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CFP - Review Cards > Estates Live Review > Flashcards

Estates Live Review Flashcards

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1
Q

Community property basic defintion

A

each spouse owns a separate, undivided, equal interest in the property

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2
Q

community property survivorship rights

A

there are NO survivorship rights in community property; thus a will is deeded by each spouse, and the property will be subject to probate upon the death of either spouse

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3
Q

Name the two most common non community property interests

A
  1. income earned and assets owned by either spouse prior to marriage
  2. property received as a gift or inherited by one spouse
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4
Q

income tax advantage of community property

A

the property gets a full step up in basis (only LTCG property) in the entire property if at least one half of the whole proerpty is includible in the deceased spouse’s gross estate

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5
Q

estate tax of non spouse joint tenant property

A

FULL value of jointly held property is included in the gross estate of the first tenant to die unless the survivor can document that they contribted to the purchase price of the property

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6
Q

what type of property cannot be disclaimed

A

TBE

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7
Q

who can hold property TBE

A

spouses only

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8
Q

TIC basics

A

several tenants possible
undivided interest
income with respect to their interest
TICs can transfer their shares to others
NO survivorship rights

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9
Q

4 types of assets that are subject to probate

A

fee simple
TIC
the beneficiary is the estate
community property

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10
Q

federal estate form (the number)

A

706

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11
Q

what’s included in the gross estate

A

all probate and nonprobate assets

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12
Q

how do you calculate the AGE

A

gross estate, then subtract funeral expenses, admin expenses, debts, taxes, and casualty losses

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13
Q

how do you calculate the taxable estate

A

take the AGE (aka the net estate)
Subtract the marital and charitable deductions

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14
Q

what is the tax base (for estates)

A

taxable estate
Then add back adjusted taxable gifts

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15
Q

estate tax calculation from tax base

A

tax base
-estate tax deduction
–
then multiply by 40%
–
tentative tax
-gift taxes paid
–
net estate tax

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16
Q

when are gift taxes paid added to the estate

A

gift taxes paid on any gifts within three years of death are added to the gross estate

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17
Q

when would life insurance be included in the decedent’s estate

A
  1. the proceeds are paid to the executor of the decedent’s estate
  2. decedent at death possessed an incident of ownership in the policy
  3. the insured transferred a policy with an incident of ownership within three years of death
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18
Q

if you own a life insurance policy on yourself and die, is this included in your estate

A

yes.

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19
Q

what happens at your death (estate tax wise) if your spouse owns a policy on your life

A

If you gift it to them and die within three years of transfer, the DB is included in your estate
if you gifted it to them and your estate is your bene. the DB is included in your probate estate

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20
Q

what happens if you sell your life insurance policy to someone else and then die?

A

nothing is included in your estate (no three year rule)

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21
Q

incidents of ownership

A

right to assign, terminate, to borrow against the cash reserves, to name benes, and to change beneficiaries

NOT premium paying

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22
Q

what happens estate tax wise if you own a policy on your spouse and you die

A

replacement cost is included in your probate estate (no three year rule)

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23
Q

what happens if you have a life insurance on your spouse, you gift it to your kid, and then you die

A

nothing is included in your gross estate, there is no three year rule

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24
Q

see general power of appointment, think what?

A

OUTRIGHT OWNERSHIP

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25
Q

special vs general powers of appointment with estate and gift tax

A

general powers ARE subject to estate and gift tax
Special powers are NOT subject to gift or estate tax

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26
Q

when is gift tax paid included in your estate?

A

gift tax PAID (not the gift) on gifts within three years of death are included in the estate of the transferor

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27
Q

transfers with retained life estates

A

included in the decedent’s gross estate IF they retain the right to use or enjoy the property or receive income from it

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28
Q

valuation of a gift if FMV is greater than the donor’s adjusted basis

A

1.appreciated property
the value of the gift for gift tax purposes is its FMV at the date of the gift
2. If FM is greater than the donor’s adjusted basis, then the donor’s adjusted basis applies for income tax purposes

this is carryover basis

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29
Q

what happens if a gift is less than donor’s adjusted basis

A

this is loss property
dual basis rules apply when the property is transferred

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30
Q

Types of gifts that are fully deductible for gift tax purposes (hint: there are 4)

A

gifts to us citizen spouse
gifts to qualified charities
direct payments to a medical provider or educational institution
gifts to American political parties

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31
Q

when do you have to file a form 709

A
  1. if you gave more than $18k to any non spouse

2.a gift of future interest in any amount

  1. a gift from a noncommunity/individal account for which spouses elect gift splitting
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32
Q

primary rule for gifts of future interest

A

terms of the transfer, typically trusts, delay posession and enjoyment

DO NOT qualify for the annual exclusion

33
Q

examples of NON completed gifts

A
  1. revocable trusts
  2. disclaimer
  3. disclaimer trusts
34
Q

gifts of future interest

A

do NOT qualify for the annual exclusion, must use exemption

35
Q

examples of future interest gifts (Hint: there are three)

A

2503b trusts
remainder interests
a trust in which income will be accumulated for a period of years

36
Q

examples of gifts of present interest

A

2503c tursts
direct gift
crummey trust
529 plans
UGMA/UTMA

37
Q

taxable gift of life insurance

A

insured transfers their policy to someone else
taxable gift is equal to the interpolated terminal reserve, plus the unearned premium (replacement value)

38
Q

what’s better for incapacity planning; revocable trust or durable power of attorney

A

Revocable trust
continutes after death

39
Q

who appoints guardians?

