PASS Flashcards
1
Q
prospect then…
A
scope of relationship
2
Q
TCJA
A
repealed ONLY corporate AMT
(NOT accumulated earnings tax)
C Corp taxed at flat 21%
3
Q
TCJA key employee compensation deducti9on
A
$1MM
4
Q
letter of intent
A
NOT legally binding
special needs living situation and future goals
(no parents estate planning docs)
5
Q
durable POA
A
drafted by estate planner
* complements/ replaces revocable
6
Q
Bhettr case
A
- Bhettr increase life insurance on his life w/ Nitan and Summ as bene
- remove Gudd as bene from life insurance of Bhettr
- ILIT own LI so NOT in Bhettr estate
- Bhettr LI transferred to trust
- family limited partnership w/ limited interest to Nitan and Summ
- buy sell w/ Gudd
7
Q
investment w/ research team for stocks
A
weak form
8
Q
NOT eliminated through diversificati0on
A
market risk
9
Q
sandwich generation
A
struggle to support 3 generations (parent, self, children) w/ pool resource
10
Q
wear 2 hats
A
advisor and salesperson
11
Q
flat free
A
calc on client net worth
12
Q
mutual fund theorm
A
risk free investment and market portfolio
13
Q
risk premium
A
induce investor to buy uncertain payout
high risk = high premium
14
Q
Fama 3-factor model
A
price/book/size (value/ small outperform growth)
15
Q
adoption credit ($13,840 per child)
A
full amount available for special needs REGARDLESS expenses
phased out for upper income
(special needs adoption less expensive)
* 5 year carryover
16
Q
advisor shows/ recommend
A
framing
17
Q
digital assets at death
A
fed and state developing laws how to designate prior
18
Q
private equity premium puzzle
A
undiversified due to illusion of control (private business holds own stock)
19
Q
prices increase more than fundamentals
A
volatility puzzle
20
Q
return chasing
A
invest more in recent high performing and withdraw underperforming
dollar weighted - compare investor to mutual fund
21
Q
Baker, Bradley, Wurgler 1968-2008
A
high beta = LOWER return
LOW beta more efficient
*against CAPM
22
Q
pet
A
used to be property at death —> pet trust
23
Q
house money effect
A
gains = house $ and will lose unearned easily (don’t know when to walk away)
24
Q
status quo
A
= inherited (stay with because familiar)
25
hedonic adaption
relative compensation limited around us
| extreme --> go back to normal (divorce, job loss, death)
26
inflation hedge
1. TIP
2. real estate
3. social security
(not single straight life annuity)
27
QDRO remarry
if NOT worded property --> automatically paid to new spouse rather than surviving spouse
* CANNOT change bene
* 10% penalty if not 59 1/2
* even frozen/ overlooked plans
28
1041 exchange
```
seller = not taxed
buyer = no basis step up (basis transfer)
```
29
Medicare/ Medicaid (poor)
does NOT pay for LTC
| for special needs/ Alzheimers
30
ROTH IRA conversion
convert by Dec. 31st of year
31
testamentary trust
life insurance for LIQUIDITY w/ no incident of ownership (children own or ILIT)
* pay tax
32
large estate
= life insurance for LIQUIDITY w/ no incident of ownership (children own or ILIT)
* pay tax
33
life insurance estate enhancement
young/ small estate/ special needs
34
dying intestate
dying without a will
35
excluded gifts
NOT included in estate tax calc
36
living will
= medical directive
37
nonqualified annuity taxation
```
pre-annuitization = LIFO
annuitization = ratio
```
38
DURABLE POA
ceases at death (continues when client incapacitated)
| general - stops when incapacitated
39
installment note taxation
seller: capital gain (15%)
basis (tax-free)
interest (ordinary income)
buyer: interest is deductible
40
completed gift
=beyond recall and no control
41
changing will
disabled CAN change will
| incapacitated CANNOT
42
springing POA
*recognized by ALL states
| = until regain competency/ revokes
43
medical POA
must be accompanied by HIPAA
44
social security disability
not in estate planning
* end when recover/ die
* no LTC
45
inclusionary/ exclusionary
fed estate tax = inclusionary = tax paid out of estate
gift tax = exclusionary = pay tax on gift and gift tax separately
46
lose pass-through
if S CORP is over 100 employees
47
life insurance
= INCLUDED in gross estate (EXCEPT ILIT)
48
ABLE
contributions can be used for Medicaid at a later date
| *ALL assets NOT for SSI/ Medicaid eligibility
49
