G.60 Marital deduction Flashcards
learnings will learn the intricacies of the Marital Deduction, including its application, limitations, and impact on estate planning strategies.
Which of the following statements is true regarding the unlimited marital deduction?
A. It applies only to cash transfers between spouses.
B. It allows for unlimited transfers of property to a surviving spouse without incurring federal estate taxes.
C. It is capped at $1 million per spouse.
D. Non-citizen spouses are eligible without limitation.
B. It allows for unlimited transfers of property to a surviving spouse without incurring federal estate taxes.
The unlimited marital deduction permits unlimited transfers of assets between spouses at death without any estate tax liability. This deduction is not limited to cash and does not have a cap. However, non-citizen spouses have limitations.
G.60 Marital deduction
The marital deduction is available for transfers to a surviving spouse who is not a U.S. citizen if:
A. The property is transferred to a Qualified Domestic Trust (QDOT).
B. The surviving spouse becomes a U.S. citizen before the transfer.
C. The property transferred is in the form of cash only.
D. The amount transferred does not exceed the annual exclusion amount.
A. The property is transferred to a Qualified Domestic Trust (QDOT).
For a surviving spouse who is not a U.S. citizen, the marital deduction can be used if the property is transferred to a Qualified Domestic Trust (QDOT), ensuring that estate taxes may be deferred until the death of the surviving spouse.
G.60 Marital deduction
Which of the following is NOT required for property to qualify for the marital deduction?
A. The property must pass outright to the surviving spouse.
B. The surviving spouse must be a U.S. citizen.
C. The property must be included in the decedent’s gross estate.
D. The property must generate income.
D. The property must generate income.
For property to qualify for the marital deduction, it does not need to generate income. Key requirements include passing outright to the surviving spouse, inclusion in the decedent’s gross estate, and the surviving spouse being a U.S. citizen (or the use of a QDOT for non-citizen spouses).
G.60 Marital deduction
Transfers to which type of trust generally qualify for the marital deduction?
A. Charitable Remainder Trust
B. Qualified Terminable Interest Property (QTIP) Trust
C. Irrevocable Life Insurance Trust
D. Grantor Retained Annuity Trust
B. Qualified Terminable Interest Property (QTIP) Trust.
Transfers to a Qualified Terminable Interest Property (QTIP) Trust qualify for the marital deduction because the surviving spouse has a qualifying income interest for life, even though they do not have control over the ultimate disposition of the property.
G.60 Marital deduction
In the context of the marital deduction, which of the following best describes terminal interest property?
A. Property that will eventually be passed to the surviving spouse.
B. Property interests that end upon the death of the surviving spouse.
C. Property that can only be used for terminal care expenses.
D. Property transferred to a spouse with an incurable disease.
B. Property interests that end upon the death of the surviving spouse.
Terminal interest property refers to property interests that terminate upon the death of the surviving spouse, such as life estates. Generally, these do not qualify for the marital deduction unless the QTIP rules are applied.
G.60 Marital deduction
For estate tax purposes, which of the following best explains the purpose of a Qualified Domestic Trust (QDOT)?
A. To allow non-U.S. citizens to avoid estate taxes entirely.
B. To ensure that estate taxes are paid on assets left to a non-citizen spouse.
C. To convert non-liquid assets into liquid assets for tax payment purposes.
D. To qualify non-marital gifts for the marital deduction.
B. To ensure that estate taxes are paid on assets left to a non-citizen spouse.
A QDOT is used to defer estate taxes on assets left to a non-citizen spouse until the death of the spouse. It ensures that estate taxes will eventually be collected while allowing the marital deduction benefits.
G.60 Marital deduction
Which condition must NOT be met for property transferred to a surviving spouse to qualify for the marital deduction?
A. The property is transferred as part of the taxable estate.
B. The surviving spouse must be designated to control the disposition of the property after death.
C. The transfer is subject to estate taxes or gift taxes.
D. The surviving spouse is legally married to the decedent at the time of death.
B. The surviving spouse must be designated to control the disposition of the property after death.
For the marital deduction, it is not a requirement that the surviving spouse controls the disposition of the property after their death. The critical factor is that the spouse receives the property rights.
G.60 Marital deduction
A non-citizen spouse can receive assets free from estate taxation if:
A. The assets are directly transferred to the spouse without any trusts involved.
B. The spouse agrees to pay any applicable estate taxes.
C. The assets are placed in a QDOT.
D. The assets do not exceed $60,000 in value.
C. The assets are placed in a QDOT.
A non-citizen spouse can effectively receive assets free from immediate estate taxation if the assets are placed in a Qualified Domestic Trust (QDOT), which defers the tax until the non-citizen spouse’s death.
G.60 Marital deduction
Which statement is true about the marital deduction and joint property?
A. Joint property automatically qualifies for the marital deduction in full.
B. Only the decedent’s portion of the joint property is eligible for the marital deduction.
C. The entire value of the joint property is subject to estate taxes, without any deductions.
D. Joint property with rights of survivorship does not qualify for the marital deduction.
B. Only the decedent’s portion of the joint property is eligible for the marital deduction.
In the case of joint property, only the portion of the property attributable to the decedent is considered for the marital deduction. The surviving spouse’s portion is not subject to estate taxes because it is not part of the decedent’s estate.
G.60 Marital deduction
Which type of transfer does NOT qualify for the marital deduction?
