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NALA Testing > Wills Trust Estate > Flashcards

Wills Trust Estate Flashcards

1
Q

form 709

A

IRS form used to report taxable gifts and it also allocates the lifetime use of a tax payer’s generation-skipping transfer tax exemption (over $14k in gifts not to spouse)

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2
Q

form 1040

A

individual income tax return

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3
Q

form 706

A

used by an executor of a decedent’s estate calculate estate tax owed

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4
Q

form 1041

A

income tax return for estates and trusts; required if the estate generates more than $600 in annual gross

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5
Q

joint tenants with rights to surviorship

A

the interest of a deceased owner automatically get transferred to the remaining survivor owners

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6
Q

tenants by the entirety

A

real property held by husband and wife whereby each owns the undivided whole of the property, coupled with the rights of survivorship

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7
Q

beneficiary deed

A

a type of real estate transfer deed that takes effect upon the death of the property owner; must be recorded in the county where the property is located

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8
Q

TOD

A

a non-retirement account designating a beneficiary that establishes a transfer on death; such as brokerage or investment account/stocks

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9
Q

POD

A

a payable on death account by one person who has named another person (the beneficiary) to receive any money left in the account when the owner dies; such as bank accounts
totton trust

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10
Q

beneficiary designation

A

application/form; simply just stating a beneficiary; such as IRA, 401k, retirement

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11
Q

heritable estate

A

intestacy; who gets whats left

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12
Q

before heritable estate can begin, these must be taken out:

A
  1. dowery/curtesy
  2. homestead rights
  3. statutory allowances (things needed to keep the homestead going)
  4. taxes
  5. administration of estate
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13
Q

per capita distribution

A

when it goes to the same category of people (related in equal degree), all will inherit in equal shares

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14
Q

post humous heirs

A

conceived before death, but born there after death

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15
Q

brokerage house

A

an institution, not a bank; when you buy a stock or bond, they will hold all your shares in a brokerage account - they communicate with the banks that issues dividends

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16
Q

mutual funds

A

a professionally managed investment fund that pools money from many investors to purchase security (such as stocks and bonds)

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17
Q

list parts of a will

A
  1. exordium clause = opening
  2. apportionments clause = debts
  3. dispostivie provision = giving/distributive
  4. attestation clause = 2 witness signature
  5. testimonian clause = testator signature
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18
Q

owned in severalty

A

a form of property ownership; owned solely by one person or an individual company

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19
Q

joint ownership

A

when 2 or more persons owns property concurrently

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20
Q

tenants in common

A

one owns an undivided interest in property between 2 or more people; however, interest does NOT pass on to the other owners by law (the deceased interest can go into probate w/out the traditional documents)

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21
Q

community property

A

form of ownership by husband and wife; property acquired DURING MARRIAGE

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22
Q

fee simple estate

A

aka fee simple absolute; the biggest estate a person can hold; entitled to all rights and privileges

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23
Q

life estate

A

the right of the “life tenant” to use the property until his death ONLY

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24
Q

reversion interest

A

after the life tenant, it comes back to the grantor

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25
Q

remainder

A

after the life tenant goes, it goes to a future owner

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26
Q

a will must have what to be valid…

A

intent & testamentary capacity

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27
Q

testamentary capacity

A

2 factors: age and sound mind; must be age of majority 18 yrs (or married/emancipated/in armed service)

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28
Q

holographic will

A

completely hand written; do not require a signature of witnesses but must follow statutory requirements (intent & testamentary)

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29
Q

nuncupative will

A

oral will; only dispose of personal property; often called soldiers and sailors wills

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30
Q

rules in regards to witness of a will (4)

A

must have 2 witness; they need not be informed of the wills contents; must sign in the testator’s presence; a beneficiary should NOT be allowed to witness a will

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31
Q

codicils

A

a method to change terms of a will; an addition or supplement to a will that modifies certain sections

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32
Q

methods of revocation of will (3)

A
  1. physical act
  2. operation of law
  3. by subsequent writing - write an new will expressly revoking the prior will
33
Q

dependent relative revocation

A

aka ineffective revocation; is a doctrine making a revocation of a former will ineffective if the testator made the revocation through execution of a new will, and that newly executed will is determined invalid

34
Q

in torrem clauses

A

aka “no contest clause”; a provision in a will which threatens that if anyone challenges the legality of the will or any part of it, then that person will be cut off or given only a dollar, instead of getting the full gift provided in the will.