A

the court! and they supervise.

40
Q

why would a grantor do a defective trust?

A

they may be intentionally tainted because the grantor’s income tax bracket may be lower than the trust’s tax rate

41
Q

crummey rights

A

lesser of the amount of the annual exclusion ($18k) or the value of the gift transferred

42
Q

estate and gift tax with respect to ascertainable standards

A

think HEMS
NOT subject to estate or gift tax

43
Q

five or five power

A

included in the donee-decedent’s estate (or considered a taxable gift) only to the extent that property exceeds the greater of $5k or 5% of the total value of the fund subject to the power

44
Q

bypass trust

A

Simple or complex

first spouse to die controls

“B” trust

goal is to give the decedent postmortem control over the property
usually equal to the exemption $13,610,000

45
Q

marital trust

A

second spouse to die controls the trust

“power of appointment” trust

“A trust”

surviving spouse has transfer control over the property

46
Q

QTIP trust

A

qualified terminable interest

simple trust

“C trust”

47
Q

QTIP Trust “Keys”

A

Lifetime income
Annual payments
Mandatory payments
Exclusively for spouse

48
Q

QDT/QDOT

A

simple trust
qualified domestic trust
similar to QTIP, but used for noncitizen spouses

49
Q

UGMA vs UTMA

A

UTMA allows any property interest to be transferred
UGMA generally can only include securities, life insurance, and annuities

50
Q

Section 2503(b)

A

Two parts
1. income interest
2. remainder/reversionary interest

income = present interest
corpus is a gift of future interest

51
Q

2503(c)

A

-trust must provide the property or income expended by age 21
-anything remaining passes outright at 21
-if the donee dies before age 21, it’s payable to their estate

52
Q

dynasty trust

A

beneficiary interests are limited to life estates

53
Q

CRAT

A

Charitable remainder annuity trust

income tax deduction from the present value of the presumed remainder interest

only ONE initial transfer

up to 20 years

remainder interest passes to a qualified charity

at least 5% must go each year

fixed payments based on initial distribution

54
Q

CRUT

A

Charitable remainder unitrust

multiple transfers to the trust are allowed

reappraised values

55
Q

pooled income fund (PIF)

A

donor places property into a common trust fund operated by the charity

one common fund with commingled property

public charity receives the remainder interest

56
Q

Charitable gift annuity

A

no specified amount of income required

property is transferred TO the charitable org

charity receives income NOW

57
Q

CLAT and CLUT

A

established at death
estate can take a present value of the payment stream as an estate tax deduction

58
Q

private foundation

A

distributes 5% of investment assets

59
Q

installment sale

A

FMV in exchange for payments

PV of remaining payments INCLUDED in owner’s estate

gain is a capital gain

60
Q

what happens if the seller dies during the installment sale repayment

A

the remaining payments are included in his/her estate which is a disadvantage

61
Q

SCIN

A

self canceling installment note

balance of any payments due at the date of death are automatically cancelled

no value included in the owern’s estate

higher payout than installment

62
Q

intrafamily transfers if the property owner needs income

A

“PIGS” need income

Private Annuity
Installment Sale
Grantor Retained Aunnuity Trust
SCIN

63
Q

what if the property owner wants to gift assets and/or income to family members

A

Partnerhip/S corp (gifting shares)

FLP

Gift leaseback
QPRT

64
Q

GRAT/GRUT

A

irrevocable trust into which the grantor transfers appreciating or income producing property in exchange for the right to receive a fixed annuity for a number of years

at the end of the term, corpus is distributed to a remainderperson

owner must outlive term of the asset is brought back into the estate

65
Q

Gifting partnership/S corporation shares

A

family member receives conduit income

ineffective if a child is under age 24 (kiddie tax)

Not available if business is service related

66
Q

Family Limited Partnership (FLP) - gifting shares

A

gift interest to limited partners to reduce the estate

qualifies for various valuation discounts

general partner maintains control

67
Q

gift leaseback

A

lease payments are a business deduction, income to family member

do NOT use if child is under 24

gifts fully depreciated assets

68
Q

QPRT

A

qualified personal residence trust (QPRT)

irrevocable trust

grantor transfers their personal residence retaining an interest for personal occupancy for a period of years

69
Q

what happens if donor of QPRT dies before the initial term is complete?

A

FMV at date of death is included in the donor’s estate as if the trust never existed

home as a “string” on it

70
Q

skip persons if not related

A

37 1/2 years younger than the transferor

71
Q

AVD

A

alternate valuation date

must reduce total value of the gross estate

72
Q

qualified disclaimer

A

generally a refusal by a primary benef to accept property

73
Q

Section 303

A

allows a corporation to make a distribution of a portion of stock of a decedent that will not be taxed as a dividend

74
Q

requirements for section 303

A

business must be a regular corp or an S corp

Value must be more than 35% of the adjusted gross estate

only an amount equal to a total of all estate taxes and admin expenses can be redeemed

75
Q

6166

A

installment payment of estate taxes

76
Q

6166 keys

A

estate tax attributable to the closely held business interest can be paid in 10 equal nstallments beginning 4 years after death

77
Q

2302A

A

special use valuation for real estate used for farming or a closely held business

78
Q

2302A keys

A

at least 50% of the estate

real property must constitute at least 25% of the gross estate

qualifeid use property

79
Q

estate planning for non traditional relationships

A

guardianship for children

jtwros can be dangerous

revocable tursts or TIC is best

CFP - Review Cards (17 decks)

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