Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
57 Cards in this Set
- Front
- Back
|
What are the three basic forms of legal interest
|
Fee simple (absolute)=maximum ownership interest
Life estate=interest of owner terminates upon death Term of years (example=lease) |
|
|
What is a reversionary interest
|
Right of original owner or transferor to use possess and enjoy property after an intervening interest
|
|
|
Why is it important to distinguish present interest from a future interest
|
1. Only a gift of present interest in property entitles the transferor or donor to take the gift tax annual exclusion
2. Future interest are important in drafting irrevocable trust instruments for clients who wish to provide flexibility and direction in the distribution of their estate |
|
|
What is the difference between community property and common law
|
Common law allows ownership of property solely in ones one name
Community property each spouse has an undivided one half interest ina ll property belonging to the community |
|
|
What is quasi community property
|
property acquired by an individual whiloe a resident of a non community property state that would have been community property had the individual resided in a community property state at the time of acquisition. Such property is treated as individual property of the acquiring spouse until the death or divorce of the acquiring spouse.
|
|
|
What happens to property when one spoual joint tenant dies
|
The surviving spouse receives a stepped up basis in the 50% of the joint property that was included in the decedent's gross estate.
If community state, property both halves receive a step up in basis |
|
|
What is tenancy by the entirety?
|
a limited form of joint tenancy with right of survivorship that can exist ONLY between spouses.. It features creditor protection from the claims of each spouse's separate creditors. One spouse cannot sever interest w/o consent of the other It (unless one spouse xfers intreest w/o conset of other spouse??) AVOIDS probate. Each spouse owns 50% but it works like a JTWROS
|
|
|
What is a trust?
|
A legal entity that includes a grantor, beneficiary and trustee
|
|
|
What is probate?
|
the state adopted method of transferring ownership of assets from a decedent to heirs at death. There is also ancillary probate which I a separate probate proceeding when real estate is in a state other than the decedent's state of residence.
|
|
|
What types of transfers avoid probate?
|
1. Transfer by operation of law, e.g. JTWROS
2. Transfer by trust 3. Transfer by contract jtwros and tenancy entirety |
|
|
What is the simultaneous Death Act
|
Each joint tenant is presumed to have survived the other as long as each tenant's death occurs within 120 hours of the other's.simultaneous death clause is optionally inclded in will. A survivoship clause-beneficiary must survive a specified period beyond testators death to receive bequest
|
|
|
What are the advantages of a valid will?
|
1. can name an executor
2. can designate a guardian 3. can xfer property to anyone 4. can specifiy how estate taxes are apportioned 5. can contain provisions to establish trustz g. can name charitable beneficiaries |
|
|
What is a simple versus complex will
|
A complex will involves transfer (estate) tax planning. Simple will does not.
|
|
|
What is a codicil
|
Mechanism used to modify a will
|
|
|
What is abatement?
|
When the assets in a decedent's estate aren't sufficient to pay all bequests, the process of abatement reduces or eliminates bequests so all the debts and administrative expenses can be paid in full.
|
|
|
What is ademption
|
When a will leaves a specific item of property to an heir but the decedent no longer owns the property at the time of death.
|
|
|
What can be done to avoid will contests?
|
1. Do not disinherit any natural heir
2. Establish trust during lifetime to provide for testamentary disposition to heirs 3. Include an in terrorem clause in the will--this discourages an heir from challenging any provision by providing a complete disinheritance for the heir who makes the challenge. some states will not enforce this |
|
|
What is a testamentary trust
|
A trust created in a will. It is subject to probate
|
|
|
Which of the following statements regarding gift splitting is CORRECT?
I.If one spouse makes the entire gift, the annual exclusion can be doubled to $28,000 (for 2012). II.Gifts made from community property or JTWROS property held by spouses require a gift-splitting election. |
Only the first. gifts made from community property or from JTWROS property owned by spouses do not require a gift-splitting election.
|
|
|
In providing medical directives, explain the difference in power of a will vs. a power of attorney.
|
A living will addresses only the situation of a terminal illness in that it provides for the suspension of medical care in terminal illness.. A living will does not appoint a surrogate decision maker; in some states it can gover artificial nourishment is a direct instruction from the patient to his physician.
A durable power of attorney for health care (DPOAHC) is much broader in scope. It appoints a surrogate decision maker to act when the principal is unable to give informed consent. A durable power of attorney for health care (DPOAHC) is always a springing power. |
|
|
What is the major advantage of community property that common-law property states do not have.
|
At the death of the first community property spouse, both halves receive a stepped-up basis. This is NOT the case in a common law state.
|
|
|
What is quasi-community property?
|
A legal concept in six states (including CA) whereby out of state property acquired by an individual while a resident of noncommunity property state that would have been community property when acquired is treated as community property at the death of the acquiring spouse's.
|
|
|
What is recognized as separate property in a community property state?
|
Property one spouse acquires by gift or inheritance or property acquired before marriage
|
|
|
Does a joint tenant in JTWROS have the right to sever their interest in the property w/o consent of the others, thereby destroying the survivorship right?
|
Yes
|
|
|
Does a joint tenant in tenancy by the entirety have the right to sever their interest in the property w/o consent of the other spouse?
|
No
|
|
|
How can you avoid having a family limited partnership being given an investment company status and thus forcing the donor to recognize and pay taxes on any capital gains embedded in the contributed assets?
