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CHFC Round 2 > Round 2 > Flashcards

Round 2 Flashcards

1
Q

Estate Freeze

A

= retain some interest for owner control and cash flow

  1. installment note (gift business to heir)
  2. lifetime gift (gift stock to son)
  3. Charitable Remainder Trust
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2
Q

TCJA

A

= $11.18MM

sunsets in 2025 (and goes back to $5MM)

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3
Q

minority discount

A

50% or less

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4
Q

interest on installment note

A

= deductible from income of buyer

payments pass to estate at death

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5
Q

private annuity

A

no payments due at seller death

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6
Q

compensate key employee of corporation

A

= nonqualified deferred compensation

Section 162 bonus insurance plan

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7
Q

sprinkle trust

A

trustee can determine if income distributed to bene or not
(bene can be trustee)
* CAN continue in death

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8
Q

grantor trust

A

grantor pays income tax on assets
= REVOCABLE (avoids probate)
grantor treated as owner

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9
Q

709 gift tax return

A

= only when file taxes and when EXCEED annual exclusion ($15k)
* do NOT need for annual exclusion/ gifts excluded

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10
Q

endowment effect

A

prefer what’s ours

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11
Q

EMH

A
  • prices reflect ALL available info instantly
  • trade at fair market value
  • outperform market, increase risk/ beta
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12
Q

CAPM

A

=RISK (diversification)

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13
Q

MPT

A

how risk fist into neoclassical

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14
Q

illusion of control

A

= hold undiversified assets

private equity premium puzzle

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15
Q

limit to arbitrage

A

impacts investor to force down price of overprices stock

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16
Q

family harmony

A

avoid keeping score

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17
Q

prenup

A

waive rights to property/ business

preserve for KIDS

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18
Q

child support

A

taxed to GIVER

*ends at 18 or “emancipated” = military

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19
Q

community property

A

CA, WI, LA, AZ, TX, WA, ID, NV, New Mexico

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20
Q

social security

A

= ANNUITY only

not lump sum

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21
Q

live off of 30% less in retirement

A

= anchoring

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22
Q

GRAT

A

= gift of FUTURE interest
= appreciating asset out of estate to avoid estate tax
*does NOT allow for GST exemption

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23
Q

divinity trust

A

preserve as much principal through generations

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24
Q

retirement planning goal

A

= accumulate assets for decumulation

  1. available assets to replace/ secure post-retirement
  2. meet retirement objectives
  3. elim/ minimize risks that disrupt plan
  4. plan to address shortfalls

*at least 5 years prior to retirement

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25
Q

QDRO

A

= COURT order

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26
Q

volatility puzzle

A

stock prices vary based on future earnings & interest rates

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27
Q

QDOT

A

surviving spouse to take marital deduction is NOT U.S. citizen

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28
Q

gift tax within 3 years of death

A

back into estate

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29
Q

installment sale (buy/sell)

A

defers capital gains

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30
Q

establish connection then?

A

gather data

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31
Q

NOT qualified distribution for ROTH IRA

A

= work car

CAN use ROTH IRA from dead spouse

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32
Q

lease payments for LLC- how taxed?

A

taxed as ordinary income to partners

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33
Q

NOT in retirement planning process

A

POLST

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34
Q

buy sell death benefits

A

tax free to business

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35
Q

loan from life insurance cash value

A

NO income tax at time of loan

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36
Q

effective tax rate

A

= predictable/ stable income (simple)

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37
Q

lump sum insurance

A
  • burial, travel, bereavement
  • 6/12 living expenses
  • legacy plan, inheritance
  • buy/sell
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38
Q

estate planning changing due to?

A

technology

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39
Q

state law

A

can override will (community property) and interpret provisions

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40
Q

life insurance w/ estate as bene

A

does NOT avoid probate (brings into estate)

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41
Q

JTWROS

A 
probate AVOIDENT 
(title passes by deed)
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42
Q

gift tax =

estate tax=

A

gift tax = exclusionary

estate tax = inclusionary

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43
Q

life insurance proceeds included in estate

A

incident of ownership or payable to estate

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44
Q

DSUE

decedent survivor unused exemption

A

unused marital deduction available to survivor ($11.18)

- at survivor’s death, estate can use

45
Q

residuary trust planning

A

= 2 trusts

  1. assets qualify for exclusion ($11.18)
  2. assets qualify for marital deduction
46
Q

gift to closely held business

A

NO annual exclusion (future interest)

47
Q

Fed Estate tax steps

A
  1. gross
  2. AGI
  3. AGI- maritable, charitable, state death
  4. deductions/ credits
  5. calculate
48
Q

gain from property sale

A

sale amount - basis

49
Q

capital loss

A

$3,000/ year against ordinary income

50
Q

charitable deduction on AGI

A

60% of AGI

51
Q

reimbursement of medial expenses in following year

A

same/ all included as income for that year

52
Q

qualified adoption expenses

A

credit in year adoption FINALIZED

claims from previous years also included

53
Q

social security threshold

A

= substantial gainful activity levels of earnings

* needs based

54
Q

SSI income limits (poor)

A

$2,000 single

$3,000 couple

55
Q

if NOT given N

A

= perpetuity
PV = cash flow/ R

R= (1+ROR/ 1+ inflation) -1

56
Q

2503 (c)

