Estates, Trusts & Gift Taxes 1 of 4 (13)

Question 1

Trust

Answer 1

An artificial entity, created by a Trustor (Grantor or Settlor), who places property in the custody of one party, the trustee (control), for the benefit of another, the beneficiary.

Question 2

Distributable Net Income (DNI)

Answer 2

The maximum portion of a distribution to the beneficiary of a trust or estate that can be taxed to the beneficiary, with the rest being treated as a tax-free distribution of principal.

Question 3

Alternative Valuation Date (AVD)

Answer 3

A date six months after a decedent’s death that assets can be valued at, if they are not yet distributed and if electing the AVD, as opposed to valuing assets as of the date of death. The AVD can be used if it will reduce the value of the estate and the amount of estate tax due.

Question 4

Income in Respect of Decedent (IRD)

Answer 4

Collection of amounts earned by and due to the decedent as of the date of death, such as unpaid salary, that is treated as income to the estate and to the recipient (the beneficiary), who will declare it as IRD.