|
For a single donor, the primary means of not being construed to be an investment company is for less than 80% of the value of the contributed assets to consist of cash and marketable securities.
|
|
|
What are the exceptions when using the alternate ation date election?
|
The valuation date applies to all assets with two exceptions 1) wasting assets such as patents, annuities, installment notes that are valued at death; 2) assets disposed of after the date of death but before the alternate valuation date
|
|
|
What are the special double basis rules when a the FMV of a gift is less than the donor's basis and the donee sells the property at a price that is between the donor's adjusted basis and the FMV on the date of the gift.
|
Because the fair market value (FMV) on the date of the gift was less than the donor's (Joan's) adjusted tax basis, the double basis rule applies. Under the double basis rule, no gain or loss is recognized if the donee sells the property at a price that is between the donor's adjusted basis and the FMV on the date of the gift.
|
|
|
Are loans included in gross amount of gifts?
|
Gifts loans of $10K or less are not subject to gift tax unless the donee uses the proceeds to purchase income producing property
|
|
|
What are the xteristics of property owned as tenants by the entirety?
|
1) Can only be used by spouses. 2) Each spouse holds a joint interest in the property 50% 3) any transaction with the property requires the approval of both spouses acting as one. 4) upon the death of one owner, the property passes to the surviving spouse
|
|
|
What is estate planning
|
accumulation, management, conservation, xfer of wealth, considering legal tax and personal objectives.
|
|
|
What are the benefits of estate planning
|
Reduce or eliminate potential estate tax, arrange for efficient business succession, health care decisions, avoid probate, pass property to individuals of choice
|
|
|
What is the estate planning process
|
Gather client info, establish objectives, DEFINE problem areas, determine liquidity needs now and at regular intervals, establish priorities for objectives, develop plan
|
|
|
What are adverse consequences of intestacy
|
court will select who benefits, assets will not be left to charity, costs
|
|
|
What are the general provisions of a will
|
An introductory clause, establishent of testators domicile, declaration, revocation of all prior wills, id of executor, payments of debts clause, payment of taxes clause, disposition of tangible personal property clause, disposition of real estate clause, specific bequests of intangi les and cash, a residuary clause, an appointment and powers clause thant names executor and guardian, a testator;s signature clause, a witness clause.
|
|
|
What is per stirpes distribution
|
By roots=members of a designated class inherit property as members of the class.
|
|
|
What is per capita distribution
|
per head
|
|
|
What rules could make a trust agreement void
|
rules against perpetuities and cause problems for a will
|
|
|
What is a letter of personal instruction and what should it contain
|
Details and wishers regarding tangible possessions of nominal value, funeral arrangements. These cause problems when put into a will rather than a letter of personal instruction (side letter)
|
|
|
What is in a will that is not in a durable health power of attorney
|
advance medical directives and a narrow range of issues related to terminal patients,
|
|
|
What are fixtures
|
personal property affixed to real property
|
|
|
How does the FDIC treat JTWROS for the purpose of insurance
|
treated as individualS. Divides insurance by # of owners
|
|
|
What are the tax consequences of nonspousal JTWROS
|
if the tenants contributed unequal amounts toward the purchase price, the tenant contributing the greater percentage has made a gift to the other tenants.
|
|
|
What are the estate tax consequences of nonspousal JTWROS
|
The percentage of contribution rule determines what portion of the property will be included in the decedents gross estate. Initially 100% goes in estate of person who dies. Then it will be determined by contribution
|
|
|
What is an advantage of community property
|
one half of the value of all community property is included in the probate estate and gross estate of first spouse to die.. BOTH halves of community property receive a step-up in basis to FMV at death of first spouse
|
|
|
What are the exceptions to community property
|
inherited property, acquired prior to marriage, gift, court award due to personal injury, donation from other spouse
|
|
|
What happens when a community state couple moves to a common law state
|
the xracter does not change. The spouses may choose to divide the property upon arrival in a common law state
|
|
|
What are advantages of probate
|
protests creditors, 0rovides clean title
|
|
|
How are assets xfered at death
|
by will, law of intestacy, contract operation of law
|
|
|
What is an assumption made about joint tenancy
|
Each tenant is considered to have an equal share.
|
|
|
Which is the only title that can have unequal ownership
|
Tenants in common
|
|
|
What are the estate tax ramificatiobs of JTWROS
|
JTWROS avoids probate because the decedent's share of the property passes to the surviving tenants automatically by operation of law. If JTs are not married, the percentage of contribution rule determines what portion of the property will be included in the decedents gross estate If the JT are spouses, one half of the property is included in the gross estate of the first to die, regardless of amt spouse contributed..
|
|
|
What percentage does each spouse own in tenancy of the entirety
|
50% Transferable with spouse consent survivorship
|
|
|
What is the inherited basis of fee simple, tenants in common, joint tenancy, tenants entirety
|
FS=FMV
TC= step up to FMV for portion owned by deceased JT=step up to FMV for portion owned by deceased (common law) TE=step up to FMV for portion owned by deceased CP=FMV step up for both halves. transferable with spouse consent |
|
|
What is another name for POD (pay on death), TOD(transfer on death)
|
Totten trust
|
|
|
Where should instructions to a doctor for terminal illness be documented
|
Medical directive or in will. It is not covered in power of attorney for health.
|
|
|
What are the new rules for 2013
|
step up to FMV for inherited property, portability of exemption, sale of inherited property ALWAYS LONG TERM
|
