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65 Cards in this Set
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Another term for fee simple |
Absolute ownership |
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What is fee simple? |
Max ownership, owner can use or dispose of property in any way he chooses during his life and at death |
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What's life estate? |
Partial interest Person can use property for remainder of their life of another individuals life
e.g. Dad might let daughter live in home but only until moms death. 3rd party life is less common |
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What's another term for term of years |
An interest for years |
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What is term of years? |
Entitles owner to a possession for a fixed period
Common example is a lease in exchange for a series of payments |
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What is a remainder? |
The right of a 3rd party to use or enjoy property after the intervening right of someone else.
e.g. Dad leaves home to kid, wife gets first during her life so she received a life estate and kid gets remainder |
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What's a reversion? |
Owner transfers property back to him after an intervening interest |
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What is tenants in common |
2 or more people with undivided and possibly unequal interest Ina property
When a TC owner dies his portion goes to heir in will or intestate |
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What is JTWROS |
Joint tenants with rights of survivorship
2 or more people own property with an undivided EQUAL interest.
When one passes the other owner gets their share, WITHOUT a will!
Joint tenants have right to sever their partition with out consent of the other party therefore destroying the survivorship right. |
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What is Tenants by entirety |
Can only exist bet spouses
Neither spouse can sever survivorship right without mutual consent
TE has creditor protection from claims of each spouses separate creditors |
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What is ancillary probate |
Decedent owns real property in 2 or more states at death
Requires multiple probate proceedings
e.g. Lived in NY and vacation home in Florida, subject to 2 probates |
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Situs orobaye |
Real assets owned at death are probated according to the law of the state in which property is located |
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Domicile probate |
Personal assets owned at death are probated according to the laws of the decedent's state of residence |
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What 3 types of transfers avoid probate |
Trust
Operation of law (JTWROS )
Contract, using beneficiary designations |
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What's AVD |
Alternative valuation date
Estate can elect to use AVD over date of death for federal estate tax purposes
6 months after date of death |
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Step up basis when decedent owns 100% of property |
100% step up basis |
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Step up basis if decedent owns property as JTWROS |
If spouses- Decent's 50% share gets step up basis, other 50% stays at original Cost basis
If non spouses- Decedent's share gets step up basis, consideration furnish rule determines percentage of property included in estate |
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Step up basis under community property |
Both halves receive step up basis |
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Holographic will |
Unwitnessed will
If a will is entered into probate n in decedent's own writing
Decedent had to be legally competent n will in their own handwriting |
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Nuncupative will |
Oral will recognized by a few states
Witnesses who heard testator have to be available to testify in court n not have any interests in property
In some states can only be used to pass on personal property not real property |
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Codicil |
A will may be modified or amended by a codicil
A separate document making a simple addition or deletion of previous will provisions |
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Another term for letter of personal instruction |
A side letter |
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What is a letter of personal instruction |
Not legally binding, can place funeral directions there since will isn't read until after the funeral. Or info about where to find important docs |
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Pour over will |
Will used with a revocable living trust to catch any assets that weren't transferred into the living trust |
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Complex will |
Includes a testamentary trust, but can be drafted without one |
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Another term for prenuptial agreement |
Marital property agreement |
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Marital property agreement |
A prenup
The agreement provides for restricted on subsequent transfers of property between spouses in exchange for relinquishment of marital property rights in event of divorce or death |
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Conservator ship |
Fiduciary relationship to manage owns property.
