Estate Final, Estate Final UVU

Of the following, which property transfers at death by contract? A. Roth IRAs. B. Property titled Joint Tenancy with Rights of Survivorship (JTWROS). C. An Irrevocable Living Trust. D. A Grantor Retained Annuity Trust (GRAT).

The correct answer is a. Only the Roth IRA transfers property at death by contract. The beneficiary designation is the contract, and at the death of the account owner, the account assets will be transferred to the beneficiary. All of the others transfer by state property titling law or by state trust law.

Chris and Jenn made the following gifts this year: Chris gave their son, Evan, a car worth $4,000 owned as community property. Chris also gave Evan his stamp collection (separate property) valued at $60,000. Chris gave his brother Stephen $20,000 of Chris' separate property so Stephen could purchase a new home. Chris gave his sister Heather $4,000 in cash from his and Jenn's joint checking account which consists only of community property. He also gave Heather a piece of land he purchased before his marriage to Jenn, valued at $49,000. Assuming Jenn did not want to split gifts, what is Chris' total taxable gifts after taking into consideration any available deductions or exclusions. A. $36,000. B. $91,000. C. 104,000. D. $133,000.

b (couldn't post picture of answer)

Curtis, who was married, recently died owning several assets. Given the assets below, determine whether each asset should be included in Curtis' probate estate. a)Yes, this item is included in the probate estate. b)No, this item is not included in the probate estate. 1) His personal residence worth $250,000 titled fee simple. 2) A $500,000 life insurance policy on his own life. His daughter Ann was the named beneficiary and received the proceeds 40 days after Curtis' death. 3) Curtis' portion of acreage owned as community property with his wife. 4) A car owned jointly with his son Kevin as JTWROS.

1) Yes 2) No 3) Yes 4) No Items owned fee simple and as community property are always included in the gross estate. The life insurance policy had a designated beneficiary who was alive at Curtis' death because she received the property, thus the proceeds are not included in Curtis'

Lisa made the following transfers during 2017: $17,000 to her grandson for his law school tuition. $1,000 to her neighbor to help him pay a hospital bill. A transfer of property valued at $100,000 to a GRAT. Lisa retained an annuity valuedat $40,000 and her daughter is the remainder beneficiary. What is the total amount of Lisa's taxable gifts for 2017? A. $48,000. B. $60,000. C. $63,000. D. $65,000.

C

Big Mike, a very generous man, has given his granddaughter, Jordan, a gift equal to $5.490 million last year and paid any relevant taxes. He now wants to give his grandson, Colin, a gift of $5.490 million plus the annual exclusion of $14,000 on his birthday and wants to know what his total outflow will be for the gifts and any other related taxes. The amount of his cash flows related to the gift to Colin is? A. $5.464 million. B. $7.644 million. C. $9.824 million. D. $10.774 million.

D $5.49 Gift $5.504 x 0.40 GST $2.196 $2.196 GST Gift Tax $3.074 10.774 $5.504 Gift - 14 $5.490 $2.196 GST $7.686 0.40 $3.074 Gift Tax

Rosie and her brother Michael decided recently to purchase an RV together. They both want to use the RV to take their families camping. The price for the RV was $10,000. Since Michael expects to use the RV 60% of the time and Rosie 40% of the time, Michael contributed $6,000 and Rosie contributed $4,000. Their ownership percentage equals their contribution percentage. Which type of property titling must the RV be to reflect their ownership interest? A. Sole Ownership. B. JTWROS. C. Tenancy in Common. D. Tenancy by the Entirety.

Fee Simple ownership is for one owner. They cannot own the property JTWROS because they own unequal ownership percentages. Tenancy by the Entirety and Community Property must be owned between married people.

Elizabeth, who is not a licensed attorney, recently started her own financial planning practice. Which of the following activities would be considered the unauthorized practice of law? A. Preparing a last will and testament for her first client. B. Helping clients to identify their financial planning goals. C. Preparing financial statements for prospective clients. E. Referring clients to her brother, Jack, who happens to be a licensed attorney.

The correct answer is a. Only licensed attorneys should prepare last will and testaments for clients.

Claude decides to prepare his will, but does not want to seek the help of an attorney. Claude handwrites all of the provisions of the will and does not have it witnessed by anyone. What type of will does Claude have, if any? A. Holographic. B. Nuncupative. C. Statutory. D. Claude does not have a will.

The correct answer is a. A holographic will is one that is handwritten. Answer b is incorrect because a nuncupative will, which is not valid in all states, is an oral will. Answer c is incorrect because a statutory will must generally be prepared by an attorney and must be witnessed.

Dawson recently prepared a last will and testament in which he left all of his assets to his girlfriend, Jen. Dawson and Jen broke up last night and now Dawson wants to leave all of his worldly possessions to his best friend, Joey. What can Dawson do to prevent Jen from receiving any of his assets? A. Dawson can shred the will under which Jen receives all of his assets. B. Dawson can send Jen an email telling her that he is cutting her out of his will. C. Dawson can tell Joey that he plans to write a new will. D. Dawson can give the will to Joey.

The correct answer is a. A will can be revoked by physically destroying the will. None of the other answers would effectively revoke Dawson's will.

Ben is interested in using a Qualified Personal Residence Trust (QPRT) as part of his estate plan. Which of the following are false regarding QPRTs? A. At the end of the trust term, the house will revert back to the grantor. B. With a QPRT, the grantor must survive the trust term to realize any estate tax savings. C. A QPRT can be used with either primary residences or vacation homes. D. The grantor will have made a taxable gift upon the creation of the QPRT

The correct answer is a. At the end of the trust term, ownership of the house is transferred to the beneficiaries of the QPRT. All of the other statements are true.

Eugene is considering having his attorney prepare a springing power of attorney in which his gives his friend, Eleanor, the power to handle his finances. Why should Eugene include such a document in his overall estate plan? A. In the event that Eugene becomes disabled, Eleanor will be able to pay Eugene's bills. B. Eleanor is not legally competent. C. Eleanor is only 16 years old. D. Eugene wants Eleanor to be able to handle all of his finances immediately.

The correct answer is a. Eugene should not make Eleanor the agent of his springing power of attorney if she is not legally competent or is not of the age of majority. If Eugene wants Eleanor to be able to handle his finances immediately, he should not use a spring power of attorney, which only becomes effective upon the principal's disability or incapacity.