3rd party special needs trust
grantor CAN make his heirs bene
50
IRD (Income In Respect Of A Decedent)
UNTAXED INCOME which decedent earned
| tax deferred income going to bene (no step up basis)
51
pour over will w/ testamentary trust
pour all assets into trust at death (get out of estate)
52
spousal elective share
minimum amount of estate going to surviving spouse
53
SLAT
= irrevocable trust where spouse can access income for HEMS
54
reverse mortgage
62 and up
55
incomplete transfer
double taxation (gift and asset of estate)
56
transfer property w/ right to designate people to enjoy income/posses
("will substitute")
INCLUDED in gross estate
57
custodial w/ donor custodian of minor bene
INCLUDED in gross estate
| mom UTMA open at death w/ daughter minor
58
GRAT
= annuity
| grantor pays income tax on annuity stream
59
QPRT (qualifying personal residence trust)
- GRAT
- trust w/ grantor residence and grantor can live in it
- transfer to bene = gift
- residence/ appreciation EXCLUDED from estate
* income getting out of it = use of property
60
bequth
leave when dead to bene (not gift)
61
life insurance on DECENDENT
PROCEEDS are estate taxable (except in ILIT
62
life insurance on ANOTHER
POLICY fair market value is estate taxable (not the proceeds)
63
power of appointment
if favorable decedent = general power of appointment = INCLUDED in gross estate
64
ascertainable standard
= protects from creditors
| = HEMS (allows bee to be trustee without in estate)
65
deductions
```
funeral
admin
loss of casualty/ theft
debt
--
marital
charitable
```
66
DSUE (portability election)
decedent estate must file estate tax return
| *if remarry = forfeit
67
gift of straw man
(intermediary) = taxable gift
68
lapsed Crummery provision
= multiple benes
completed gift to other bene w/ retained interest = INCLUDED in estate
*need 5 AND 5 PROVISION = no taxable gift if greater or ,$5,000 or 5% of trust
69
Form 706
*only if EXCEEDS exemption --> filed within 9 months of decedent death
(6 month extension)
70
6166
14 year installment period
first 5 years = interest only
must own at least 20%
no more than 15 owners
71
marital deduction
SURVIVING spouse must need GENERAL POA to qualify (EXCEPT QTIP)
= just transfer (deferring tax to survivor)
72
credit shelter trust
| AB, by-pass
1. A trust (marital trust)
| 2. B trust (by-pass, credit shelter) = *annual exclusion and remaining goes to A
73
completed gift with JTWROS
when other WITHDRAWALS
74
UTMA and 2503(c)
DOES use annual exclusion
75
GSTT
= grandchild or 37 1/2 years outside family
76
A client believed their advisor who always guessed correctly for 5 years, and will again this year
hot hand fallacy
77
Advisor suggest LTC insurance for client, but client does not want to make any changes because they don't think they need LTC.
anchoring
78
Recommend to take social security
Single male unhealthy and high paying job
79
Penalty/ common mistake for filing a gift tax when NOT taxable?
NO penalty
80
If a couple is 25 and save a certain amount monthly and want a certain amount in retirement. Then if instead start saving at 35, to get the same amount in retirement, you recommend:
Save more annually
| not increase beta
81
heir to business If family NOT prepared
= outside board of directors
82
REDUCE accumulated earning tax
= incorporate business and pay family salary
| moves $ from C
83
administrative expenses
2.5% of estate
84
split gift Form 709
filed YEAR AFTER gift made w/ consenting spouse signature
85
lack of marketability
10-35%
86
fractional interest
10-20%
87
buy/sell entity tax treatment
entity purchase = increase basis
| stock redemption = no change
88
Medicaid/ SSI lookback
= 36-60 . months
89
SSI/ Medicaid eligibility
try to spend down UGMA
90
disability
mental/ physical that:
1. can result from death
2. last for at least 12 months
91
qualify for social security before Medicaid
must qualify for social for 2 years before qualify for Medicaid
92
SSI
| SSDI
SSI = disability BEFORE 22 and no work ($750K monthly)
SSDI = disability anytime and have worked
93
Miller Trust
holds EXCESS income (above 133%) of special needs so can still qualify for SSI
94
2503(B)
distribute income AND past 21
95
2503(C)
can accumulate, but distribute ALL at 21
| *annual exclusion
