Fundamentals Of Estate Planning

Question 1

What are the seven steps of estate planning?

Hint: same as for financial planning: UIADPIM

Answer 1

U-Understand current circumstances.
I-Identify goals.
A-Analyze their current path.
D-Develop alternatives
P-Present recommendations.
I-Implement recommendations
M-Monitor and update as necessary

Question 2

Who is on the EP team? (5)

Answer 2

Attorney, CPA, Life Insurance Officer, Trust Officer, CFP

Question 3

If you die with a will that doesn’t dispose of all of your property, can you be said to die intestate?

Answer 3

Yes, or partially intestate.

Question 4

What is “ancillary probate”?

Answer 4

When you die, your movable property is disposed according to your state of residence.

Property, on the other had, is disposed according to the laws of its state.

Question 5

What is a holographic will?

What does it need to be valid?

Answer 5

A hand-written will.

It must be signed and dated, but doesn’t need witnesses to be valid in most states.

Question 6

What is a nuncupative will?

Is it valid?

Answer 6

• An oral will, or a dying declaration.
• Not valid in some states.
• Some states say valid for tangible personalty, but not real property.
• Some states say valid to a limited $ amt.

Question 7

What is a statutory will?

Answer 7

One written by an attorney.

Question 8

What is the difference between a reciprocal will and a joint will?

Answer 8

A reciprocal will is two spouses leaving their property to each other.

A joint will is the same, but also binds the surviving party to leave their assets to the person designated in the joint will.

Question 9

What is legal testamentary capacity?

Answer 9

The required mental competence to write a will.

• Must recollect the property being disposed of in the will.
• Must recognize friends and relatives who have any claim to his assets.

Question 10

What is a residuary clause (2)?

Answer 10

• disposes of residual assets

- names executor and successor executor and defines their powers.

Question 11

What must you do to disclaim a bequest?

Answer 11

• Not benefit from the property, nor direct any future interest in the property.
• Disclaim within 9 mos. of death.
• Disclaim in writing.

Question 12

What is Per Stirpes (by the roots)?

Answer 12

If you leave your estate to your 3 children per stirpes, and one dies before you, your surviving children still get 1/3 ea. And your grandchildren from the deceased child split 1/3.

Question 13

What is per capita by generation?

Answer 13

Inheriting members of ea. Generation always get the same amount.

Question 14

What is a codicil?

Answer 14

A supplement to a will, used to modify, amend, or explain it.

Question 15

What is a side instruction letter?

Answer 15

Gives instruction for funeral and burial.

Gives instruction regarding specific tangible possessions (like household goods)

Question 16

What are marital portion, homicide statutes, and divorce statutes?

Answer 16

State laws that

• require a spouse to be provided for in a will.
• prevent those convicted of killing the deceased from inheriting.
• prevent a former spouse from inheriting.

Question 17

What are anti-lapse statutes?

Answer 17

Laws that say if someone in your will has died, you would want their portion of your estate to go to their heirs.

Question 18

What is power of appointment?

Answer 18

The ability of someone given power of attorney to dispose of the principal’s assets for himself.

Question 19

If you’ve given someone power of appointment over your assets and they die, what happens to your assets?

Answer 19

They become part of that person’s estate.

Question 20

What does durable power of attorney mean?

Answer 20

The power does not expire when the principal becomes incapacitated, but does expire at their death.

Question 21

What is a living will?

Answer 21

A document that says whether you’d like sustaining life care under certain circumstances.

Question 22

Describe Tenancy In Common (5)

Answer 22

• Property owned on % basis between 2 or more individuals.
• Each can sell their % as they see fit.
• Each has their % included in their gross estate.
• Passes thru probate.
• If it goes to spouse, eligible for unlimited marital deduction.

Question 23

Describe JTWROS (4)

Answer 23

• Property owned by 2 or more in equal %.
• At death, property is included in GROSS Estate BY ACTUAL CONTRIBUTION RULE but not included in probate estate, because it passes by right of survivorship.
• Each party can sell their interest, and if they do it becomes “fee simple” ownership (sole ownership)
• Property is included in gross estate according to ORIGINAL contribution.

Question 24

When does the “actual contribution rule” (for inclusion in GROSS estate of JTWROS property) not apply? How is gross estate inclusion applied then?

Answer 24

When the joint tenants are married. If this is the case, they are both deemed to have contributed 50%, and each must include 50% in their GROSS estate.

Question 25

Does JTWROS property get a stepped-up basis?

Answer 25

Yes, sort of. The actual contribution steps up to FMV.

Question 26

Describe Tenancy By the Entirety (4)

Answer 26

• Owned by spouses only
• Cannot be partitioned without consent of the other spouse.
• Automatically transfers at death to other spouse.
• 50% in gross estate, 0% in probate estate.

Question 27

Describe Community Property

Answer 27

• Only available to spouses; AK, AZ, CA, ID, LA, NE, TX, WA, WI, NM
• Only available in some states
• Each spouse deemed to own 50%
• At death of one spouse, BOTH halves step to FMV
• No automatic transfer to surviving spouse.

Question 28

What happens when a couple moves from a “common law” (separate property) state to a community property state?

Answer 28

Property bought before the move usually stays common law.

Property bought after the move becomes community property.

Question 29

How do community property states treat property acquired before the marriage, or property gifted to or inherited by one spouse during the marriage?

Answer 29

Separate property.

Question 30

Does community property automatically transfer to surviving spouse?

Answer 30

No!

Question 31

What is life estate?

What is interest for term?

Answer 31

The right to use a property and its earnings for life.

The right to use property for a specified period of time.

Question 32

What happens to life estate or interest for term at the end of life or term?

Answer 32

It goes to the remainder interest, or the remainder man.

Question 33

What is legal vs equitable ownership?

Answer 33

Legal ownership = title to property.

Equitable ownership = economic rights to property.

Question 34

Define legatee, heir, and devisee

Answer 34

Legatee - Inherits property thru a will.

Heir - Inherits property intestate.

Devisee - Inherits real property thru a will.

Question 35

What are letters testamentary?

Answer 35

Letters that allow the executor to act as an agent of the probate court.

Question 36

What are a ademption and abatement?

Answer 36

Ademption - When an asset left to a legatee no longer exists or is out of the deceased’s possession, and the legatee inherits nothing.

Abatement - When the probate estate has insufficient assets to meet the provisions of the will and the legatees inherit a reduced amount determined by the court.