Bernard made a gift of $500,000 to his brother in 1997. At the time of the gift, the applicable gift tax credit was $192,800, but due to Bernard's prior taxable gifts he paid $200,000 of gift tax. When Bernard died in 2017, the applicable gift tax credit had increased to $2,141,800. At Bernard's death, what amount related to the $500,000 gift to his brother is included in his gross estate? A. $0. C. $153,000. D. $200,000. E. $500,000.

The correct answer is a. Gift tax paid on gifts made within three years of a decedent's date of death is included in the decedent's gross estate. In this case, Bernard made the gift more than three years before his death, so $0 is included in his gross estate related to this gift. The value of the gift, $500,000 is added to the decedent's taxable estate to determine the tentative tax base and Bernard will get credit for the gift tax paid of $200,000.

Bernard made a gift of $500,000 to his brother in 1997. At the time of the gift, the applicable gift tax credit was $192,800, but due to Bernard's prior taxable gifts he paid $200,000 of gift tax. When Bernard died in 2017, the applicable gift tax credit had increased to $2,141,800. At Bernard's death, what amount related to the $500,000 gift to his brother is included in his gross estate? A. $0. C. $153,000. D. $200,000. E. $500,000.

The correct answer is a. Gift tax paid on gifts made within three years of a decedent's date of death is included in the decedent's gross estate. In this case, Bernard made the gift more than three years before his death, so $0 is included in his gross estate related to this gift. The value of the gift, $500,000 is added to the decedent's taxable estate to determine the tentative tax base and Bernard will get credit for the gift tax paid of $200,000.

Which of the following is not a common estate planning goal? A. Maximizing transfer costs. B. Minimizing transfer taxes. C. Providing for liquidity at death. D. Fulfilling client's healthcare decisions.

The correct answer is a. Minimizing transfer costs, not maximizing transfer costs, is a common estate planning goal. All of the other answers are common estate planning goals.

Under what circumstances would property be subject to ancillary probate? A. If the decedent is a resident of one state and owns real property in another state. B. If the decedent is a tenant in common with an unrelated person. C. If the decedent was a resident of a community property state. D. If the decedent owns a life estate in real property located in a state other than his state of residence.

The correct answer is a. None of the other answers describe circumstances under which the decedent's property would be subject to ancillary probate.

Elizabeth, who is not a licensed attorney, recently started her own financial planning practice. Which of the following activities would be considered the unauthorized practice of law? A. Preparing a last will and testament for her first client. B. Helping clients to identify their financial planning goals. C. Preparing financial statements for prospective clients. E. Referring clients to her brother, Jack, who happens to be a licensed attorney.

The correct answer is a. Only licensed attorneys should prepare last will and testaments for clients.

Which of the following is true concerning the 5/5 Lapse Rule? A. The 5/5 Lapse Rule deems that a taxable gift has been made where a power to withdraw in excess of $5,000 or five percent of the trust assets is lapsed by the powerholder. B. The 5/5 Lapse Rule only comes into play with a single beneficiary trust. C. Amounts that lapse under the 5/5 Lapse Rule qualify for the annual exclusion. D. Gifts under the 5/5 Lapse Rule do not have to be disclosed on a gift tax return.

The correct answer is a. Option a is the definition of the 5/5 Lapse Rule. Option b is incorrect because the 5/5 Lapse Rule does not come into play with a single beneficiary trust because a person cannot make a taxable gift to himself. Option c is incorrect because amounts that lapse under the 5/5 Lapse Rule do not qualify for the annual exclusion. Option d is incorrect because gifts under the 5/5 Lapse Rule do have to be disclosed on a gift tax return.

Fred, the founder and CEO of WonderCo, recently passed away. At his death, Fred owned 80% of the stock of WonderCo; and the WonderCo stock was his only asset. WonderCo is a publicly traded company. Which of the following discounts would be applicable to Fred's WonderCo stock? A. Key Person Discount. B. Minority Discount. C. Both a and b. D. Neither a nor b.

The correct answer is a. Option b is incorrect because Fred owns a controlling interest in WonderCo; therefore, a Minority Discount is not applicable. Therefore, option c is also incorrect. Option d is incorrect because answer a is correct; since Fred was both the founder and CEO of WonderCo, his stock is entitled to a Key Person Discount.

Which one of the following transfers made this year by 85-year old Jennifer is not sooner or later subject to the Generation Skipping Transfer Tax? A. A gift of a remainder interest in a trust just established which is paying an income interest to Jennifer. The remainderman is a grandson whose parents died in an auto accident earlier this year before the inception of the trust. B. A transfer by Jennifer of $15,000 to a UTMA account established by her son for Jennifer's granddaughter. C. An irrevocable trust which pays income to Jennifer for 10 years and then pays the remainder to her grandniece who is only 25 years younger than Jennifer. D. An irrevocable trust which pays income to Jennifer's daughter for life, then distributes the remainder to the grandchild of a friend and that grandchild is currently 31 years old.

The correct answer is a. Options b, c, and d all have skip persons as transferees. Only the grandson in a is not a skip person. His parent's death moved him up a generation. The 37½ year rule does not apply to lineal descendants. The 31 year old may or may not receive assets in option d.

Which of the following applies to the income tax or estate tax treatment of life insurance policy proceeds? A. Benefits received under a periodic settlement option are partially subject to income tax. B. Death proceeds are includible in the gross estate of the decedent if the decedent was the insured regardless of ownership. C. Payments under a cashout settlement option are partially subject to income tax. D. For a personally owned life insurance policy premiums are deductible if made as part of a court ordered child or spousal support plan (QDRO).

The correct answer is a. Periodic annuity settlement benefits are not fully subject to income tax because the recipient has a tax basis equal to the original proceeds. Proceeds are includible in estate for tax purposes only if grantor retained an incident of ownership. Life insurance premiums are not deductible when personally owned, and the 3-year rule applies to a life insurance policy regardless of irre- vocability.

Eric died on July 24, 20xx. At the time of his death, he owned 1,000 shares of Jefferson Crab stock. Given the daily trade prices for Jefferson Crab surrounding Eric's date of death, at what value will the Jefferson Crab be included in Eric's gross estate? Price Open High Low Close Thursday, July 15, 20xx $101 $107 $95 $105 Monday, July 19, 20xx $104 $108 $100 $103 Tuesday, July 27, 20xx $103 $105 $101 $104 Wednesday, July 28, 20xx $108 $112 $108 $109 A. $103,290. B. $103,440. C. $103,500. D. $104,000.