A

child trust w/ income/ corpus distributed at 21

* IS present interest

57
Q

expend

A

= spend down

58
Q

spousal support (alimony)

A

TAXED to RECEIVER
DEDUCTION to contributor
*after 1/1/19 not taxed or deductible

59
Q

divorce rental property

A

original basis and new basis taxed as ORINDARY INCOME

60
Q

UTMA and 2503(c)

A

permits annual exclusion on gifts to these

61
Q

first $100,000 in ABLE

A

NOT counted as resource for SSI eligibility

* many states have Medicaid payback at death

62
Q

1041

A

= property transfer for divorce NOT taxed (must be within 6 years)

  • even if to 3rd party, not HSA/ MSA
  • NOT if nonresident alien
63
Q

section 736

A

husband/ wife divorce and both partner of business:

  • distributive shares
  • payment of partnership property
64
Q

312 (I) plans

A
  1. money-purchase
  2. tandem
  3. target-benefit
65
Q

reserved jurisdiction method

A

= employee spouse receive stock options vesting at later date

66
Q

spousal support

A

no designation of payment from 1 to other

*ex-spouse CANNOT file joint tax return

67
Q

QTIP

A
  • hold property for surviving spouse and income distributions
  • passed to bene
  • blended family
68
Q

neoclassical economic theory

A

full info, utility max, rational preference

69
Q

status quo basis

A

avoid moving from current situation because might be negative

70
Q

amygdala

A

= emotional (system 1)

71
Q

medical expenses are an example of

A

= essential/ discretionary

72
Q

raise money from outsiders?

A

= LLC

73
Q

3.8% tax

A

= net investment income (interest, dividend capital gain)

74
Q

S corp taxation

A

losses DEDUCTIBLE by stockholder

75
Q

when business owner retires

A
  • reduce owner’s taxable estate

- increase estate liquidity

76
Q

included in gross estate of decedent (dead owner):

A
  • PROPERTY owned at death (business interest)
  • life insurance within 3 YRS
  • transfers W/ RIGHT
  • JOINT property
  • benefit w/ qualified retirement plan
  • property interest w/ GENERAL POWER OF APPOINTMENT
  • life insurance w/ BENE PAY COST OF SETTLING ESTATE
77
Q

applicable credit amount

A

tax created by exclusion for lifetime and transfer @ death

78
Q

blockage discount

A

more sellers than buy = reduce price

79
Q

installment note @ death

A

included in SELLER gross estate

80
Q

6166 - installment PAYMENT

A

= business value INCLUDED in seller’s gross estate
decedent must own 20% (corp, LLC, partnership)
closely held = no more than 15

81
Q

buy/sell w/ life insurance

A 
policyowner = purchaser
beneficiary = transferred to dead owner's estate

*premiums = NOT deductible

82
Q

cross-purchase

A

policyowner = purchaser

premium = after-tax dollars
income tax = purchaser equal to sale price
capital gains = seller

83
Q

entity purchase

A

policyowner = business on life of each owner

business transfers proceeds to dead owner’s estate

84
Q

straw man

A

intermediary ignored (buying from someone else)

85
Q

miscellaneous expense

A

= Schedule A (2% AGI limit)

86
Q

value effect

small stock effect

A

NOT consistent with CAPM

87
Q

applicable credit

A

= annual exclusion

88
Q

self-canceling installment note

A

NOT included in seller’s gross estate

89
Q

annual exclusion gifts

A

NOT included in estate tax computation

90
Q

LLC key employee retention

A

company buys key person life and disability insurance

91
Q

GST

GSST

A 
GST = MONEY to grandchild
GSST = TAX on the money to grandchild
92
Q

child support tax

A

taxed to GIVER

93
Q

Alimony tax

A

deductible to GIVER
taxed to RECEIVER
*after 1/1/19 = taxed to GIVER

94
Q

buy/sell liquidation

A

** assume ENTITY

= distributive share = capital gain = ordinary income

95
Q

cross purchase buyer tax

A

basis = purchase price

96
Q

ABLE

A

automatically eligible if:

  • receive SSI only
  • disability before 26
  • disabled
97
Q

charitable

A

= DEDUCTION (not adjusted)

98
Q

Adjusted (gross income) examples

A
  • business expenses of own business
  • loss of sale
  • alimony
99
Q

charity gift

A

gift tax return and qualified for gift tax (completed gift)

* DEDUCTION (not adjustment)

100
Q

DONOR for marital deduction

A

must be U.S citizen

* SURVIVING spouse does NOT have to be U.S. citizen

101
Q

QTIP

A

deceased spouse (1st to die) decides who remained bene is (remainder interest)

102
Q

above-the-line

A

= ADJUSTMENT = deduction whether or not taxpayer itemizes

103
Q

below-the-line

A

= DEDUCTION (standard/ itemized)

104
Q

lease of business

A

LLC (business) lease to LLC (building)

lease payments taxed to owner’s as ordinary income

105
Q

related party installment sale

A

if family member sells business within 2 years and in trust term –> all deferred tax IMMEDIATELY TAXED to owner

106
Q

self-cancelling installment note

A

out of your estate

107
Q

private annuity

A

= no estate taxes

108
Q

6166 installment payments

A

first 10 years NOT interest only

109
Q

divorce retirement plan discovery process

A

questionnaire asking all plans from previous jobs

CHFC Round 2 (3 decks)

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