Lesson 3 Flashcards
What is the purpose of Crummey powers?
A. To make the trust irrevocable.
B. To enable the heirs to inherit property tax free.
C. To change a future interest to a present interest and, therefore, eligible for a gift tax
exclusion.
D. To enable the trust to hold both liquid and illiquid assets.
C. To change a future interest to a present interest and, therefore, eligible for a gift tax
exclusion.
Which of the following is an appropriate method of gifting?
A. Outright gifting of real property to minor children
B. Outright gifting if the donor wants to maintain control over the gifted property until death
C. Gifting through a revocable trust to maintain control and reduce estate taxes
D. Outright gifts to reduce the gross estate of a high net worth client
D. Outright gifts to reduce the gross estate of a high net worth client
Which one of the following statements concerning completed gifts for gift tax purposes is correct?
A. A gift is considered to be complete once the donor files a gift tax return reporting the gift.
B. Gift tax applies to both complete and incomplete transfers of property if the donor has intent to
make a gift.
C. The term completed transfer implies that the transferred property is beyond the donor’s
ability to get the property back.
D. A gift of property that can later be revoked by the donor is treated as a completed gift if the donor
waits at least 3 years to revoke.
C. The term completed transfer implies that the transferred property is beyond the donor’s
ability to get the property back.
Debra has three grandchildren, aged 14, 15, and 21 to whom she would like to make annual gifts in
an effort to bring down the value of her taxable estate. Assuming Debra’s children are still alive, the
annual exclusion is $16,000, and the GSTT lifetime exemption is $12,060,000, what is the most
Debra can give this year to her grandchildren, in total, without triggering the generation-skipping
transfer tax?
A. $15,000
B. $45,000
C. $11,580,000
D. $12,108.000
D. $12,108.000
Which one of the following statements concerning the federal gift tax annual exclusion is correct?
A. Use of the annual exclusion generally has the effect of increasing a decedent-donor’s gross estate.
B. The annual exclusion applies only to present interest and certain future interest transfers of
property by a donor.
C. One benefit of the annual exclusion is that the value of gifted property can be uncertain at the time
of gifting.
D. The annual exclusion only applies to gifts or transfers of a present interest.
D. The annual exclusion only applies to gifts or transfers of a present interest.
Which of the following statements concerning qualified terminal interest property (QTIP) trusts is
correct?
A. QTIP trusts are used primarily for transfers of property to noncitizen spouses.
B. QTIP trusts require the accumulation of income for the lifetime of the donee-spouse.
C. QTIP trust property is excluded from the gross estate of both spouses because of the marital
deduction.
D. QTIP trusts are an exception to the nonqualifying marital deduction terminable interest
rules.
D. QTIP trusts are an exception to the nonqualifying marital deduction terminable interest
rules.
Ignoring the annual exclusion, which of the following transfers is a taxable gift for federal estate tax
purposes?
A. A lawyer, who typically bills $500 an hour, provides 40 hours of free service to a friend.
B. A married couple donates $60,000 to a qualified charity.
C. A father lends his daughter $200,000 interest free for a period of 10 years.
D. For one week per year, the owner of a beach house lets her brother stay there rent-free.
C. A father lends his daughter $200,000 interest free for a period of 10 years.
Gary and Daisy own their home, and it is titled jointly with right of survivorship (JTWROS). They
originally purchased their home for $150,000, and it is currently worth $300,000. Gary and Daisy each
own an automobile that is worth $20,000. Gary owns a stock portfolio solely in his name that has a basis
of $200,000 and is currently worth $1.5 million today. Today, the total value of Gary’s share of assets is $5
million, and he has not previously made any taxable gifts or used up any part of his lifetime exemption.
Assuming that Gary dies today and Daisy survives, which of the following statements correctly
describes a consequence of Gary’s death?
A. The value of Gary’s share of the home will pass through probate.
B. The federal estate tax liability on Gary’s estate would be $0.
C. Daisy would receive full ownership of the home with a stepped-up basis of $300,000.
D. Daisy would receive full ownership of the stock with a carry-over basis of $200,000.
B. The federal estate tax liability on Gary’s estate would be $0.
Common mistakes made in estate tax planning include which of the following?
I. Worsening the estate tax situation by making transfers of gifts with retained
powers that can cause estate inclusion.
II. Filing an estate tax return and/or gift tax return by the applicable filing
deadlines.
A. I only
Bhettr and Hapi Dae live in a common-law state. If Bhettr died this year, predeceasing Hapi, and his
executor elects his date of death as the valuation date, all of the following assets would be includible
in Bhettr’s gross estate for estate tax purposes EXCEPT:
A. Any life insurance policies owned by Bhettr
B. 100 percent of the of property owned jointly by Bhettr and Hapi
C. All T-bills owned by Bhettr
D. A residence individually titled to Bhettr
B. 100 percent of the of property owned jointly by Bhettr and Hapi