The correct answer is a. Since the stock is not traded on the date of Eric's death, the value is determined utilizing the artificial valuation formula in the text, the average of the high and low for the 2 relevant dates, Monday and Tuesday. [($104 x 2) + ($103 x 5)]/7 = $103.29 x 1,000 shares = $103,290. Saturday and Sunday are not counted as trading days for purposes of the calculation.

Mrs. Riley dies in 2017 leaving her entire $7.2 million estate through her will to her penniless husband, John. His estate goes to their children at his death. He has terminal cancer with a life expectancy of only 1 to 2 years. The alternative valuation date value of Mrs. Riley's entire estate is equal to $7,000,000. Select the post mortem technique John should utilize to reduce the overall estate tax liability of both estates: A. Elect Portability. B. Elect to use the alternative valuation date. C. Disclaim $2,000,000 and elect to use the alternative valuation date. D. Do Nothing.

The correct answer is a. The alternative valuation can only be used if it reduces both the gross estate (yes) and reduces the estate tax due (no, because it was all left to a spouse so no estate tax would be due in either situation). Since the new estate law permits the portability of the estate applicable exclusion between spouses, disclaiming any of the property is not necessary as Mrs. Riley's unused credit can be utilized by John in addition to his own (up to $10,980,000 in 2017).

Paul would like to transfer a substantial portion of his net worth to his son, Chad. Paul believes that the assets will appreciate in value before his death, but Paul does not need any of the assets to sustain his current standard of living. However, Paul is concerned about Chad's ability to manage the assets and is afraid Chad may squander the assets. Of the following transfers, which would ensure that the assets are excluded from Paul's gross estate and could also ensure that Chad cannot squander the assets? A. An Irrevocable Trust. B. An Outright Transfer. C. An Installment Sale. D. A Grantor Retained Annuity Trust.

The correct answer is a. The assets transferred to the irrevocable trust would be excluded from Paul's gross estate, and would be subject to the management of the trustee as directed by Paul. As such, Chad would not be able to access the assets. An outright transfer (Option b) would not meet Paul's requirements because Chad would be able to access the assets immediately. Option c, an installment sale, would not meet Paul's requirements because Chad would be able to access the assets immediately, and any monies returned to Paul as installment payments would be included in Paul's gross estate. Option d does not meet Paul's requirements because if Paul dies during the term of the GRAT, the assets will be included in Paul's gross estate.

You are opening a new financial planning practice and you would like to put together a team of experts to help your clients. Which of the following groups represents the best team to help your clients? A. Financial planner, CPA, and attorney. B. CPA, psychiatrist, and insurance salesman. C. Financial planner, attorney, and real estate agent. D. Attorney, insurance salesman, and IRS agent.

The correct answer is a. The best team for your client would include a financial planner, CPA, and attorney. A licensed insurance specialist is also a good asset to an estate planning team, but the team described in option b is not as good of a team overall as the team in option a.

Chris and Jenn made the following gifts this year: Chris gave their son, Evan, a car worth $4,000 owned as community property. Chris also gave his son his stamp collection (separate property) valued at $60,000. Chris gave his brother Stephen $20,000 of Chris' separate property so Stephen could purchase a new home. Chris gave his sister Heather $4,000 in cash from his and Jenn's joint checking account which consists only of community property. He also gave Heather a piece of land he purchased before his marriage to Jenn, valued at $49,000. After the gift, how is Evan's ownership of the car classified? A. Sole Ownership. B. Joint Tenancy with Chris. C. Tenancy in Common with Chris and Jenn D. Community Property with Evan's wife Michelle.

The correct answer is a. The car is owned by Chris as fee simple sole ownership. There is no indication that Chris or Jenn retained any interest in the car after the gift. Even though Evan is married, a gift to an individual would not be community property.

Which of the following statements accurately reflects the nature of buy-sell agreements? A. A stock redemption plan must have a corporation as a party to the contractual arrangement. B. A stock redemption plan increases the cost basis of surviving shareholders. C. Under a cross-purchase plan funded with life insurance, premiums paid are tax deductible to the payor. D. Proceeds of a life insurance policy owned by a surviving shareholder must be included in the gross estate of the decedent.

The correct answer is a. The corporation must be a party to the stock redemption plan. A stock redemption plan is a stock purchase by a corporation, so the cost basis of the surviving shareholders are not affected, thus they do not receive a step up in basis. Proceeds of a policy owned by a surviving shareholder are not includible in the decedent's gross estate. Premiums are not tax deductible.

Kristi transferred $10,000,000 to the Kristi Family Trust. The trust is designed as an irrevocable grantor trust. Kristi retained a 5% annuity payout from the trust for the lesser of five years after the establishment of the trust or until her date of death, and she has named her only nephew, Alex, as the remainder beneficiary of the trust. Of the following statements regarding Kristi's transfer to this trust, which is true? A. Because Kristi retained the annuity interest from the trust, if she dies during the five years after the establishment of the trust, the full fair market value of the trust assets will be included in her gross estate. B. Because Kristi retained the annuity interest from the trust, she has not made a completed transfer (for gift tax purposes) to her nephew at the date she transferred $10,000,000 to the Kristi Family Trust. C. Any income within the Kristi Family Trust is taxed to the trust. D. The Kristi Family Trust is a testamentary trust because the term of the trust relates to her death.

The correct answer is a. The fact pattern describes a Grantor Retained Annuity Trust (GRAT) established by Kristi. If Kristi dies during the term of her annuity interest, the full fair market value of the trust assets will be included in her gross estate. Option b is false because the irrevocable transfer of the remainder interest in the trust is a completed transfer and therefore a gift. Option c is false because the income of a grantor trust is taxable to the grantor. Option d is false because the trust is an inter vivos trust (created during the grantor's life), not a testamentary trust (created in a decedent's will).

Melissa is a very generous single woman. Before this year, she had given $2,000,000 in taxable gifts over the years. In the current year, Melissa gave her daughter Riley $100,000 and promptly filed her gift tax return. Melissa did not make any other gifts this year. How much gift tax must Melissa pay the IRS because of this transaction? A. $0. B. $25,900. C. $30,450. D. $711,250.