Conservator acts on behalf of the ward, owner of the property |
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Duties of a conservator |
Manage the wards property
Is an officer of the court under authority granted to him by the local judge
Makes annual filings and reports summarizing 1. Performance of investments 2. Expenses paid |
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Guardianship |
Fiduciary relationship
Guardian manages the personal care and well being of another (ward) |
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Duties of a guardian |
Manage well being and personal care of ward such as
Where ward lives and goes to school
Healthcare needs are met
Can give permission if ward a minor such as getting married and enlisting in the military
Must account to court annually |
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Revocable trust |
Set up for avoidance of probate and grantors possible legal incapacity
When grantor is incapacitated successor trustee is named to fund the trust |
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Special needs trust |
Established by clients who have a dependent that's developmentally disabled
Not permitted in all states
When it is, it's to furnish additional benefits without disqualifying child from public assistance such as SSI |
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Nondurable power of attorney |
Becomes legally invalid at the onset of the principal's incapacity |
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Incapacity |
Not disabled (physical or mental condition)
The absence of a legal ability to act because you're a minor or may have Alzheimer's
You lose ability to execute wills or contracts |
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Durable power of attorney |
DPOA powers granted to the attorney in fact survive the principals legal incapacity, unlike non-durable POA. |
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Difference between springing and non-springing POA |
Springing power of attorney Authority to act is delayed until principal becomes incapacitated
Non springing Even when principal is still capable |
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Advance medical directive/living will |
Provides for suspension of medical care
Doesn't appoint a surrogate decision maker but is a direct instruction from the patient
Addresses only the situation of terminal illness whereas POA is broader and addresses a multiplicity of health care situations |
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Sprinkle provision |
Trustee is granted the power to direct trust income
Can sprinkle income among more than one beneficiary |
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Spray provision |
Trustee granted power to make distributions in different amounts among permissible beneficiaries |
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Support provision |
A trust authorizing a trustee to only distribute income or principal as deemed necessary for the support or education of the beneficiary |
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Another term for minors trust |
Section 2503(c) |
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Minors trust |
Trust used in education planning
Distribution of trust income annually on minors behalf and distribution of principal when minor is age 21. Contributions to this trust qualify for gift tax annual exclusion |
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Crummey Trust |
Trust provides limited right of withdrawal of principal annually by the beneficiary
Contributions qualify for annual gift tax exclusions |
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Support trust |
Funded with income producing assets to provide support for a dependent child or parent |
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Pour over trust |
Created during a grantors life to hold and manage assets for several beneficiaries
Usually funded at grantors death by a pour over will |
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Dynasty/GST trust |
Trusted created inter vivos or at testamentary to pass grantors assets to successive generations of lineal descendants
Takes advantage of generation skipping transfer tax |
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ILIT irrevocable life insurance trust |
Trust established to remove the face value of the grantors life insurance policy from his gross estate
Such trust may be funded (including income producing assets) or unfunded (including only the life insurance) |
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Standby trust |
Contingent trust
An RLT used to handle the grantors financial affairs if the grantor becomes incapacitated |
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Totten trust |
Trust where corpus is a bank account.
Transfer isn't made til death so it's similar to an irrevocable trust
Avoids probate and similar to a TOD or POD account where totten trusts aren't recognized under state law |
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Bypass trust |
Non marital trust permitting surviving spouse to have some interest in trust assets but not enough to warrant inclusion of those assets in the survivors gross estate
Trust assets bypass the survivors gross estate |
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3 types of marital trusts |
2 forms 1. A trust for general appointment of power
2. QTIP or C trust Qualified terminable interest property
3. QDOT Qualified domestic trust (For benefit of non resident alien) |
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3 types of marital trusts |
2 forms 1. A trust for general appointment of power
2. QTIP or C trust Qualified terminable interest property
3. QDOT Qualified domestic trust (For benefit of non resident alien) |
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Marital trust |
Takes advantage of the unlimited marital deduction to reduce tax liability
Examples are trust a or trust c/qtip or qdot |
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Section 2503(b) |
Mandatory income trust
Similar to 2593(c) used in education planning
Must distribute income to the child annually But doesn't require distribution of principal at age 21 |
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Section 2503(b) |
Mandatory income trust
Similar to 2593(c) used in education planning
Must distribute income to the child annually But doesn't require distribution of principal at age 21 |
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Grantor retained trust |
Popular form of irrevocable trust designed to allow grantor the retention of income or use of property for a limited period
GRAT and GRUT achieve transfer tax savings but not GRIT
Grantor retained annuity trust, unitrust or interest trust |
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What is lifetime gift exemption and applicable credit |
5,450,000 2,125,800
Adjusted for inflation yearly |
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Which is a grantor trust, unfunded or funded ILIT |
For income tax purposes, a funded ILIT is a grantor trust
An unfunded ILIT is not |
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2016 standard Deductions for Single Mfj Head Mfs |
Single- $6300 MFJ- $12,600 Head- $9300 MGS- $6300 |
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Who gets additional standard deduction |
Age 65 or older OR blind |
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Which is a grantor trust, funded or unfunded ILIT |
A funded ILIT is treated as a grantor trust |
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Which is a grantor trust, funded or unfunded ILIT |
A funded ILIT is treated as a grantor trust |
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Life insurance owned on another's life and policy owner dies, what is in his estate? |
If term life insurance Unused premium remaining as of owners death
Cash value insurance Interpolated terminal reserve + Unearned premiums |
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What's an IDGT |
Irrevocable trust Grantor is owner of trust for income tax purposes but not transfer tax purposes
As long as grantor isn't trustee too it's not in his gross estate
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Intentionally defective grantor trust |
