Section 5: Estate, Trusts, & Gift Taxes

Question 1

Alternative Valuation Date

Answer 1

6 months after death

Question 2

Estate Tax Return Due

Answer 2

9 months after death

Question 3

Valid Trust (BRATS)

Answer 3

• Beneficiary - must identify who receives benefits
• Reasonable Intent - valid purpose for trust
• Assets - The trust must contain sime corpus or property
• Trustee - trustee must be placed to exercise control over assets
• Specified life - identifiable termination date
  
  • Private trust - cannot live forever
  • Charitable trust - lives forever

Question 4

Trusts are irrevocable unless

Answer 4

• reserve rights
• end of term
• occurrence of an event (death)
• purpose accomplished
• consent of trustor & all beneficiaries, remainderman, and courts

Question 5

Die without a will, assets distributed in the following order

Answer 5

• Spouse
• Children/Grandchildren
• Parent/ Grandparent
• Brothers/Sisters

Question 6

Grantor/Revocable Trust

Answer 6

creator(grantor) reserves the right to withdraw assets at any time

Question 7

Simple Trust

Answer 7

• Makes annual distributions exactly equal to Distributable Net Income (DNI) to taxpaying beneficiaries each year
• Taxable income normally reduced to $0 by distributions

Question 8

Complex Trust

Answer 8

• Trust that is not simple and meets 1 of the following criteria
  
  • Some of the DNI is kept in trust
  • Personal exemption is $100, not $300
  • Oftern pays taxes on undistributed income

Question 9

Trust Personal Exemptions

Answer 9

• Complex - $100
• Simple - $300
• Estate - $600

Question 10

Trust Deductions

Answer 10

• Trustee Management Fees - Accountants, attorney’s, tax prep ( only deductable to percent of taxable income)
• Charity - Can deduct 100%
• Income Distribution Deduction - Taxed only once. Either stays or gets distributed by K-1

Question 11

Distributable Net Income (DNI)

Answer 11

• Max amount that can be taxed to beneficiaries, the rest is a distribution of principal
• Gross Income + Muni bond interst (no capital gains)
• Distributions Paid Deduction = $0
• No Exemptions

Question 12

Gift of Present Interest

Answer 12

• An immediate transfer of wealth
• Subject to $14k gift exclusion

Question 13

Gift of Future Interest

Answer 13

• Irrevocable transfer of the right to access wealth at a future time
• Must be reported regardless of amount
• Does not qualify for gift exclusion

Question 14

Uncompleted Gift (No Interest)

Answer 14

• Revocable transfer of the right to access wealth at a future time
• not reported and wealth is still considered a part of the taxpayer’s estate as long as they retain the right to revoke