The correct answer is a. The problem states that she has given over two million dollars in taxable gifts therefore she has an unused amount of her $5,490,000 (2017) exclusion remains. The calculation is as follows: $100,000 - $14,000 = $86,000 + $2,000,000 = $2,086,000 total taxable gifts (no gift tax due at this time).

Melissa is a very generous single woman. Before this year, she had given $2,000,000 in taxable gifts over the years. In the current year, Melissa gave her daughter Riley $100,000 and promptly filed her gift tax return. Melissa did not make any other gifts this year. How much gift tax must Melissa pay the IRS because of this transaction? A. $0. B. $25,900. C. $30,450. D. $711,250.

The correct answer is a. The problem states that she has given over two million dollars in taxable gifts therefore she has an unused amount of her $5,490,000 (2017) exclusion remains. The calculation is as follows: $100,000 - $14,000 = $86,000 + $2,000,000 = $2,086,000 total taxable gifts (no gift tax due at this time).

Chad and Ross (both males) have been involved in an intimate relationship for the past 25 years. Chad's family is quite wealthy, and has provided Chad with every "extra" in life. Unfortunately, Chad's family is also very conservative and they do not approve of Chad's relationship with Ross. Chad was diagnosed with cancer last year and given only 12-15 months to live. Chad plans to leave the substantial wealth he has inherited over the years to Ross. After a few too many glasses of wine last Christmas, Chad's mother proclaimed, "Chad, I hope you have a great estate planning attorney, because I will spend every penny I have to keep Ross from inheriting a dime from you!" In a fit of rage, Chad has come to you, an estate planning attorney, and asks you to recommend ways he can ensure that Ross will receive his assets. Which of the following would you be least likely to recommend to Chad to meet his objectives? A. A well-drafted will leaving everything to Ross with a no-contest clause. B. A revocable living trust created and funded now with Ross as the beneficiary at Chad's death. C. An irrevocable trust created and funded with Chad as the income beneficiary and Ross as the remainder beneficiary. D. Retitling all assets as JTWROS.

The correct answer is a. While all of these options may seem to accomplish Chad's goal, option a has the most inherent risk. The trust options and titling option are much less likely to be susceptible to fraud and undue influence claims. The use of a will in this situation is very susceptible to a contest. The no-contest clause is irrelevant because Chad did not leave anything to anyone else to encourage them not to contest. Chad and Ross could get married.

Natalie and her younger sister Kate purchased a beach-front condominium together 15 years ago. They own the property as a joint tenancy with rights of survivorship. At the time of the purchase, Natalie, being the older sister, was in a better financial position. Therefore, Natalie contributed $300,000 and Kate contributed $100,000 to the purchase price. The property is now worth $800,000. Which of the following statements is correct? A. Natalie and Kate each own 50% of the condo. B. If Natalie were to die today, her share of the condo would transfer to her husband Brian. C. If Kate were to die today, Natalie's new basis in the property would be $400,000. D. If Natalie and Kate were to disagree on how the property was being managed, the only way they could partition their share of the property would be to find a willing buyer that would purchase both of their interests.

The correct answer is a. Because the property is owned JTWROS they automatically own 50% each. Answer b is incorrect because if Natalie were to die today, then her share of the condominium would transfer to Kate. Answer c is incorrect because if Kate died today, then Natalie's new basis would be $500,000 (Natalie's original $300,000 basis and Kate's step-to fair market value basis of $200,000 based on the contribution rule). Answer d is incorrect because if they disagree on how the property is being managed then either one can easily sell their share to any person. They do not need the consent of the other party.

Alton would like to transfer the ownership of his Picasso painting to his son Edgar, but Alton would like to continue to have the painting hanging in his house. Which of the following would you recommend to Alton? A. TPPT. B. CRAT. C. QPRT. D. FLP.

The correct answer is a. Option b is incorrect because Alton's son Edgar is not a charity. Option c is incorrect because a QPRT, or Qualified Personal Residence Trust, is a special form of a GRAT to which the grantor contributes his personal residence. Option d is incorrect because a FLP would be more appropriate for transferring ownership of a family business than ownership of a paint- ing. Option a is correct because TPPTs or Tangible Personal Property Trusts are funded with personal property and the grantor retains the right to use the property that has been trans- ferred to the trust.

Which of the following is NOT a terminable interest? A. An ownership interest in a life insurance policy. B. A life estate in a home. C. An interest in a patent. D. An interest in property for a term equal to an individual's life.

The correct answer is a. (Chapter 10) The ownership interest of a life insurance policy is not a terminable interest. The ownership interest does not terminate. All of the other interests listed are terminable interests. A life estate is a terminable interest because the interest in the property terminates at the individual's death. An interest in a patent is a terminable interest because a patent right terminates after a certain period of time. Option d describes a life estate, so it is also a terminable interest.

Which of the following is NOT a terminable interest? A. An ownership interest in a life insurance policy. B. A life estate in a home. C. An interest in a patent. D. An interest in property for a term equal to an individual's life.

The correct answer is a. (Chapter 10) The ownership interest of a life insurance policy is not a terminable interest. The ownership interest does not terminate. All of the other interests listed are terminable interests. A life estate is a terminable interest because the interest in the property terminates at the individual's death. An interest in a patent is a terminable interest because a patent right terminates after a certain period of time. Option d describes a life estate, so it is also a terminable interest.

Jaime, a wealthy doctor, wrote a will many years ago after his first child was born. His will leaves his home on Drury Lane to his daughter, Taylor. Jaime sold the home on Drury Lane last year and purchased a new home on Mulberry Lane. The extinction of Taylor's legacy is called what? A. Abatement. B. Ademption. C. Surety. D. Letters testamentary.

The correct answer is b. Abatement is the reduction in an estate when there are insufficient assets to satisfy all legatee provisions. A surety bond is a bond posted by the administrator of the probate process. Letters testamentary is the document given to the executor from the probate court authorizing the executor to act on behalf of the estate.

Diana's will leaves all of her property to her husband, George. If he does not survive her by more than eight months, the property will transfer to Diana's only daughter. Diana dies on May 1 and George dies on the following December 1. Of the following statements, which is correct? A. Diana's property will transfer to her daughter and the property will be eligible for the unlimited marital deduction in Diana's estate. B. Diana's property will transfer to her daughter and the property will not be eligible for the unlimited marital deduction in Diana's estate. C. Diana's property will transfer to George and the property will be eligible for the unlimited marital deduction in Diana's estate. D. Diana's property will transfer to George and the property will not be eligible for the unlimited marital deduction in Diana's estate.

