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CFP Prep - Nipa > Estate T&D > Flashcards

Estate T&D Flashcards

1
Q

JTWROS

A

Joint Tenants with Rights of Survivorship

It is an arrangement under which two or
more adults own equal interests in an asset for legal, estate planning, and tax purposes.

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2
Q

GRAT

A

Grantor Retained Annuity Trust

Grantor RETAINS a right to payment of a FIXED $$ amount of initial valuation for a FIXED number of years

Evaluated at the start of the trust and payments stays the same = Annuity

ADDITION ASSETS NOT PERMITTED

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3
Q

GRUT

A

Grantor Retained Uni Turst

Grantor RETAINS the right to payment for FIXED % of the ivalue of the trust property DETERMINED ANNUALLY for a # of years

Revalued at annually ; served as inflation hedge

payments are go up and down

ADDITION ASSETS ARE PERMITTED

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4
Q

CLT

A

Charitable Lead Trusts (CLT)

pays an INCOME STREAM to a qualified CHARITY for a TRUST TERM, usually not exceeding 20.

At the expiration of the TRUST TERM (lead period), the remainder interest passes to GRANTOR OR one or more NON-CHARITABLE beneficiaries.

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5
Q

CLAT

A

Charitable Lead Annuity Trust (CLAT)

a type of CLT that is designed to provide annual payment of a FIXED amount to a qualified CHARITY for a TRUST TERM (lead period)

At the expiration of the lead period, the REMAINDER (remaining interest) passes to GRANTOR OR one or more NON-CHARITABLE beneficiaries.

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6
Q

CLUT

A

Charitable Lead Uni Trust (CLUT)

a type of CLT that provides payment of a periodic sum, usually a percentage of the trust assets (revalued annually) to a qualified charity, with the remainder going to a GRANTOR OR NON-CHARITABLE beneficiary.

This creates annual payments that go ‘up and down’ based on the annual valuation.

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7
Q

CRT

A

Charitable Remainder Trusts

vehicle for gift tax charitable deductions

A trust in which GRANTOR OR NON-CHARITABLE beneficiaries receive annuity or unitrust payments FIRST for the TRUST TERM and then the REMAINING INTEREST is received by a qualified CHARITY.

The grantor receives a charitable income tax deduction for the PV of the charity’s remainder interest.

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8
Q

CRAT

A

Charitable Remainder Annuity Trusts (CRAT)

a trust designed to permit payment of a FIXED amount (based on a % of the trust’s initial valuation) AT LEAST annually to a GRANTOR or NON-CHARITABLE beneficiary FOR A TRUST TERM with the remainder going to CHARITY.

Additional assets CANNOT be added.

Charity receives ALL trust assets UPON the death of the income beneficiary or at the end of the trust term.

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9
Q

CRUT

A

Charitable Remainder Uni Trust (CRUT)

payment of a periodic sum (A fixed percentage of net FMV of the trust, revalued annually) to a GRANTOR or NON-CHARITABLE beneficiary at least annually FOR TRUST TERM with the remainder going to CHARITY.

Additional assets CAN be added.

Reduces the value of the grantor’s gross estate.

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10
Q

QPRT

A

Qualified Personal Residence Trusts (QPRTs)

Irrevocable GRANTOR trust (for houses) that holds a person’s residence, allowing couples or individual to live in the house rent-free for a specified period.

At the end of the term, home passes gift tax-free to the trust beneficiaries.

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11
Q

Q-TIP Trust

A

QTIP (Qualified Terminable Interest Property) Trusts

AKA - C-Trust

Provides the BENE spouse with INCOME FOR LIFE, qualifies the TRUST PROPERTY for the MARITAL DEDUCTION and gives trust CORPUS TO CHILDREN from a previous marriage.

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12
Q

ILIT

A

An Irrevocable Life Insurance Trust (ILIT)

Grantor transfers existing LI policy into ILIT or sends cash to buy a new LI (i.e. send premiums).

Owner of LI in ILIT: Turst
Beneficiary in the LI = Trust
Insured = Grantor

Death benefits of IL can go to a non-trust beneficiary

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13
Q

A-Trust

A

GENERAL Power of Appointment Trust; Marital Trust

A marital trust that provides the surviving spouse with a general power of appointment, access to income, and the ability to invade the trust corpus during life.

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14
Q

A-B Trust

A

An arrangement designed to give the surviving spouse full use of the family’s economic wealth, while at the same time minimizing, to the extent possible, the total federal estate tax payable at the deaths of both spouses.

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15
Q

Disclaimer Trust

A

An estate planning technique in which a married couple incorporates an irrevocable trust in their planning, which is funded only if the surviving spouse chooses to “disclaim,” or refuse to accept, the outright distribution of certain assets following the deceased spouse’s death.

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16
Q

Estate Trust

A

Qualifies property for a marital deduction in the decedent’s estate.

Used if the beneficiary spouse has substantial wealth and does not need the trust income or corpus.

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17
Q

2503(B) Trust

A

aka, Qualifying Minor’s Trust or Mandatory Income Trust

is an irrevocable trust that requires the distribution of income on an annual basis.

Most often, distributed funds are placed into a custodial bank account until the child reaches legal age

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18
Q

2503(C) trust

A

enables a grantor to make a gift to a minor in the trust and still obtain the annual gift tax exclusion.

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19
Q

QDOTs

A

Qualified Domestic Trust (QDOT)

the decedent’s estate will qualify for the federal marital deduction if assets transfer into a QDOT

QDOT ensures that the assets will not ultimately leave the US without being taxed.

