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224 Cards in this Set

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Premortem flexibility for assets placed in a trust can best be achieved if the trust is irrevocable. T or F
False. The owner will continue to have total control of the trust assets only if the trust is revocable.
If a financial planner advises a client to place solely owned property into joint tenancy with right of survivorship, the financial planner is practicing law.
T or F
T The financial planner is advising the client to give up some of his or her legal rights in the property, and, therefore, is practicing law.
Which one of the following is a method by which assets can be transferred both during life and at death?
a). by right of survivorship (b) irr trust (c) testamentary trust
Irrevocable trust.An irrevocable trust can be used to transfer assets both while the grantor is alive and when the grantor is dead
Bill Jenkins owns a vacation home in another state. Bill wants to include his new wife, Edna, on the title to the vacation home. His primary concern is to avoid probate without making it possible for Edna to dispose of the property prior to his death without his consent. Which one of the following statements concerning the most appropriate form of titling and the rationale therefore is correct? (a) TBE will prevent lifetime disposition w/o Bill's consent (b)Tenancy in common with Edna will eliminate the need for ancillary probate (c)Sole ownership enables Bill to leave the home to Edna outside of probate.
a). Tenancy by the entirety will prevent lifetime disposition without Bill's consent.

Correct because:
Tenancy by the entirety requires the consent of both spouses to dispose of property
What is spousal elective share?
Statuatory % which a spouse can elect (if he/she is not given enough in the will).
What is the homestead allowance?
Gives dependent spouse and/or children ownership or right to occupy a personal residence.
What is a mortmain statute?
Negate distributions over a certain level to charitable beneficiaries in a person's will. Properly provides for spouse and children.
What is an abatement statute?
Specifies which shares are to be reduced (in case of omitted beneficiary) and by what amounts.
What is ademption?
When a will gives an asset to a beneficiary but that asset is no longer available.
Are assets in a revocable living trust subj to probate?
No
Are assets in a irrevocable testamentory trust subj to probate?
Yes
5 Duties of personal rep
1. Marshal assets
2. Pay creditors
3. Pay taxes
4. Manage assets
5. Distribute assets
What is domicile?
A person's permanent residence.
What is the primary characteristic of the unified xfer tax system?
It has an identical amount of tax liability on lifetime and deathtime xfers of equal value.
Is the gift tax tax exclusive or tax inclusive?
Tax exclusive. When a gift tax is paid, the $ used is not itself taxed.
What is the value of a bequest of ownership of a life insurance policy?
Its replacement cost
What are "special use" valuation rules?
1. Must have been owned by decedent or decedent's family and used as farm or business for 5 of last 8 years.
2. Value of real & personal property must be = to at least 50% of gross estate after debts.
3. Real estate must be at least 25% of gross estate.
4. Must pass to qual heir.
5. Material participation of decedent or his/her family 5 of the last 8 years.
What is the due date for the Federal estate tax return?
9 months after decedent's death.
Is the executor personally liable for the payment of the estate tax? Y or N
Yes
When was the gift tax and the estate tax unified?
1976
What is the alternative valuation date?
6 months after death.
What is the value of a recently purchased insurance policy?
replacement cost measured by gross premium paid
What is the value of an established whole life policy?
replacement cost measured by the interpolated terminal reserve plus any unused portion of the last premium.
If decedent is both owner and insured of a life insurance policy..is the death benefit included in the estate?
Yes
What is a minority discount?
Discount that can be claimed when there is a xfer of a closely held business interest that has no ability to influence the business interests of the company.
What is a blockage discount?
Discount that may be claimed by an estate for a block of publically traded stock that is so large that the stock price would be depressed if the block of stock were sold.
Common assets included in gross estate
1.Probate or solely owned property.
2. Life insurance
3.Jointly owned property
4. Survivorship benefits in annuity or pension
5. Gen powers of appt.
Will a 10K CD with P.O.D. be included in gross estate?
yes
Will insurance on decedent's spouse be incl in decedent's gross estate?
yes, as intangible asset.