The correct answer is b. Diana's property will not transfer to George because he failed to survive her for at least eight months. Therefore, both answer c and answer d are incorrect. Option a is incorrect because the property that transfers to Diana's daughter will not be eligible for the unlimited marital deduction in Diana's estate. For transfers to a surviving spouse to qualify for the unlimited marital deduction, the survival period in the survivorship clause cannot exceed six months. Due to the length of the survivorship clause, the property would not have qualified for the unlimited marital deduction even if George survived Diana by more than eight months

Kerri was recently diagnosed with an inoperable brain tumor. While the tumor has not caused any noticeable mental problems yet, Kerri's brain function is expected to deteriorate substantially over the next three years, resulting in significant medical expenditures. Kerri's sister Ann was diagnosed with the same illness 2 years ago. Kerri's only other surviving relatives include three brothers, two nieces, and one nephew. Although Kerri's brother invited her to live with him, Kerri sold her home in Oklahoma last month and moved to an assisted living facility in South Texas that specializes in caring for patients with brain tumors. Kerri's gross estate is currently valued at $8,000,000, including $2,000,000 in personal property, $2,000,000 in a retirement account, and $4,000,000 in a closely held family business. The only estate planning document Kerri currently has is a valid will that was executed a year ago. Kerri reviewed the will after her diagnosis and is confident that all of her wishes have been properly documented. Which of the following statements is correct? A. Since Kerri has a valid will, there is no need for her financial planner to review or update her will. B. If Kerri were to decide to make changes to her will utilizing a codicil, she would still have to be competent to execute such a document for it to be considered valid. C. Kerri should begin a gifting program of $14,000 per year per person to her surviving relatives. D. Kerri should execute a general power of attorney and a durable power of attorney for health care with Ann as her appointed agent.

The correct answer is b. Kerri should have her will reviewed because she moved from Oklahoma to Texas. Moving from one state to another necessitates a review of the will to ensure that all new state laws are met. A codicil is an amendment or change to the will and to be valid the testator must be competent when the codicil is executed. Option c is incorrect because even though her estate is over the applicable exclusion, a gifting program is not appropriate because of the significant medical expenses she is expected to incur over the next three years. Option d is incorrect; Ann is not the appropriate person to be Kerri's agent because Ann also has a brain tumor and there- fore, could not make decisions for Kerri.

Nate owns the following property: A personal residence titled fee simple valued at $500,000. A $500,000 life insurance policy on his own life. The only named beneficiary is Nate's brother Jaime, who died 6 months ago leaving two children, Michael and Kristi. A car valued at $15,000 titled JTRWROS with Nate's mother. An IRA valued at $400,000 with Nate's mother as the named beneficiary. What is the current value of Nate's probate estate? A. $500,000. B. $1,000,000. C. $1,400,000. D. $1,415,000.

The correct answer is b. The probate estate will include the personal residence and the life insurance policy. The life insurance policy is included because the named beneficiary was already dead at Nate's death. The car is not included because of the JTWROS ownership, thus it transfers by operation of law. The IRA is not included because there is a living named beneficiary and thus will transfer via contract law.

Which of the following statements is false? A. The unlimited marital deduction is a deduction from a decedent's adjusted gross estate to arrive at the decedent's taxable estate. The unlimited marital deduction is limited to the value of the assets included in the decedent's gross estate which are transferred to the decedent's surviving spouse. B. The credit for tax paid on prior transfers was repealed in 2005. At that time, the credit became a deduction. C. If the sum of a decedent's gross estate and lifetime adjusted taxable gifts is less than the applicable estate tax credit equivalency amount for the year of the decedent's death, the executor of the decedent's estate does not have to file an estate tax return. D. Jesse gave his mom property valued at $100,000 six months before her death. Jesse's adjusted basis in the property was $45,000. Jesse was the sole heir of his mother's estate, and the same property was distributed from his mother's estate to him. At his mom's date of death, the property had a fair market of $105,000. Jesse's adjusted basis in this property is $45,000.

The correct answer is b. Option b is a false statement. The credit for tax paid on prior transfers was NOT repealed in 2005. The state death tax credit was repealed in 2005 and was replaced with a deduction. All of the other statements are true statements.

Which of the following is an advantage of a revocable living trust? A. Reduction in federal estate taxes. B. Avoidance of probate. C. Removal of asset appreciation from the grantor's gross estate. D. Distribution of the trust assets according to the terms of the grantor's will.

The correct answer is b. Option b is an advantage of using a revocable living trust. Option a is incorrect because use of a revocable living trust does not reduce the grantor's federal estate taxes because the full fair market value of the trust assets are included in the grantor's gross estate. Option c is incorrect for the same reason. Option d is incorrect because the trust agreement, not the grantor's will, controls the distribution of the trust assets.

Which of the following accurately describes a life estate? A. An interest in property for a specified number of years. B. An interest in property that ceases upon the death of the owner of the life estate. C. An undivided interest in property held by two or more related or unrelated persons. D. A complete interest in property with all the rights associated with outright ownership.

The correct answer is b. Option b is the definition of a life estate. Option a is the definition of an interest for a term. Option c is the definition of tenancy in common. Option d is the definition of fee simple.

Robbie transferred $100,000 to an irrevocable trust for the benefit of his minor child, Dominic. The transfer was eligible for the annual exclusion. The trust permits the trustee to accumulate trust income within the trust, and only make distributions to Dominic based upon an ascertainable standard until Dominic is 21 years old. When Dominic attains the age of 21, the trust must terminate and the trust assets must be distributed to Dominic. Which type of trust has Robbie created? A. 2503(b) Trust. B. 2503(c) Trust. C. Totten Trust. D. Intentionally Defective Grantor Trust (IDGT).

The correct answer is b. Robbie has created a 2503(c) trust. A 2503(c) trust allows income to be accumulated within the trust until the minor beneficiary attains the age of majority and the transfer of property to the trust qualifies for the annual exclusion. A 2503(b) trust requires the trustee to make annual income distributions to the minor beneficiary. A Totten Trust is a bank account which includes a payable on death clause. An IDGT is a grantor trust which requires the grantor to pay the income tax on the income of the trust.

