Estate, tax, compliance, and tax calculation, sources for state liquidity, and power of appointment Flashcards
What are exclusions from the gross estate?
Life insurance owned by others
Completed gifts
Life state for the decedent‘s own life only a retained life estate is included , meaning you have control
What is the adjusted gross estate?
Gross estate minus funeral expenses, administrative expenses, debts, taxes, income, taxes, and casualty losses
Also called the tentative taxable estate
What is the taxable estate?
Adjusted gross state last marital and charitable deductions, and in some cases, state level death or inheritance taxes
An unlimited amount of property passing to the surviving spouse, can pass a state tax-free if what following requirements are met
Property is included in the decedent’s gross estate
Property actually passes to the surviving spouse
What is the tentative tax?
Once the tax basis determined, tentative tax is calculated by subtracting the $13,610,000 (2024) exemption from the tax base and multiplying the excess by 40%
The nature of the transfer tax system is what?
Cumulative
Uses the same rate for lifetime gifts, and testamentary transfers
When is life insurance included in the gross estate?
Insured possesses any incidents of ownership on the policy covering his or her own life
Full proceeds of life insurance will be included in the gross estate
In general, what happens to life insurance cash value when the insured dies
The cash value is retained by the carrier at death, the insurer only pays the death benefit, unless the policy is an UL or VUL option B
What is the use and purpose of powers of appointment?
Interest held by a person, providing the holder with the ability to determine who shall enjoy, use, and possess the property subject to the power generally occur in trust or estates
What is a general power of appointment?
Outright ownership
Holder can exercise the power without any conditions or restrictions placed on the ability to exercise the power
What is a special (limited) power of appointment?
Power limits the class of individuals who may receive the trust or states property can transfer the property only to specifically designated individuals or only under specific circumstances
Holder can exercise power only under certain specific conditions
What is a five or five power?
Property subject to a general power will be included in a Donnie’s descendants estate only to the extent that’s the property exceeds the greater of the following
$5000 or 5% of the total value of the fund subject to the power as measured at the time of lapse
Provide flexibility and financial security for a beneficiary with minimal tax consequences
When does a general power of appointment lapse?
When it is not exercised within a given period of time
When is a general power of appointment Exercised?
Holder of the power of appointment chooses to use it in favor of one or more beneficiaries, the holder exercises the power
When is a power of appointment released?
When the holder of a power relinquishes all control to determine who the beneficiaries of the property will be