Will single life annuity that terminates with decedent's death be incl in decedent's gross estate?
No
Will a revocable living trust be incl in a decedent's gross estate?
No
Is an unpaid federal of gift tax of $6000 ded from the gross estate?
yes
What are 4 exceptions to the terminable interest rule?
1. any property interest that is terminable solely because surviving spouse is req to survive for a specific period.
2. a life estate with a Gen Power of Appt
3. an income interest in a CRUT or CRAT
4. a QTIP where the marital ded is elected.
Can the elective share be deducted from the gross estate?
yes
For what 3 instances does the 3 year rule on estate tax include?
1. gift taxes paid within 3 yrs of death.
2. Assignment of ownership rights on a life insurance policy.
3 Release of a retained interest.
Decedent had to the right to income from irr Family Trust created by his Father. Would the vaue of the right to income be included in his gross estate
No..only the retained right.
Guy owns a paid up life ins policy. His wife is pri beneficiary. Would the death benefit be incl in his gross estate?
No..since the wife is the death benefit beneficiary, the death benefit quals for the marital deduction.
What is the amount incl in first to die estate on a joint and survivor annuity?
1/2 of the repl cost of a single life annuity on survivor spouse at the time of 1st to die death.
Can the elective share be deducted from the gross estate?
yes
For what 3 instances does the 3 year rule on estate tax include?
1. gift taxes paid within 3 yrs of death.
2. Assignment of ownership rights on a life insurance policy.
3 Release of a retained interest.
Decedent had the right to income from irr Family Trust created by his father. Would the value of the right to income be included in his gross estate
No..only the retained right.
Guy owns a paid up life ins policy. His wife is pri beneficiary. Would the death benefit be incl in his gross estate?
No..since the wife is the death benefit beneficiary, the death benefit quals for the marital deduction.
What is the amount incl in first to die estate on a joint and survivor annuity?
1/2 of the repl cost of a single life annuity on survivor spouse at the time of 1st to die death.
3 common ways health care decisions are made for an incompetent person.
1. Living will
2. Health agency laws
3. Guardianship
4. Surrogate decision making laws
What is a durable power of attorney for health care?
contains a detailed list of what the agent can or cannot do.
What is a medical proxy?
appt of a surrogate decision maker contained in another document such as a living will. The powers of a medical proxy are usually severely limited.
What are strengths of a living will?
1. permits a person to express a willingness to die w/o unnecessary medical intervention. 2. it expresses the wishes of that person in the event of future incapacity.
What are weaknesses of a living will?
descriptive terms take on a different meaning after tragedy strikes; impossible to anticipate circumstances that might happen; living will is only effective when patient is terminally ill
3 common techniques used to leave property to children from a prior marriage
1. Custodial accounts
2. Trusts
3. Conservatorship
Is a non US citizen/decedent eligible who is a US resident for the estate marital deduction?
Yes..if property passes to a US citizen spouse.
What is the purpose of the qual domestic trust (QDOT)?
To ensure that the estate tax that was deferred at the death of the first spouse, because of the marital deduction, is paid at the death of the surviving spouse.
What is criteria to qualify for the installment method of paying the estate tax?
The value of the business must exceed 35% of the adj gross estate.
Placing a non exoneraton clause in a will improves the liquidity of an estate. T of F
T Placing a non-exoneration clause in a client's will improves the liquidity position of an estate because it prevents the recipient of a specifically bequeathed property from claiming a common-law right to have the estate pay the mortgage on the property prior to distribution.
Which one of the following is an estate liquidity need that cannot be completely eliminated by proper premortem planning?
a). admin expenses
b) Death taxes
c) Misc cash needs
d) cash bequests
a) admin expenses
The gross-up rule would apply to a taxable gift made within two years of a donor's death if the transferor used his or her unified credit to pay the gift tax due.