Mario's executor determined that the estate tax liability for Mario's estate is $600,000. However, Mario's executor forgot to file the estate tax return and filed and paid 65 days late. Calculate the penalties that Mario's estate will now have to pay. A. $81,000. B. $90,000. C. $99,000. D. $690,000.

The correct answer is b. The failure-to-file penalty of $90,000 (5% x $600,000 x 3 months) is reduced by the failureto-pay penalty of $9,000 (0.5% x $600,000 x 3 months), creating an adjusted failure-to-file penalty of $81,000. Adding the failure-to-pay penalty of $9,000 to the adjusted failure-to-file penalty creates a total penalty of $90,000. Option d is incorrect because the question asks only for penalties. $690,000 is penalties plus tax.

Brett died recently leaving all his assets in a trust for his wife Greer. Brett was concerned that Greer would not be able to manage her money adequately to maintain her standard of living for the rest of her life. Therefore, he placed the assets into a spendthrift trust and gave Greer the right to receive a certain amount of income each year. Brett appointed his good friend Paul to be the trustee of the trust. How is Paul's ownership classified? A. Paul holds a life estate over the property. B. Paul holds the legal title to the property. C. Paul holds the equitable title to the property. D. Paul does not hold an interest in the property.

The correct answer is b. Paul holds the legal title to the property as trustee for the trust. Greer as the beneficiary holds the equitable title. A life estate identifies the person who has a current beneficial right in the property, which in this case would be Greer.

Bobby, a single man, owned a building with a fair market value of $2,000,000. Bobby's adjusted basis in the building was $1,000,000. In 2017 Bobby agreed to sell the building to his adult son, Robby for $1,300,000. What is the amount of Bobby's taxable gift? A. Bobby has made a taxable gift of $300,000. B. Bobby has made a taxable gift of $686,000. C. Bobby has made a taxable gift of $700,000. D. Bobby has made a taxable gift of $2,000,000.

The correct answer is b. The discount of $700,000 ($2,000,000 - $1,300,000) is treated as a gift eligible for the annual exclusion, thus creating a taxable gift of $686,000 for 2017.

Sylvia and Rachel own a townhouse together and are not married. Rachel contributed 40% of the purchase price and Sylvia contributed 60% of the purchase price. Each of them has an equal interest in the property. Which of the following are permissible ways they could title the property? Sole Ownership. Tenancy in Common. Joint Tenancy with Rights of Survivorship. Tenancy by the Entirety. Community Property. A. 2 only. B. 2 and 3. C. 1, 3 and 4. D. 2, 3 and 4. E. 2, 3, 4 and 5.

The correct answer is b. The property could be titled either as Tenancy in Common or Joint Tenancy with Rights of Survivorship. The property could not be owned at Tenancy by the entirety or Community Property because Sylvia and Rachel are not married. Fee simple sole ownership is not an option either because there is more than one owner.

Gina, age 79, recently had a stroke. Afraid that she may not live long enough to see her family enjoy her beach house, she would like to transfer it to her daughter, Taylor. Gina does not want to pay any gift tax or utilize any of her lifetime credit amount. Which of the following techniques, if used by Gina to transfer the beach house to Taylor, will not result in a taxable gift? A. GRAT. B. QPRT. C. SCIN. D. GRUT.

The correct answer is c. A SCIN is a note with a self-cancelling premium payment attached so that the note will cancel at the transferor's death. The GRAT, QPRT and the GRUT are irrevocable trusts and will result in a current taxable gift.

John has a general power of appointment over his father's assets. Which of the following is not true regarding such a power? A. John can appoint his father's money to pay for the needs of his father. B. John can appoint money to John's creditors. C. John must only appoint money using an ascertainable standard. D. If John predeceases his father, John's gross estate would include his father's assets even though they had not been previously appointed to John.

The correct answer is c. Answers a, b, and d are all true. Because John has a general power of appointment over his father's assets, John may appoint those assets to anyone for any reason and is not limited by an ascertainable standard such as health, education, maintenance, or support.

John has a general power of appointment over his father's assets. Which of the following is not true regarding such a power? A. John can appoint his father's money to pay for the needs of his father. B. John can appoint money to John's creditors. C. John must only appoint money using an ascertainable standard. D. If John predeceases his father, John's gross estate would include his father's assets even though they had not been previously appointed to John.

The correct answer is c. Answers a, b, and d are all true. Because John has a general power of appointment over his father's assets, John may appoint those assets to anyone for any reason and is not limited by an ascertainable standard such as health, education, maintenance, or support.

Carolyn made the following transfers during her life: The transfer of her home to an irrevocable trust for the benefit of her four children on January 1, 2017. Carolyn retained the right to live in the home for the remainder of her life. The fair market value of the home at the date of the transfer to the trust was $1,000,000. The fair market value of the home at Carolyn's date of death was $1,200,000. A transfer of $44,000 to an irrevocable trust for the benefit of her four children on January 2, 2012. Carolyn retained the right to a 4% annuity payment from the trust for the years 2012 and 2013. At Carolyn's date of death, the trust had a value of $62,000. If Carolyn died on July 13, 2017, with regard to the above transfers, how much is included in Carolyn's gross estate? A. $0. B. $1,044,000. C. $1,200,000. D. $1,262,000.

The correct answer is c. Carolyn's gross estate would include the fair market value of the home at her date of death, but not the value of the trust listed in #2. The transfer listed as #1 would be included in Car- olyn's gross estate because Carolyn retained an interest in the home that terminated at her death. Therefore, the full fair market value of the transferred property would be included in the transferor's gross estate at the time of the transferor's death. No amount related to the transfer listed as #2 would be included in Carolyn's gross estate because the annuity interest terminated before Carolyn's death.

You are a CFP and although you never went to law school, you consider yourself to be very good at reviewing wills. Your client, Catherine, asks you to prepare a will for her. Should you prepare a will for Catherine? A. Yes, Catherine is your best client and you might lose her if you do not prepare the will. B. Yes, it is permissible for a CFP to prepare a legal document. c. No, preparing Catherine's will would be considered the unauthorized practice of law. D. No, you should only prepare Catherine's will if you are going to prepare her husband's will as well.

