testator

Question 72

The right to ownership

Answer 72

Title

Question 73

A fiduciary arrangement set up by a grantor whereby property is held and managed for a named beneficiary by a third party known as a trustee

Answer 73

Trust

Question 74

Property owned by a trust

Answer 74

Trust Corpus

Question 75

The person or organization that holds legal title to the property held in trust. the trustee holds and manages the property for the benefit of the beneficiary.

Answer 75

Trustee

Question 76

Laws enacted in many states that enable gifts to minor children. Only allow figts of cash, securities, or life insurance.

Answer 76

Uniform Gifts to Minors Act (UGMA)

Question 77

Laws enacted in many states that enable the transfer of property to minor children. Accounts are more flexible than UGMA accounts and allow more types of gifts, such as property. Also allow both inter vivos and testamentary transfers

Answer 77

Uniformed Transfers to Minors Act (UTMA)

Question 78

Any person may transer unlimited amounts of qualifying property to a qualified charity free of gift or estate tax because of the deduction.

Answer 78

Unlimited Charitable Deduction

Question 79

A legal document that specifies how a person wished to distribut probate property in the event of death.

Answer 79

Will

Question 80

Legal arrangements that avoid probate by allowing the transfer of estate assets without intervention of a probate court

Answer 80

Will Substitutes