T or F
F The gross-up rule applies only when gift tax is paid out of pocket on gifts made within three years of death
All of the following are common characteristics of the federal gift tax and the federal estate tax except
a. the progressive nature of the tax rates.
b. the cumulative nature of the calculation.
c). the annual exclusion for an indexed amount of taxable value
d). the unlimited marital deduction for qualifying transfers to a spouse.
c). the annual exclusion for an indexed amount of taxable value.

Correct because:
An annual exclusion can be taken only for present interest gifts, not for transfers at death.
What is distributable net income?
Accounting concept that limits the amount that trust beneficiaries must report as gross income for income tax purposes.
limits reportable income
When does a trust pay income tax on income?
1. Irrevocable
2. All income is not taxed to an individual
3. Income is accumulated
What is the throwback rule?
Distributions from foreign trusts and trusts before 1984 exceed dist net income and trust has accumulated income. The accumulated income is taxed to the beneficiaries.
What situations are exempt from the throwback rule?
a. a gift or bequest of $ or property.
b. made to a charity
c. Beneficiary is under age 21
Is split dollar insurance taxable to the employee?
Yes
Is income from a custodial account taxed to the minor?
Yes
What are the tax implications to the donor of a net gift?
Donor has a taxable gain to the extent that the gift tax paid by the donor exceeds adj gain in the property.
What is basis for donee for a gift of stock?
Cost of the stock plus an adj of any gift tax paid, if any.
Section 2701 criteria
Gratuitous xfers of closely held partnership or corporate interests between family members. Donor retains ownership interest.
Section 2702 criteria
Gratuitous xfers of trusts between family members where the owner retains an ownership interest.
Section 2703 criteria
Transactions involve restrictions on right to acquire, use, sell property at less than FMV
Section 2704 critera
Lapses of voting or liquidation rights and to restrictions upon liquidation of business entities.
voting lapses
How do Section 2701 and 2702 affect calc of gift tax due?
If Section 2701 or 2702 apply,
the gift tax due will based on FMV of gifted interest if interest retained by donor is qual.
What is the fundamental valuation principle for the value of gifted assets?
Value to be taxed is the FMV of the property to be xferred on the date of xfer.
What is the value of a term insurance policy for gift tax purposes?
Its replacement cost, valued by the unearned portion of the last premium.
How is property in a inter vivos irr trust, in which the donor has no retained interest, valued by gift tax purposes?
The donor of the property has made a gift..on the date the property is xferred to the trust.
Is a gift of 9K remainder interest to a irr trust subj to gift tax?
Yes. Gift is of future interest and NOT eligible to the annual exclusion. Subj to gift tax.
Is putting a brother's name with your name as JT on a deed on a warehouse when brother did not contribute to the purchase subj to gift tax?
Sub to the amount that exceeds the annual exclusion. The amount of the gift would be 50% of the FMV.
Will providing a loan of 15K to one's stepson for one year w/o interest be subj to gift tax?
Subj if the annual exclusion would not keep the gift from being incl in total calendar year gifts of the donor.
Is the xfer of a life insurance policy to a irr trust in which the donor has retained the right to name add'l beneficiaries subj to gift tax?
No, though trust is irr, donor has a retained interest making gift incomplete.
What types of trusts will avoid gift taxation up a xfer of assets into the trust
To avoid gift tax on xfer of assets into a trust, the trust must be either one that does not exist until the grantor's death...or a trust in which the grantor has retained powers that make the xfer incomplete.

testamentary trust
unfunded rev trust
funded rev trust
loving (or living) rev trust
Is the annual exclusion avail on a irr support trust or or unfunded irr trust?
No
Identify situations where est a trust will result in an annual exclusion for the grantor
a. xferring income producing assets into an irr trust that reqs dist of income to beneficiaries at least annually.
b. xferring assets into an irr trust and beneficiary has Crummy power.
c. when contributions are made to a 2503(c) trust when a statute grants annual exclusion on public policy grounds.