The correct answer is c. Drafting legal documents, such a wills, is an activity reserved for licensed attorneys. If you are not a licensed attorney and you prepare a legal document, you have engaged in the unauthorized practice of law.

Nellie recently executed a power of attorney giving Jessie the power to perform certain tasks. Which of the following powers given to Jessie would cause the power to be deemed a general power of appointment? A. Nellie gave Jessie the power to use Nellie's money to pay Nellie's creditors. B. Nellie gave Jessie the power to sell and buy property on Nellie's behalf. C. Nellie gave Jessie the power to use Nellie's money to pay Jessie's creditors. D. Nellie gave Jessie the power to make gifts to Nellie's heirs and charities.

The correct answer is c. Giving Jessie the power to pay his own creditors creates a general power of appointment over the assets. The other powers do not benefit Jessie and thus do not create a general power of appointment.

Brody and Tanya recently sold some land they owned for $150,000. They received the land five years ago as a wedding gift from Brody's Aunt Jeanette. Aunt Jeanette purchased the land many years ago when the property was worth $20,000. At the date of the gift, the property was worth $100,000 and Aunt Jeanette paid $47,000 in gift tax. What is the long term capital gain on the sale of the property? A. $42,400. B. $50,000. C. $92,400. D. $130,000.

The correct answer is c. In general, when a donor makes a gift of property other than cash to a donee, the donee will take the property at the donor's adjusted basis. The holding period of the donee will include the holding period of the donor for purposes of subsequent transfers and the determination of long or short-term capital gains. An exception to the general basis rule occurs when the donor gives property with a fair market value in excess of his adjusted basis and the donor pays gift tax. The gift tax associated with the appreciation is added to the donor's original adjusted basis to determine the donee's basis. Thus, the basis would be: $20k + ($47k * $80k/$100k) = $57,600. The gain on the asset would be $150,000 - $57,600 = $92,400.

Brody and Tanya recently sold some land they owned for $150,000. They received the land five years ago as a wedding gift from Brody's Aunt Jeanette. Aunt Jeanette purchased the land many years ago when the property was worth $20,000. At the date of the gift, the property was worth $100,000 and Aunt Jeanette paid $47,000 in gift tax. What is the long term capital gain on the sale of the property? A. $42,400. B. $50,000. C. $92,400. D. $130,000.

The correct answer is c. In general, when a donor makes a gift of property other than cash to a donee, the donee will take the property at the donor's adjusted basis. The holding period of the donee will include the holding period of the donor for purposes of subsequent transfers and the determination of long or short-term capital gains. An exception to the general basis rule occurs when the donor gives property with a fair market value in excess of his adjusted basis and the donor pays gift tax. The gift tax associated with the appreciation is added to the donor's original adjusted basis to determine the donee's basis. Thus, the basis would be: $20k + ($47k * $80k/$100k) = $57,600. The gain on the asset would be $150,000 - $57,600 = $92,400.

Laurie and Chance are considering purchasing a piece of land on which they plan to build a vacation home. Laurie and Chance are engaged to be married, and are unsure of how they should title the property. Which of the following statements is correct regarding their ownership and titling of the land? A. Laurie and Chance cannot own the property as joint tenants because joint tenancies may only be established between married parties. B. If Laurie and Chance were married and owned the property as a joint tenancy between spouses, one-half of the value of the property will be included in the probate estate of the first spouse to die without regard to the actual contribution of each spouse. C. If the property is held as a joint tenancy then Laurie and Chance will each own the same fractional share in the property regardless of how much they contribute. D. If the property is held as a joint tenancy and Chance dies first, the property will pass to Laurie unless Chance's will directs a different disposition.

The correct answer is c. Joint tenancy requires equal ownership. Option a is incorrect because joint tenancies may be established by spouses or nonspouses. Option b is incorrect because if the two were married, each would be deemed to have contributed 50%, therefore only 50% would be included in the gross estate of the first spouse to die. Nothing will be included in the probate estate. Option d is incorrect because if the property is held as a joint tenancy then the property will transfer automatically at the first tenant's death, regardless of what the will dictates.

Which of the following qualifies for the unlimited marital deduction? A An outright bequest to resident alien spouse. B Property passing to a noncitizen spouse in a QTIP. C An outright bequest to a resident spouse who, prior to the decedent's death was a noncitizen, but who after the decedent's death and before the estate tax eturn was filed, became a U.S. citizen. D An income beneficiary of a CRUT who is a nonresident alien spouse.

The correct answer is c. Of the options, only an outright bequest to a resident alien spouse who becomes a U.S. citizen before the estate return is filed qualifies for the unlimited marital deduction.

Which of the following is true regarding a Grantor Retained Annuity Trust (GRAT)? A. At the end of the GRAT term, a taxable gift occurs. B. If the grantor dies during the trust term, a pro rata portion of the trust assets will be included in the grantor's estate. C. Interest and dividends earned by assets in a GRAT are taxed to the grantor. D. If the grantor survives the trust term, all of the trust assets will be included in the grantor's estate.

The correct answer is c. Option a is incorrect because a taxable gift occurs when the GRAT is established, not when the GRAT term ends. Option b is incorrect because if the grantor dies during the trust term, all of the trust assets are included in his gross estate. Option d is incorrect because if the grantor survives the trust term, none of the trust assets are included in his estate.

Tom loans $11,000 to his daughter Tina. Why would interest not be imputed on this loan? A. Interest would not be imputed because the loan is less than the amount of the annual exclusion. B. Interest would not be imputed because loans of $100,000 or less are exempt from both income tax and gift tax consequences. C. Interest would not be imputed because Tina has unearned income of $500. D. Interest would not be imputed because Tina's earned income is less than $1,000.

The correct answer is c. Option a is incorrect because gift loans do not qualify for the annual exclusion. Option b is incorrect; loans of less than $10,000 are exempt from both income tax and gift tax consequences. Option d is incorrect because whether interest is imputed on this loan is based on Tina's level of unearned income, not earned income.

Tom loans $11,000 to his daughter Tina. Why would interest not be imputed on this loan? A. Interest would not be imputed because the loan is less than the amount of the annual exclusion. B. Interest would not be imputed because loans of $100,000 or less are exempt from both income tax and gift tax consequences. C. Interest would not be imputed because Tina has unearned income of $500. D. Interest would not be imputed because Tina's earned income is less than $1,000.