20
Q

B-Trust

A

B-Trusts For Spousal Transfers

AKA
credit shelter trust
OR
family trust

21
Q

HEMS

A

Examples:
H = Health costs (Medical and dental costs)
E = Education (Obtaining a higher degree.)
M = Maintenance (Access to money to cover non-discretionary cost of living expenses.)
S = Support (Additional funds to continue a beneficiary’s quality of life.)

22
Q

Probate

A

process of proving the will in court

23
Q

TIP

A

Terminable Interest Property = an interest in property that may terminate on some event or contingency.

24
Q

ILIT

A

Irrevocable Life Insurance Trusts (ILITs)

can provide the decedent’s estate with liquidity for payment of all death taxes with existing life insurance, or with insurance, the trust intends to purchase, without subjecting the proceeds themselves to depletion by estate taxes.

25
SCINs
Self-Cancelling Installment Note (SCIN) ; Cancel at dealth Duration = Fixed Term Payments Secured = Y, Impact on Seller's Gross Estate = transferred property removed from owner's gross estate Partially or fully cancels the installment note before the note matures. The seller can cancel the installment note in the will. The unpaid balance of the note is not included in the seller’s gross estate. The seller can cancel the entire note at once, which is subject to capital gains and gift taxes. Example: Basis of business $100,000 sold for $800,000. Capital gain is reported on $700,000 and $682,000 is subject to gift taxes. A seller can cancel the note in increments of $18,000 per year per buyer to avoid or reduce taxable gifts in 2024.
26
Mutual Will
will made in agreement with another person to dispose of certain property interests.
27
Reciprocal Will
Each person’s will designates that all property be distributed to the other person.
28
Holographic will
A handwritten will.
29
Nuncupative will
An oral will (requires others to withness the oral will)
30
Intestacy
State law determines the beneficiaries for property in the absence of a will or will substitutes.
31
Living Will
Medical Only Living wills and other advance directives include written, legal instructions that state the treatment you want for medical conditions when you're unable to make decisions for yourself.
32
Funded Revocable Living Trust
A fully funded revocable living trust means all, or nearly all, of the assets that can be transferred to the trust have been formally transferred to it. This process involves changing the ownership of assets so they are held by the trustee of the trust, rather than by the individual creator of the trust. typically a grantor trust, the trustee is often the grantor initially and manages the trust's assets.
33
Power of Attorney
A written agreement that allows one individual, known as the agent, to act on behalf of another, known as the principal. If the principal becomes disabled or incapacitated, an agent with powers of attorney is granted authority to make key decisions and engage in various of actions for the principal.
34
General power of attorney
* Grants the agent authority to make a broad array of decisions, including financial, legal, or business matters. * Lapses at disability or incapacitation.
35
Special power of attorney
* The agent only acts on behalf of the principal for a specific matter. * Once the task or action is completed, or a period has passed, the authority expires.
36
Springing power of attorney
* **From** Legal Incapacitation **TO** Death * This does not become operative until the principal becomes legally incapacitated. * The principal's state of incapacitation must be confirmed by medical profession, which may take time and potentially delay decisions.
37
Durable Power of Attorney
* **From** Doc Creation **TO** Death legal document that allows you to name someone you trust to make financial, health, or other decisions on your behalf if you become incapacitated or are unable to make those decisions yourself. * The agent can act immediately on behalf of the principal. * DPOA remains valid even after you become incapacitated
38
Non-durable power of attorney
* **From** Doc Creation **TO** Incapacitation * The power of attorney remains active until incapacitation. * It is also used if a principal needs the agent to complete a specific task on their behalf (e.g., signing a form while the principal is on vacation).
39
Residuary Clause
The residuary clause identifies the person(s) that will inherit any residue (everything that is left of the estate after payment of funeral fees, taxes, debts, and gifts/debts/claims.)
40
Per Capita
* Used when one dies without a will (intestate) * State Laws typically dictate that estate be transfered on per capita or per stripes basis. * * **Equal distribution of assets amongst ALL survivors **(regardless of generation) * * By the head,” share and share alike,” or “according to the number of individuals.”
41
Per Stirpes
* Used when one dies without a will (intestate) * State Laws typically dictate that estate be transfered on per capita or per stripes basis. * Assets to be distributed to **Deceased Bene's children evenlly** * “by the trunk,” “by the roots,” or “by right of representation.”
42
Per Capita by Generation
* Used when one dies without a will (intestate) * State Laws typically dictate that estate be transfered on per capita or per stripes basis. * Distributed equally amongst each generation * Used when the 2nd gen is set to receive their specified % share, * with all heirs in the 3rd generation receiving an evenly-split % of the remainder
43
AVD
Alternate Valuation Date Form 706 is generally due, 9 months from the DoD
44
AVD Election (Who, What, When, where and why)
* **Who? **Executor makes the election. * **What? **A valuation date that is set 6-months from the date of death. * **When? **Selected within one year of estate tax return filing, including extensions. * **Where?** AVD election is made on Form 706 and is IRREVOCABLE * **Why? **To receive a lower valuation of the estate which, in turn, reduces potential taxation.
45
AVD Exception
* If AVD election is made, all assets MUST be valued as of AVD. * **EXCEPTION:** Depreciating assets - * Cars * Patents * Intellectual property * Life Estate * Remainer Interests * Copyright musical scores

CFP Prep - Nipa (19 decks)

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