What is the annual exclusion amount for a $15K cash gift to a son; the donor splits the gift with her spouse
$7500 for both spouses
What are the gift tax implications of a gift to a 2503(c) minor's trust?
Gift tax liability on the FMV of property xferred less the annual exclusion.
What are the gift tax implications of a gift to a 2503(b) mandatory income trust?
The annual income portion quals for the annual exclusion; the remainder interest does not (since it is a future interest).
What are the gift tax implications of a gift to a Crummy trust?
Due to the Crummy power, the donor can offest gift tax liability in an amount equal to the lesser of (1) the max annual exclusion for each holder of a Crummy power (2) the aggregate amount the holders may withdraw in the year under the power (3) the FMV xfers to the trust during the calendar year.
Is naming one's spouse as the beneficiary on a life ins policy deductible?
No, naming a beneficiary is revocable. Thus, no gift occurs.
What is the total gift tax applicable credit amount avail in 2006 to a donor who has made no prior taxable gifts?
$345,800
Rita created an irrevocable trust and funded it with securities valued at $200,000. The trustee has discretion to distribute income to Rita's son, Wally, for his health, education, maintenance, or support until he reaches age 25, at which time the trustee is to distribute all assets in the trust to him. Rita named herself trustee. Is this a completed xfer?
Yes. This is a completed transfer to Wally of the present value of the remainder interest
Criteria of a 2503(c) minors trust.
1. Not restricted to type of assets.
2. Irr xfer
3. Income distr is flex
4. Trustee must be able to use trust assets for beneficiary prior to age 21
5. 1 beneficiary per trust
Criteria of a 2503(b) mandatory income trust.
1. Not restricted to assets
2. Income dist is mandatory at least annually.
3. Remainder beneficiary receives poss of principal when trust specifies.
4. May have multiple beneficiaries.
Purpose of reverse gift
Gifting of higlhy appreciated property from a donor to a donee who most likely will predecease the donor...donor receives property back with all gain wiped out. 1 year must pass between time of gift and death of donee.
4 req for UTMA and UGMA
1. Property must be xferred for minor's benefit.
2. Individual accounts for each child req
3. Gifts must be irr
4. Property must be dist to child at age of majority.
3 differences between UGMA and UTMA
1. UTMA has no rest; UGMA only allows cash, securities or life ins.
2. UTMA allows both life and death xfers; UGMA only life
3. UTMA has expanded active investment powers.
Define spendthrift provision
provision in a trust doc that prohibits a beneficiary from assigning any future income until such interests are actually received.
What are nontax characteristics of a SPLIT?
1. 2 buyers (with widely diff ages) buy from a 3rd.
2. Older buyer acquires life interest and pays for PV for that interest.
3. Younger acquires remainder interest.
What are nontax characteristics of a RIT (remainder interest transaction)?
buyer purchases remainder interest from current owner.
What are nontax characteristics of a QPRT (qual personal residence trust)?
1. Irr trust and xfer of personal residence
2. fixed # of years
3. right to use property for residential purposes by grantor.
What are nontax characteristics of a QPRT (qual personal residence trust)?
1. Irr trust and xfer of personal residence
2. fixed # of years
3. right to use property for residential purposes by grantor.
What are nontax characteristics of a QPRT (qual personal residence trust)?
1. Irr trust and xfer of personal residence
2. fixed # of years
3. right to use property for residential purposes by grantor.
What are nontax characteristics of self cancelling notes (SCIN)?
1. Like a installment sale
2. Has provision that obligation to make future payments will be cancelled at seller's death.
3. buyer must pay premium for cancellation provision.
What is an unfunded life ins trust (ILIT) with a Crummy power?
Irr trust that only has life ins as its corpus. Usually written as bypass trusts so that death benefits will avoid inclusion in estate of grantor's spouse.
What are tax implications of dying with retained interest?
Cause incl in gross estate.
What are tax implications of a gift to a UGMA or UTMA account?
a. Income from custodial property is taxed to the minor.
b. Gift tax
c. Estate tax - value of the custodial property is incl in the estate of the deceased minor.
