Overview of Estate Planning - Review Questions Flashcards
If Bill left 50% of his estate to his wife, 25% to charity and 25% to his son, how much of Bill’s estate is deductible on his estate tax return?
Answer: 75%.
Bill’s estate can deduct a 50% marital deduction and a 25% charitable deduction from his adjusted gross estate. The remaining 25% bequeathed to his son is not subject to a deduction, but Bill’s unified credit is available to offset a tax on his estate.
Which of the following is NOT an example of a Fiduciary? (Check all that are true.)
1) An Executor
2) A Beneficiary
3) A Trustee
4) A Guardian
2) A Beneficiary
Joe and Mary are married, they have one child each from a prior marriage and two children together. They also have a god-son, John, that is like family. If Joe and Mary were to give the maximum annual gift to each child, including John, what is the total value of their combined gifts for 2024?
Choose the best answer.
1) $ 72,000
2) $ 180,000
3) $ 90,000
4) $ 144,000
2) $ 180,000
$180,000. There are a total of 5 children, both Mary and Joe are each gifting the maximum to each child $18,000. $18,000 × 10 =$180,000
Nicole was 87 years old and recently passed away. In her portfolio, she had FP stock that she purchased on December 12, 1985 for $19.87 per share. Upon her passing, the cost of FP stock was $57.21. The stock is going to be distributed outright to her niece, Lindsay. What will Lindsay’s cost basis be once she receives the stock?
Choose the best answer.
1) $ 57.21
2) $ 77.08
3) $ 19.87
4) None of the above
1) $ 57.21
$ 57.21 Lindsay will get a full step up on FP stock upon Nicole’s passing; therefore, her cost basis will be $ 57.21.
All of the following are advantages of an irrevocable trust except:
1) Assets will avoid probate upon the death of the individual
2) Appreciation of assets within the trust would be excluded from the estate upon the death of the individual
3) The Grantor has complete control of the assets during his/her lifetime.
4) Income earned within the trust may be directed to a beneficiary, which can result in tax saving if the
beneficiary is in a lower tax bracket
3) The Grantor has complete control of the assets during his/her lifetime.
The Grantor has complete control of the assets during his/her lifetime. That is incorrect. When creating an irrevocable trust, the Grantor no longer maintains any control of the assets.
Who is responsible for collecting the decedent’s possessions which will be recorded as assets of the estate?
Choose the best answer.
1) The Trustee
2) The Beneficiary
3) The Executor
4) The Power of Attorney
3) The Executor
The executor is responsible for collecting the decedent’s tangible personal property.
What is one advantage of establishing a Revocable Trust?
Choose the best answer.
1) Assets will pass outside the Grantor’s estate
2) The trust language can never be changed or altered
3) Trust can help plan for the Grantor’s incapacity
4) Trust will pass through probate
3) Trust can help plan for the Grantor’s incapacity
A revocable trust can be used to plan for incapacity.
When assisting your clients, Bob and Mary, with their estate plan, you need to figure out how much each client has left of his or her lifetime exemption after they jointly make the following gifts this year:
$500,000 to Bob’s mother
$42,000 to their youngest daughter for rent
$260,000 paid directly to the hospital for Bob’s mom
$300,000 to their son for a down payment of a new home
$65,000 paid directly to the university for their grandson’s college tuition
Assume that they have split all of the gifts this year. Since they each have a lifetime exemption of $13,610,000 how much does each spouse have left of their lifetime exemption after making these gifts?
Choose the best answer.
1) $13,243,000
2) $13,568,000
3) $13,532,000
4) $12,920,000
1) $13,243,000
After making all of the above gifts, each spouse has $13,243,000 left of their lifetime exemption. You get this answer by starting with $13,610,000 and subtract out out the gift-split amount of $421,000 which represents ½ of Bob’s mother’s gift, ½ of $42,000 to their youngest daughter and ½ of the $300,000 to their son for the down payment of a home. Each gift is a present interest gift so $18,000 annual exclusion can be subtracted from each gift for total taxable gifts of $367,000 for each spouse. $13,610,000 − $367,000 = $13,243,000. The $65,000 paid directly to the university and $260,000 paid directly to the hospital will not count against their lifetime exemption because both are exempt gifts paid directly to the medical/educational institution.
50000 - 36000 = 464000
42000 - 36000 = 6000
300000 - 36000 = 264000
464000 + 6000 + 264000 = 734,000
734,000 / 2 = $367,000