35
Q

when there is no will, one will petition for this..

A

letters of administration for an administrator

36
Q

when there is a will, one will petition for this…

A

testamentary letters for an executor

37
Q

administrator with will annexed

A

when a testator’s choice of personal rep. predeceased or fails to qualify, this person will step in

38
Q

administrator pendente lite

A

Latin for “administrator pending litigation.” The person appointed by a court to begin probate proceedings during a lawsuit that challenges the will

39
Q

small estate

A

under $100k; informal administration; normally takes a few weeks to a couple of months to complete

40
Q

ancillary administration

A

required when a decedent was domiciled in 1 jurisdiction but has real property in another at the time of death - when this occurs, a probate proceeding of the decedents real property located in the other jurisdiction is required - court located in the decedent’s place of domicile is prohibited from making distribution decisions about real property not within its jurisdictional limits

41
Q

trust

A

the trustor/settlor/grantor transfers property to a trustee; the trustee holds property in the trust for the benefit of the beneficiaries

42
Q

2 kinds of trust

A

testamentary trust and those created as a stand alone

43
Q

testamentary turst

A

those created in a will

44
Q

2 types of stand alone trust and their definition

A
  1. revocable = aka inter-vivos or living trust; they can be altered or amended
  2. irrevocable = one put into effect,they cannot be altered or amended
45
Q

implied trust

A

involuntary trust; those that are created by operation of law; it is imposed by law to situations either by presuming an intention of the participants to create a trust, or simply because of the facts at hand. Two types of implied trusts are constructive and resulting trusts.

46
Q

constructive trust

A

not an actual trust by the traditional definition; it is a legal fiction that is used as a remedy for unjust enrichment, meaning there is no trustee, but the constructive trust orders the person who would otherwise be unjustly enriched to transfer the property to the intended party.

47
Q

resulting trust

A

an equitable reversion that arises by operation of law (as determined by the court) whenever a person has created an express intentional trust, but the trust fails or does not completely dispose of the trust property

48
Q

how to get things into a trust:

  1. deed of house?
  2. stock accounts?
  3. bank accounts?
  4. life insurance?
  5. tangible personal property?
A
  1. warranty deed (any real property)
  2. title it in the name of the trust
  3. should be in the name of the trust
  4. must name the trust as a beneficiary
  5. do a “bill of sale”
49
Q

spend thrift trust

A

a trust that is created for the benefit of a person (often unable to control his spending) that gives an independent trustee full authority to make decisions as to how the trust funds may be spent for the benefit of the beneficiary; also includes a provision that protects the trust principle and unpaid income from creditors

50
Q

sprinkling and spray trust

A

allows the trustee the discretion to “sprinkle and spray” the income from the trust as the trustee sees fit among a group of beneficiaries

51
Q

marital deduction trust

A

a deduction permitted by the IRS; only available to legally married couples; provides for the exclusion of estate death taxes at the time of the first spouse’s death

52
Q

martial and family trust A/B

A

whereby trust assets are split into 2 portion: the surviving spouse is the beneficiary of both, with children as beneficiaries of the remaining interest

53
Q

QTIP trust

A

a tax provision that allows a trustor to create a trust giving a life interest to all the income of the trust to a surviving spouse with the remainder of the trust property passing to someone other than the surviving spouse upon that spouse’s death

ex. wife dies - husband is beneficiary - husband dies - wife’s children from her first marriage becomes beneficiary

54
Q

A-B trust

A

a joint trust created by a married couple for the purpose of minimizing estate taxes; the trust divides into 2 upon the death of the first spouse

55
Q

credit shelter trust

A

a type of trust fund that allows married couple to reduce estate taxes by taking advantage of the state and federal estate tax exemption - generally only applicable in mulitmillion dollar estate

56
Q

charitable remainder trust

A

a tax-exempt irrevocable trust designed to reduce the taxable income of individuals by first dispersing income to the beneficiaries of the trust for a specified period of time and then donating the remainder of the trust to the designated charity

57
Q

charitable lead trust

A

an irrevocable trust designed to provide financial support to one or more charities for a period of time, with the remaining assets eventually going to family members or other beneficiaries.