What are tax implications of a gift to a 2503(b) mandatory income trust?
1. Income tax. Taxable to the beneficiary annually
2. Gift - divided into 2 portions: income and remainder.
3. Estate. Gen a gift is NOT incl in the grantor's gross estate.
When are installment payments reportable by the seller for income tax purposes?
In the year received.
What are income tax implications for buyers of a SPLIT?
For lifetime interest: basis is fractionalized. Dividends are taxed to lifetime owner. For remainder interest...no income tax until they become owners.
What are gift tax implications for buyers of a SPLIT?
treated as "term" interest"
What are the tax implications of a QPRT?
Donor will pay gift tax on the PV of the remainder interest. If transferor outlives term, no part of the value of the residence is incl in estate.
What are income tax implications when sto the SCIN holder if note becomes unenforceable by its terms due to sellers death?
Unreported gain must be recognized. Purchaser's basis will be purchase price. SCIN is not subj to gift tax or holder's estate.
What is the only type of trust that would NOT avoid probate?
Testamentary trust because it is not funded until after the grantor's death.
What trusts avoids taxation of income to the grantor?
test, unfunded rev or irr, funded irr that does not violate the grantor trust rules.
What type of trusts avoid gift tax?
test, funded rev, and a loving (living rev) trust.
What are tax advantages of a living rev trust?
It's tax neutral. All income earned is taxable to grantor, and value of assets is incl in the grantor's estate
What is "estate freeze?"
Technique used to provide a senior family member with continued involvement, income, control of assets (usually in a business) while providing family protection and continuity by xferring the asset to a junior family member. at reduced xfer cost.
What are 2 types of buy sell agreements?
1. cross purchase 2. stock redemption.
What are income tax implications of a preferred stock recap?
No gain or loss recognized.
What are gift tax implications of preferred stock recap?
Depends
All of the following are correct statements regarding a second-to-die (or "survivorship") life insurance policy except:



a). This policy cannot be placed in an irrevocable life insurance trust (ILIT).
b). Premiums are generally lower than the cost of two separate policies.
c). It may be possible to secure such a policy even if one of the proposed insureds is not otherwise insurable.
a. This policy CAN be place in an ILIT.
Joint and survivor private annuity. If husband predeceases wife, what is the tax implication?
When husband dies, the PV of future payments to wife will be incl in his gross estate
Husband has life ins policy that named estate as beneficiary. 4 yrs before, husband assigned ownership of policy to wife. What is estate tax implication?
Gross estate wil incl the policy proceeds because they are payable to his estate.
For a living rev trust, is income reported on a return for the trust? T or F
F...no reported on a personal income tax return.
Which one of the following cannot be acheived with an unfunded irr life ins trust that does NOT have a Crummy power?
1. Avoiding xfer tax on the death benefit, as long as the grantor is not the trustee.
2. sheltering premium payments gifted to the trust from the gift tax with the annual exclusion
3. naming the trust as beneficiary of the policy with the annual income payments to the grantor's spouse and children
4. avoiding probabe of death benefits
2. sheltering premium payments gifted to the trust from gift tax with the annual exclusion
If a donor wants an income stream, does not want the bear the expense and hassle of seeting up a gifting arrangment...and wants to income stream keeps up with inflation..what is best vehicle?
1. Charitable gift
2. CRAT
3. PIF
4. CRUT
3. Pooled income fund (PIF)
Owner has a closely held partnership that currently reps 60% of his adj gross estate. If he xfers the business interest to his son while still alive...his estate will no longer qual for what?
Sect 6166 deferral and installment payment of estate taxes.
In a rev trust, do trust assets receive a step up in income tax basis? Y or N
Yes
What of the following property must go through probate?
1. Car that passes to decedent's spouse by state's intestate succession statute.
2. Govt savings bond that is titled in decedent's name POD to daughter
3. Life ins proceeds payable to estate
4. Rev trust assets that pass to children at death
Car and life ins proceeds.
