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Personal Finance > Trust Review > Flashcards

Trust Review Flashcards

1
Q

Specific gifts

A

Particular item or property in an estate transferred to beneficiary on owner’s death. Specifics must be provided. (house, jewelry, etc.)

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2
Q

Non-specific gifts

A

Does not refer to specific item. (all my personal possessions)

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3
Q

Residuary gifts

A

Everything left in estate after all debts, bills and taxes have been paid and specific and non specific gifts have been distributed

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4
Q

Gifts to children

A

Executors will keep for safekeeping gifts to children under 18 until they become of age unless will specifies guardian or parents take receipt of gift on child’s behalf

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5
Q

Gifts to charities

A

Gifts left to charity in will are free from inheritance tax.

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6
Q

What is a way to show appreciation and give back?

A

Creating a will

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7
Q

Gifts by will may include…

A

Specific gifts, Non-specific gifts, Residuary gifts, Gifts to children, Gifts to charities

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8
Q

Trust

A

An agreement that determines how a person’s property is to be managed and distributed during lifetime and upon death.

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9
Q

Elements of a trust include…

A

grantor - person who forms the trust and supplies the assets
trustee - person named in the trust to administer the trust according to the terms and state trust law
beneficiary - the person for whose benefit the trust property is held by the trustee
intent from grantor - must have a valid legal purpose
property - asses subject to the trust

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10
Q

Grantor

A

Person who forms the trust and supplies the assets

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11
Q

Trustee

A

Person named in the trust to administer the trust according to the terms and state trust law

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12
Q

Beneficiary

A

The person for whose benefit the trust property is held by the trustee

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13
Q

Intent from Grantor

A

Must have a valid legal purpose

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14
Q

Property

A

Asses subject to the trust

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15
Q

Living Trust

A

Trust in which you assign the management of your assets to a trustee while you are living

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16
Q

Revocable Living Trust

A

Living trust that can be dissolved

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17
Q

Irrevocable Living Trust

A

Living trust that cannot be changed, although it can provide income to the grantor

18
Q

Will

A

Legal document designating the transfer of property and assets upon a person’s death.

19
Q

What are the three main purposes of a will?

A
  1. Ensures the estate is distributed as desired
  2. Beneficiaries (heirs), the persons specified in will receives a part of an estate
  3. T prevent the courts from assigning an administrator who may not carry out your wishes.
20
Q

Codicil

A

A document that specifies changes in an existing will must be prepared to make minor revisions.

21
Q

A Power of Attorney

A

Legal document granting a person the power to make decisions, can be signed in the event you are incapable of making decisions for yourself.

22
Q

A Living Will

A

A document to make your family aware of the type of care you want to receive if you should become terminally ill, on life support or permanently unconscious. This document is only effective in the event you are unable to express your wishes yourself.

23
Q

Oral Will

A

Spoken testaments given before witnesses. Not widely recognized from a legal perspective

24
Q

Testamentary Will

A

Formally prepared document signed in the presence of

25
Q

Holographic Will

A

Written without the presence of witness. Rarely hold up in court.

26
Q

Elements of a Will

A
  1. name and place of residence
  2. description of assets
  3. names of spouse, children and other beneficiaries
  4. alternate beneficiaries
  5. specific gifts
  6. establishment of trust if desired
  7. cancellation of debts owed to you
  8. name of executor to manage the estate
  9. name of guardian for minor children
  10. name of alternative guardian
  11. your signature
  12. witnesses’ signatures
27
Q

Probate

A

A legal process that declares a will valid and ensures the orderly distribution of assets.

28
Q

Estate

A

The assets of a deceased person after all debts are paid

29
Q

An estate is used to determine what?

A

How your wealth will be allocated on or before death.

30
Q

The Will is used to identify what?

A

A guardian for surviving children under 18 and to determine how the estate is to be distributed upon death to beneficiaries or heirs.

31
Q

If there is no will what happens?

A

The court appoints an administrator to make a decision on how the property is to be distributed.

32
Q

Estate planning

A

The process of planning or how your wealth will be allocated on or before your death.

33
Q

Consequences of No Planning

A
  • May need a guardianship
  • Medical wishes may not be carried out
  • State Law via a public probate process decides who receives your assests and in what proportions
  • Court decides who raises your minor children
  • Heirs may unnecessarily incur estate taxes
34
Q

Without a surviving spouse…

A

A large estate is subject to estate taxes.

35
Q

Determining estate taxes:

A
  • Value of estate is the value of all assets minus any liabilities minus funeral and administrative expenses.
  • In 2001, estates with values over $675,000 are subject to federal taxes of 37% to 50%.
  • Tax Relief Act of 2001 gradually increase tax free limit while reducing a maximum tax rate
  • Proper planning can reduce these taxes. Periodically, calculate the value of your estate so that you can plan appropriately if your net worth exceeds the tax-free limit.
36
Q

Estate - Primary Functions

A

-Peace of Mind
-Maintain Control
-Protect Assets for Yourself and Loved Ones
Estate Taxes
Creditors
Special Needs
-Avoid Probate

37
Q

How long does the average American live?

A

77.9 years old

38
Q

Positive Outcomes of Estate Planning

A
  • Provide for loved ones after you are gone
  • Strengthen family relationships by giving them a path for them to follow
  • Reduce time, effort and costs for survivors
  • Leaves a legacy to family, organizations, institutions
39
Q

Trade-off

A

Giving up one thing for another.

40
Q

Guardianship

A

Requires a legal document called a will.

41
Q

Estate Planning for Teens

A
  • Must be 18 in most states
  • Letters are not legal documents
  • Letters are preferred over conversation because they have a longer presence
42
Q

Who Can Help with Estate Planning?

A
  • Attorneys can provide you insights for titling documents, wills, etc…
  • Accountants can help you determine net worth, see tax advantages
  • Certified Financial Planners can help you diversify investments, protect assets

Personal Finance (1 decks)

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