A. Outright gifts to the surviving spouse during the decedent’s lifetime.
B. Transfer of property to a surviving spouse via a will.
C. Transfer of property to a surviving spouse where the spouse has a life estate.
D. Transfer of property to a child with the condition that it passes to the surviving spouse upon the child’s death.
D. Transfer of property to a child with the condition that it passes to the surviving spouse upon the child’s death.
For a transfer to qualify for the marital deduction, it must directly benefit the surviving spouse. A contingent transfer through a third party (like a child) does not meet the requirements for the marital deduction.
G.60 Marital deduction
John, a U.S. citizen, passed away, leaving behind his wife, Linda, who is also a U.S. citizen. In his will, John left $2 million in various assets directly to Linda and another $1 million in assets to a trust that pays income to Linda for the rest of her life, with the remainder going to their children upon her death.
Which of the following statements is correct regarding the marital deduction in this scenario?
A. Only the $2 million left directly to Linda qualifies for the marital deduction.
B. The entire $3 million qualifies for the marital deduction because Linda is a U.S. citizen.
C. Only the $1 million in the trust qualifies for the marital deduction.
D. None of the above qualifies for the marital deduction because the remainder interest is designated to the children.
B. The entire $3 million qualifies for the marital deduction because Linda is a U.S. citizen.
Both the direct transfer to Linda and the trust (assuming it’s structured as a Qualified Terminable Interest Property (QTIP) trust) qualify for the marital deduction, as the spouse is a U.S. citizen and the conditions for the deduction are met.
G.60 Marital deduction
David, a U.S. citizen, left his entire estate to his wife, Maria, who is not a U.S. citizen. To qualify for the marital deduction, the estate was transferred to a Qualified Domestic Trust (QDOT). The QDOT will pay Maria annual income, and upon her death, the remaining assets will pass to their children.
Which statement accurately reflects the tax implications of this scenario?
A. The QDOT assets are exempt from estate taxes until Maria’s death.
B. Estate taxes are due immediately upon David’s death, despite the use of a QDOT.
C. The income paid to Maria from the QDOT is subject to estate taxes.
D. The children will have to pay estate taxes upon receiving the remainder after Maria’s death.
A. The QDOT assets are exempt from estate taxes until Maria’s death.
A QDOT allows for the deferral of estate taxes until the non-citizen spouse’s death. The estate taxes are then assessed on the remaining trust assets.
G.60 Marital deduction
Eleanor, a U.S. citizen, bequeathed $500,000 to her husband, Thomas, also a U.S. citizen, and an additional $500,000 to a trust. The trust provides Thomas with the income for life, but grants him no right to appoint the principal, which is set to pass to their grandchildren upon his death. How does the marital deduction apply in this scenario?
A. The entire $1 million is eligible for the marital deduction.
B. Only the $500,000 given directly to Thomas qualifies for the marital deduction.
C. Only the $500,000 placed in trust qualifies for the marital deduction.
D. Neither transfer qualifies for the marital deduction due to the final beneficiaries being the grandchildren.
B. Only the $500,000 given directly to Thomas qualifies for the marital deduction.
The direct bequest to Thomas qualifies for the marital deduction. However, the trust does not qualify for the marital deduction as structured because Thomas does not have a qualifying income interest for life in the principal (i.e., he cannot appoint the principal), unless it’s specifically designed as a QTIP trust and elected as such on the estate tax return.
G.60 Marital deduction
Carl, a U.S. citizen, leaves his estate to his wife, Julie, a non-U.S. citizen, via a will. The estate planning attorney recommended creating a QDOT to ensure that the estate could benefit from the marital deduction. However, Carl’s will did not establish a QDOT, and Julie decides to set one up after Carl’s death. What is the tax consequence of this arrangement?
A. The estate cannot benefit from the marital deduction since the QDOT was not established before Carl’s death.
B. Julie can retroactively apply the marital deduction by transferring the assets into a QDOT within a specified timeframe after Carl’s death.
C. The assets transferred to Julie are subject to immediate estate taxation, with no possibility of deferral.
D. The creation of a QDOT after Carl’s death qualifies the estate for a partial marital deduction.
B. Julie can retroactively apply the marital deduction by transferring the assets into a QDOT within a specified timeframe after Carl’s death.
The IRS provides a grace period after the decedent’s death during which a surviving non-citizen spouse can transfer assets into a QDOT to qualify for the marital deduction, thereby deferring estate taxes until the surviving spouse’s death.
G.60 Marital deduction
Samantha, a U.S. citizen, passed away, leaving her husband, Alex, a U.S. citizen, a life estate in their family home, with the remainder interest going to their son upon Alex’s death. Additionally, Samantha left $100,000 in a savings account to Alex outright. How does the marital deduction apply to Samantha’s bequests?
A. Both the life estate in the family home and the $100,000 savings account qualify for the marital deduction.
B. Only the life estate in the family home qualifies for the marital deduction.
C. Only the $100,000 savings account qualifies for the marital deduction.
D. Neither the life estate in the family home nor the $100,000 savings account qualifies for the marital deduction.
A. Both the life estate in the family home and the $100,000 savings account qualify for the marital deduction.
The life estate granted to Alex qualifies for the marital deduction because it gives him the right to use the property for life, a qualifying interest. The direct bequest of $100,000 also qualifies, as it is an outright transfer to the surviving spouse.
G.60 Marital deduction