Does a power of appt trust qual for the marital deduction? Y or N
Yes
Is reporting gain on an installment basis automatic for qual sales unless the taxpayer elects NOT to have it apply? Yes or NO
Yes
The estate of a deceased owner of a closely held business that leases all of its property cannot qualify for special use valuation T or F
True
Does an estate trust provide a mandatory income stream? Yes or No
No
Gary and Georegeann have following objectives: to ensure that Gary's children from a previous marrigage will receive income producing assets on Georgeann's death and 2. to prevent assets used to provide income to Georgeann from being in incl in her gross estate. What 2 trusts accomplish this?
Bypass trust and QTIP (C) trust w/o election.
Will establishing a Totten trust have any effect on subs lifetime xfers?
No
When discussing the marital deduction the citizenship and residency status of the donor/decedent are irrelevant. T or F
True
Will placing assets in a irr trust in which the client as sole trustee has discretion to dist income reduce the client's gross estate?
No, the grantor has retained the power to determine beneficial enjoyment of assets.
With a springing power of attorney in some states, the attorney cannot compel a third party to recognize his authority. T or F
True
with a dur power of attorney for health care...can the authority of the agent be revoked as the principal is competent? Y or N
Yes
A dur gen power of attorney takes effect only after the principal is incompetent. T or F
False
If a decedent has a surviving spouse and children, the children are more likely some part of the intestate estate if they are children from a prior marriage rather than from the decedent's final marriage. T or F
True
Will a gratuitous present interest xfer to a qual charity in excess of the max annual exclusion be subj to the fed gift tax? Y or N
yes, considered a gift subj to tax if any part of the gift remains after reducing the gift by the annual exclusion amount.
Will a gift of 28K remainder interest in rental interest to a 22 yo grandson, whose parents were killed 2 years ago involve a gen skipping xfer for the Fed GSTT? Y or N
No, cause the donor's child is dead, thus moving the grandson up a generation.
When assets are placed in a rev trust, do the assets receive a step up in basis? Y or N
yes
Are life ins proceeds payable to the decedent's estate subj to probate? Y or N
Yes
Any assets remaining in a power of appt trust will be incl in the spouse's (after 1st to die, dies) estate. Y or N
Yes
Two deductions from adj gross estate: ___ deduction and ____ deduction
marital
charitable
Taxable estate is _____ less _____ and _____
adj gross estate
marital deductions
charitable deductions
Once the tax base is determined the ______ is used to calc a tentative tax
applicable transfer tax rate
Applicable excl amount for estate and GST tax
3.5 million
Applicable excl amount for gift tax ______
1 million
applicable credit amount for estate
1,455,800
applicable credit amount for gifts
345,800
Why would anyone create taxable gifts when they are added back to the estate?
To get asset appreciation out of the estate
If the insured possesses any incidents of ownership, the full proceeds will/won't be incl in gross estate
will
Special power of appt limits the ____ who may receive the property
class of individuals
Five or five power is the property sub to a general pwer that will be included in the donee-decedent's estate only to the extent that the property exceeds _____ or
$5000
5% of total value of fund subj to the power as measured at the time of lapse.
If a person's right to exercise a power is limited by HEMS (health, ed, maint, support) it is not a general power. T/F
T
In the case of a JT bank account, a gift arises upon ___ of funds by the donee, not upon creation.
withdrawal
Tenancy by entirety may be severed by joint spouse's creditors. T/F
T
A lapse of a gen power will/will not subj the holder to a gift tax liability.
will
A trust is taxable when it is ____ and income is ____
irrevocable
accumulated
In a Crummy trust the right of withdrawal amount is equal to the ____ of the amount of the ____ or the ________
lesser
amount of annual exclusion
value of gift xferred
Primary characteristic of a bypass trust is that it gives the decedent ______
postmortem control over the property
Marital trust is also known as the _____ or the ___ trust. Key characteristic of marital trust is that the ______ has postmortem control over the property in the trust.
power of appt
A
surviving spouse
4 key words for QTIP trust
LAME
L lifetime income to spouse
A annual payments to spouse
M mandatory payments to spouse
E exclusively for spouse
A QTIP can distribute income to ______ for life yet allow decedent to determine who receives property when surviving spouse dies
surviving spouse
Which trust does not qual for the maritial deduction?
bypass trust (uses applicable exclusion amount)
is 2503(b) bad boy trust subj to kiddie tax? Y/N
Y
Why is a custodial account usually preferable to a children's trust or 2503(c)?