58
Q

Cy press doctrin

A

meaning “as near as possible” allows a court to find a charity with either the same or a similar purpose to give charitable income and principal (when a charity no longer exists or merges with another charity)

59
Q

special needs trust

A

aka supplemental needs trusts; may be established to insure that the disable person, often a child, may received funds in the trust and not lose government benefits and assistance

60
Q

gifts for estate planning purposes

A

gifts are made to friends and family so that the monetary value of certain property is removed from the donor’s estate at the time of death (avoiding taxes); however there are limits as to the amount a person can receive or give before taxes will apply

61
Q

living will

A

a written statement detailing a person’s desires regarding their medical treatment in circumstances in which they are no longer able to express informed consent, especially an advance directive

62
Q

do not resuscitate directive

A

A DNR order allows you to choose whether or not you want CPR in an emergency. It is specific about CPR. It does not have instructions for other treatments, such as pain medicine, other medicines, or nutrition.

63
Q

advance directive

A

a written statement of a person’s wishes regarding medical treatment, often including a living will, made to ensure those wishes are carried out should the person be unable to communicate them to a doctor

64
Q

statutory will

A

a simple type of will legally recognized by only a handful of states; a “fill-in-the-blank” and “check the boxes” Will form that is easy to fill out, inexpensive to prepare, but very limited in use

65
Q

what should be included in the administrative provision of a trust..

A

Specified powers of the trustee, expressly to be exercisable without the need for prior court approval; any special limitations or conditions on the trustee’s power; and recitation of any powers that the trustee is expressly prohibited from exercising

66
Q

per diem

A

Latin for “per day” or “for each day” or daily allowance is a specific amount of money an organization gives an individual, often an employee, per day to cover living expenses when traveling for work

67
Q

qualified sub-chapter shareholders trust QSST

A

the trust may provide that upon the death of the income beneficiary, the principal will pass to other beneficiaries; it is one of several types of trusts that are eligible to hold stock in an S corporation. Its two primary requirements are (1) there can be only one beneficiary of the trust and (2) all income must be distributed at least annually

68
Q

Gross estate

A

This is the total value of everything you own at the time of your death. You’ll then subtract certain transactions from that gross total to arrive at the value of your net estate for estate tax purposes.

*** ALL property is included in a gross estate

69
Q

non-durable power of attorney (POA)

A

usually established to achieve a specific financial or legal goal
*** If you should become incapacitated or incompetent before the specific transaction is to occur a Non-Durable Power Of Attorney will expire, and the agent will not be able to act on your behalf. For this reason, many legal professionals encourage naming a Durable Power Of Attorney instead.

70
Q

Durable power of attorney

A

If a power of attorney is durable, it remains valid and in effect even if you become incapacitated and unable to make decisions for yourself. If a power of attorney document does not explicitly say that the power is durable, it ends if you become incapacitated.

71
Q

The basic elements of a trust (3):

A

Corpus or res (trust property)
Trustee, and
Beneficiary

72
Q

The deadline to file form 706 to report estate or GST tax is due…

A

9 month after the dates of the defendants death

73
Q

GST tax

A

a comprehensive indirect tax imposed on manufacture, sale and consumption of goods as well as services at the national level

74
Q

Trustee deed

A

Used to convey real property to a purchaser at a sale following a default under a deed of trust

75
Q

Laws against perpetuities

A

Under the Common Law, the principle that no interest in property is valid unless it vests not later than 21 years, plus the period of gestation, after some life or lives in being which exist at the time of the creation of the interest - prevents people from using legal instruments to exert control over the ownership of property for a time long beyond the lives of people living at the time the instrument was written

76
Q

Termination by operation of law (3 ways)

A

i) termination by death or insanity of either party;
(ii) termination by a supervening illegality; and
(iii) termination by destruction

77
Q

What taxes is generally required to be paid by the recipient of the transfer, rather than the transferor…

What taxes is paid by the transferor…

A

State inheritance tax is paid by the recipient

Paid by the Transferor:
Federal gift Tax
Federal estate Tax
State gift Tax

78
Q

Crummy Trust

A

to enable a person to gift into a trust and receive the annual gift tax exclusion

79
Q

A/B estate plan

A

will avoid wasting the federal estate tax credit the second spouse to die may incur if all of the property of the deceased spouse went to the surviving spouse outright or in a martial trust

NALA Testing (11 decks)

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