estate planning chapter 10

donee (of a power of appointment

)- the person to whom a power of appoinment is given also called the holder, who selects the appointee to receive an estate or an income therefrom

donor (of a power of appointment)-

)- the testator or settlor who creates and confers a power or authority upon another( called the donee) to appoint; that is to select the person to receive an estate or an income therefrom after the testators or donee's death

alternate valuation date

- a date six months from the date of death or the date the property is disposed by the estate whichever comes first

legal life estate

- a life estate created by operation of law and not directly by the parties themselves

special or limited power of appointment-

- a power of appointment that cannot be exercised in favor of the donee or his estate but only in favor of identifiable persons other than the done

Marital deduction

- an unlimited amount of decedent's gross estate, which may be given to the surviving spouse without being subject to federal estate tax levied against the decedents estate

Charitable deduction

- any contribution by a person to a qualified charity or other tax-exempt institution for which the taxpayer can claim an income tax deduction

Disclaimer

- the right of a beneficiary or heir to refuse a gift by will, trust, or inheritance without any adverse tax consequences

general power of appointment

- the right to pass on an interest in property to whomever a done chooses, including himself, his estate, his creditors, or creditors of his estate

what are The five adverse factors that will diminish an estate

1. Federal gift and estate taxes 2. State death taxes 3. Administration expenses 4. Forced liquidation 5. Termination of employment

Charitable remainder

a gift to a qualified charity after an intervening estate that qualifies as a tax deduction under certain circumstances

custodian

a person who has charge or custody of property for the benefit of another, usually for the benefit of another usually for a minor

Charitable remainder annuity trust

a trust that must pay the noncharitable income beneficiary or beneficiaries a sum certain annually for life, or more frequently if desired that is not less than 5 percent of the initial net fair market value of all property placed in the trust as determined for federal tax purposes

Charitable remainder unitrust-

a trust that specifies the noncharitable income beneficiary or beneficiary or beneficiaries are to receive annual payments for life based on a fixed percentage of the net fair market value of the trust assets as determined each year

(qualified terminable interest property) trust QTIP-

a type of trust that will qualify for the marital deduction in which the surviving spouse receives all the income for life but is not given a general power of appointment

custodianship

an alternative to a trust or guardianship that allows a person to be appointed by the court to manage property for the benefit of a minor

Present interest

an immediate and unrestricted interest in real or personal property including the privilege of possession or enjoyment of the property

Capital gains tax

an income tax on profits from the sale or exchange of a capital asset at a lower rate than the rates applied to ordinary income.

stepped-up basis

an increase in the income tax basis of appreciated property. The property is valued on the date of death or the alternate valuation date

Terminable interest-

an interest in property that terminates on the death of the holder or on the occurrence of some other specified event. The transfer of a terminable interest from one spouse to the other spouse does not qualify for the marital deduction

• The value of real or person property given by a will or trust to certain kinds of qualified charities is deductible from what

donors gross estate and federal estate tax

t/f implied trust arent operation of law

false they are

t/f passive trust are used when you want the ownership to be published

false they are used when you want ownership to be secret

Gift splitting-

for gift tax purposes, an election by spouses to make a gift by one of them to a third party as being made one-half by each spouse

Estate equalization

rearranging property ownership of total estate assets owned by the spouses so that each spouse's individual estate has approximately the same value

whats the only disadvantage to a grantor trust

the cost

appointee-

the person who is to receive the benefit of the power of appointment

Bypass trust

this trust also called trust B of an A-B trust, credit shelter trust, residuary trust, or family trust, is an estate planning device whereby a portion of a deceased spouses estate passes to a trust rather than directly to the surviving spouse, hence reducing the likelihood that the surviving spouse's subsequent estate will exceed the federal estate tax threshold.

t/f community trust is governed by the government

true

t/f if you dont state whether or not the trust is revocable or irrevocable or not it automatically goes to irrevocable

true

t/f anyone can be a trustee on a land trust

true even a bank