Simplicity
Cost
For a 529, a donor can contribute a max of _____ in ____ year for each beneficiary. Or ____ if married
$65,000
$135,000
Which of following trusts qual for the marital deduction?
1. Marital trust for 2nd wife
2. QTIP for 2nd wife
3. Nonmarital trust for 2nd wife
4. 2503(c) for grandkids
1 and 2
Will a QTIP trust be subj to estate tax?
Y
Only ___ initial xfer of property can be made to a CRAT. ____ xfer can be made to a CRUT
one
more than one
Will a joint life and survivor annuity be incl in the gross estate? Y/N
Y
Recap keys
CEO/owner share's should be reissued as preferred
Gift value of common stock = value of biz less valued of preferred stock
preferred stock pays dividends at retirement
All biz appreciation would be in donee's name
Bill has will that xfers property into his trust at death. Income goes to wife for life..then to his son. Will the value of the life interest to his wife qual for maritial deduction? Y/N
No..the interest terminates at her death
To qual for the marital deduction (US citizen dies/married to a non US citizen) property must pass to a ________
Qual Domestic Trust (QDOT)
Net gift technique involves a gift made on condition that the _____ pays the gift tax.
donee
When one spouse has most of family wealth and less affluent spouse is about to die...they can use ____
a reverse gift
In an installment sale, if the seller dies during installment sale period, the _____ are incl in his/her estate. (Disadvantage)
PV of remaining payments
For each donor, the first _____ of property being xferred by direct or indirect lifetime or death time skips to all skip persons combined can be declared exempt from GSTT.
3.5 M
The GSTT rate is the same as the max fed estate tax rate ____
45% - 2009
A GSTT gift is also subj to gift tax. T/F
T
Using an alt valuation date must cause a reduction in the ___ value of the gross estate
total
Two situations where an executor cannot elect the alternate valuation date
Assets that pass to spouse using marital deduction
Assets passing to children that are less than 3.5 M
For nontraditional relationships the best planning vehicles are
revocable trust
TIC
What is the RMD for a CLUT to avoid the 5% excise tax?
Distribute whatever was earned or nothing at all.
Which techniques of the following creates "freezing" techniques?

GRAT
Re Cap
QPRT
Private annuity
SCIN
All of them
What type of asset is best to xfer to a GRAT?
