Estates Flashcards
Assets acquired by one member of a married couple are deemed to belong to that person, unless they were put in the names of both.
Community state or a common law state?
Common law property system
Assets acquired during a marriage are treated as belonging to both partners.
Community state or a common law state?
Community property system
If they move to a non-community state, the items will remain as a community state status/ownership.
In both Tenancy by Entirety and Community property titling, owners must be what?
Spouses
What are the 4 different types of wills?
Mutual will - made in agreement with another person
Reciprocal will - each person’s will designates property that will go to the other person
Holographic will - handwritten
Nuncupative will - oral
What is a “survivorship clause” in a will?
States a “survivorship period” the beneficiary must live after the death of the testator (grantor). Period is usually 5-60 days.
What does NOT pass through probate?
Hint: Go probate free with TLC
Trusts
Law (legally titled assets as JTWROS or Tenancy in common)
Contract (named beneficiaries on life insurance, pension plans, IRAs and annuities)
Only 2 type of titling requires the owners are spouses. What are they?
Tenancy by Entirety
Community Property
Remember: Entire community are our spouses
What’s the difference between Per Capita and Per Stirpes transfer at death designations?
Per stirpes - if parent (beneficiary) passes away, their children will split the share intended for the parent beneficiary
Per Capita - if parent (beneficiary) passes away, their children will get equal split with all surviving beneficiaries
What form is filed that calculates the estate?
Form 706 - Remember 6’ under
On Form 706, the executor can elect to value the estate on either the date of death or the AVD (Alternate Valuation Date) which is 6 months after date of death.
Why would AVD be chosen?
To reduce both gross estate value and ultimately reduce Estate tax and Generation Skip Transfer tax
On Form 706, the executor can elect to value the estate on either the date of death or the AVD (Alternate Valuation Date) which is 6 months after date of death.
When is Form 706 due?
9 months from date of death
On Form 706, the executor can elect to value the estate on either the date of death or the AVD (Alternate Valuation Date) which is 6 months after date of death.
What FMV date is used for anything sold or distributed when the AVD is used?
Date of sale or distribution if prior to the AVD (6 months)
OR
AVD date if sale or distribution occurs on or after the AVD.
On Form 706, the executor can elect to value the estate on either the date of death or the AVD (Alternate Valuation Date) which is 6 months after date of death.
If AVD is chosen, all assets MUST be valued on that date with what exception?
Depreciating assets whose value declines over time must be valued using the FMV on the date of death.
Examples:
Cars
Patents
Life Estates
Remainder Interests
JTWROS spousal property is treated as equally owned. If spouses contribute in different percentages, how is the basis for each determined?
In spousal JTWROS, each is 50% owner, so the basis for each is 50%.
However, when one passes, the surviving spouse gets step up of spouse’s basis ie: their original basis plus 50% of the FMV (the spouses portion) at death. ie:
10,000 + 10,000 grows to $30,000. Spouse dies and basis for surviving spouse is 10,000 (their original basis) + 15,000 (50% FMV at death) = surviving spouse’s basis becomes $25,000
JTWROS NON-spousal property ownership is based on % of contribution. How is the basis determined upon the passing of one of the owners?
The survivor gets step up of decedent’s basis ie: their original basis plus the % of the FMV (the decedent’s portion) at death. ie:
20% and 80%; 80% owner passes:
20,000 and 80,000 grows to $200,000
Remaining owner’s basis becomes:
20,000 (their original basis) + 160,000 (80% FMV at death) = surviving owner’s basis becomes $180,000
A gift to a minor through a Section 2503(c) trust will be considered a gift of future interest or present interest?
A gift to a minor through a Section 2503(c) trust will be considered a gift of a present interest (so the gift will qualify for the annual gift tax exclusion) if the income and principal are available for distribution to or on behalf of the beneficiary at any time prior to the time the beneficiary reaches age 21.
In a Bypass Trust, who includes the trust assets in their estate?
The decedent
When the grantor transfers an existing life insurance policy into the ILIT (Irrevocable Life Insurance Trust), no portion of the death benefit proceeds will be included in the owner’s estate as long as the owner survives for at least how many years after transfer?
Three years
Remember: if I do this, I have 3 girls…
What is required once gift splitting occurs in a year
Once a married couple gift splits (gifts up to $17,000 to an individual), all other gifts given in that year must also be split.
You can “forward-fund” 529’s and have the same gift-splitting ability. What does that mean in terms of contribution in one year?
Forward funding of 529s allow up to 5 years of gift exclusions at one time (ie: $17K x 5 years = $85K)
When gift splitting, that allows each spouse to also gift up to $85K in one year, for a total of $170K.
This will require both spouses to file form 709 (on cloud 9 for gifting) to the IRS