an asset expected to appreciate
Can a property held in TBE be disclaimed in an inheritence? Y/N
N
In a personal holding company, five or fewer shareholders must own more than one-half of the outstanding stock value at some time during the last half of the taxable year. T/F
T
A CFP certificant must notify the CFP Board in writing of any crime or professional suspension within ten (10) calendar days after the date of conviction or suspension. T/F
T
A joint tenancy generally can be severed by one tenant without the consent of the other tenant or tenants. T/F
T
A CFP certificant must report any criminal conviction involving the use of alcohol or drugs, whether it is a felony or misdemeanor, to the CFP Board. T/F
T
Community property states do not allow a decedent's spouse to elect against the will. T/F
T
A gift tax return must be filed whenever the donor's spouse consents to split the gift
T
since a SPLIT (split interest transaction) involves the purchase of a property with one family member paying for a life estate and another paying for the remainder, the transaction is not subject to gift tax. T/F
T
A 303 redemption must exceed ____ of adj gross estate
35%
a transfer of $300,000 to an irrevocable trust in which Valerie retained the right to income for 15 years with the remainder to her 29-year-old grand niece. this is a GSTT xfer. T/F
T
Reporting the accrued bond interest (which is IRD—income in respect of a decedent) on the decedent's final income tax return (Form 1040) will allow the decedent's estate to take a deduction (because of a debt owed by the decedent) for any income tax liability incurred on the decedent's estate tax return (Form 706). T/F
T
A gift tax return is filed on Form ____
709
A pourover will allows merging probate estate assets with trust assets; often used with a revocable living trust. T/F
T
A RIT also could not freeze the value of their business interest, because the date of death value of their respective business interests would have to be included in .gross estates. T/F
T
Under Chapter 14, a SPLIT (or RIT—the sale of a remainder interest to a family member) is treated as a gift even though it involves a purchase! T/F
T
When shareholders of a C corporation are widely divergent in age and/or marginal income tax brackets, an entity buy-out is usually better than a cross purchase agreement, because insurance premium payments (although not deductible) are made with money that is not subjected to a second tax when distributions are made to shareholders. T/F
T
A cross-purchase agreement (when the entity involved is a C corporation) keeps the insurance out of the business because the individual owners, rather than the business entity, own the insurance policies. T/F
T
Series EE bonds are valued at their ______ price
redemption
The estate tax return is due _____months after the date of death
9
To achieve estate equalization, it is necessary to have gross estates of the same value. T/F
F
Universal life usually has few or no guarantees as to cash value build-up
T
Arbitrage Pricing Theory is a multi-factor model in which unexpected changes in four factors have been found dominant: (1) industrial production, (2) inflation, (3) risk premiums, and (4) interest rates. T/F
T
A lower coupon bond has potential for great price fluctuation. T/F
T
Benefits for a top-hat plan or an excess benefit plan can be paid through a rabbi trust. T/F
T
In a SIMPLE IRA, the employer must either match the deferrals up to 3% of salary or make a 2% of pay nonelective contribution. T/F
T
The maximum annual family contribution is $5,950 for an HSA (2009) T/F
T
At the TSA owner's death, the amount received by the beneficiary is included in the gross estate of the decedent. T/F
T
A wealth replacement trust is a ILIT. T/F
T
In a CLAT (charitable lead trust), the donor donates a gift of a __________ interest
present
Is gift tax payable deducted from a deceased adj gross estate? Y/N
Y
Which of the following are true regarding gifts and the donor's estate?

I. Generally, gifts given are simply "adjusted taxable gifts" to the extent such gifts exceed the annual
exclusion.
II. Adjusted taxable gifts are added to the taxable estate.
III. Gift taxes paid (or payable) are generally allowed as a credit against the tentative tax.
IV. Gift taxes paid on any gifts within 3 years of death are added to the gross estate.
All the above
What is the major difference between a private foundation and a supporting organization
The supporting organization cannot be controlled by the donor or the donor's family whereas the donor
controls the private foundation.
The donor gives more than $13,000 to 1 donee in 1 year. Incl in gross estate? Y/N
N
Taxable gifts are added to the taxable estate. Taxable gifts are not included
in the gross estate. T/F
T
Which of the following are examples of income in respect of a decedent (IRDInsurance renewal commisions due
II. Monthly pension payments to a deceased employee's widow
III. S corporation unearned income
IV. Business expenses payable
V. Gain still to be recognized on an installment sale)?
All but IV Biz expenses payable
Are there exceptions to the 6 month alternative valuation date (AVD)? Y/N
Yes, there are exceptions for wasting assets and assets distributed before the AVD date
Mr. and Mrs. Teal live in CA, a community property state. They have been buying stock in their joint account for
years. Their basis is $600,000. The stock is now worth $1,500,000. If either one of them dies, what will be the
survivor's basis?
If either spouse dies, the stock gets a full step up in basis.
Can you end a Tenants in Entirety by mutual agreement? Y/N
Y
Are there income and/or estate tax savings with a revocable trust? Y/N
N