The correct answer is c. Option a is incorrect because gift loans do not qualify for the annual exclusion. Option b is incorrect; loans of less than $10,000 are exempt from both income tax and gift tax consequences. Option d is incorrect because whether interest is imputed on this loan is based on Tina's level of unearned income, not earned income.

Which of the following empowers an executor to act as the agent of a probate court? A. Surety Bond. B. Letters of Administration. C. Letters Testamentary. D. Intestacy Laws.

The correct answer is c. Option a is the bond that an administrator must generally post. Option b is what empowers an administrator to act as the agent of a probate court. Option d describes the state laws that govern the disposition of a decedent's estate if he has failed to prepare a valid will.

Which of the following empowers an executor to act as the agent of a probate court? A. Surety Bond. B. Letters of Administration. C. Letters Testamentary. D. Intestacy Laws.

The correct answer is c. Option a is the bond that an administrator must generally post. Option b is what empowers an administrator to act as the agent of a probate court. Option d describes the state laws that govern the disposition of a decedent's estate if he has failed to prepare a valid will.

Donald has created a trust for the benefit of his three nephews, Huey, Dewey, and Louie, who are all minors. Donald plans on making annual contributions to the trust. Donald would like at least some of his annual contributions to the trust to qualify for the annual exclusion. What would be the best way to accomplish this goal? A. Donald should make sure that he does not contribute more than $14,000 for each nephew, or $42,000 in total, each year. B. Donald should give his nephews an unlimited ability to remove funds from the trust. C. Donald should give his nephews the right to remove some or all of the annual contribution from the trust for a limited period of time. D. Donald's annual contributions to the trust will not qualify for the annual exclusion under any circumstances.

The correct answer is c. Option c describes a Crummey provision, which converts what otherwise would have been a gift of a future interest, which would not be eligible for the annual exclusion, into a gift of a present interest, which is eligible for the annual exclusion. Option a is incorrect because without a Crummey provision, the annual contribution does not qualify for the annual exclusion, regardless of the amount. Option b is incorrect because even though this would qualify for the annual exclusion, giving minors the unfettered right to remove funds from the trust is not as good of a solution as a Crummey power. Option d is incorrect.

Which of the following statements is false regarding a bargain sale? A. The difference between the fair market value of the asset and the consideration received in exchange for the asset is considered a gift. B. The gift portion of a bargain sale will qualify for the annual exclusion. C. A bargain sale is generally inappropriate if the buyer of the property is a family member. D. If the property is sold by the seller for more than the seller's basis in the property, a taxable gain will result.

The correct answer is c. Option c is a false statement because bargain sales usually occur among related parties. All of the other options are true.

Which of the following statements is false regarding a bargain sale? A. The difference between the fair market value of the asset and the consideration received in exchange for the asset is considered a gift. B. The gift portion of a bargain sale will qualify for the annual exclusion. C. A bargain sale is generally inappropriate if the buyer of the property is a family member. D. If the property is sold by the seller for more than the seller's basis in the property, a taxable gain will result.

The correct answer is c. Option c is a false statement because bargain sales usually occur among related parties. All of the other options are true.

In 1999, Price funded a bypass trust with $675,000, the applicable estate tax credit equivalency amount at that time. At Price's death in 2017, his will included a testamentary bypass trust and a residual bequest to his U.S. citizen wife. If Price's taxable estate before prior gifts at his death was $5,490,000, how much will be transferred to the bypass trust to maximize its benefits? A. $1,325,000. B. $2,125,800. C. $4,815,000. D. $5,490,000.

The correct answer is c. Price's executor would fund the testamentary bypass trust with the difference between the applicable estate tax credit equivalency at Price's death (2017 - $5,490,000) and the funding amount of the inter vivos bypass trust ($675,000). In this case, the amount would be $4,775,000 ($5,490,000 - $675,000).

In 1999, Price funded a bypass trust with $675,000, the applicable estate tax credit equivalency amount at that time. At Price's death in 2017, his will included a testamentary bypass trust and a residual bequest to his U.S. citizen wife. If Price's taxable estate before prior gifts at his death was $5,490,000, how much will be transferred to the bypass trust to maximize its benefits? A. $1,325,000. B. $2,125,800. C. $4,815,000. D. $5,490,000.

The correct answer is c. Price's executor would fund the testamentary bypass trust with the difference between the applicable estate tax credit equivalency at Price's death (2017 - $5,490,000) and the funding amount of the inter vivos bypass trust ($675,000). In this case, the amount would be $4,775,000 ($5,490,000 - $675,000).

David would like to fund a charitable trust and name himself as the income beneficiary. He would like the payout from the trust each year to be constant. Given David's desires, which type of charitable trust should David fund? A. Charitable Lead Annuity Trust. B. Charitable Lead Unitrust. C. Charitable Remainder Annuity Trust. D. Charitable Remainder Unitrust.

The correct answer is c. The Charitable Remainder Annuity Trust would be the best option because the charity is the remainder beneficiary and David would be the income beneficiary. The CRAT is a better option than the CRUT because the payout from the CRAT would be a fixed dollar amount, rather than a fixed percentage. David wants a stable payout each year which would lead us to a fixed dollar amount, and thus the CRAT.

This year, Dottie donated $10,000 in cash to her church and she also donated medical supplies with a fair market value and adjusted basis of $20,000 to the Red Cross. Dottie's AGI for this year is $50,000. What is Dottie's charitable income tax contribution deduction for the year? A. $10,000. B. $20,000. C. $25,000. D. $30,000.

The correct answer is c. The deduction of charitable donations in the form of cash is limited to 50% of AGI. Dottie's AGI is $50,000, so the deduction of any cash donations to a public charity will be limited to $25,000. The deduction of charitable donations of ordinary income property is limited to the lesser of the adjusted basis or the fair market value of the property. Dottie has made a total donation of $30,000 this year, but her deduction will be limited to $25,000.

Which of the following is/are considered a disadvantage(s) of probate? The process can result in delays. The process may be expensive. The process provides clear title to heirs and legatees. The process is open to public scrutiny. A. 1 only. B. 1 and 2. C. 1, 2, and 4. D. 1, 2, 3, and 4.

The correct answer is c. The fact that probate provides clear title to heirs and legatees is an advantage, not a disadvantage, of the process. All of the other options are disadvantages of the probate process.

Although he has a vast fortune, Ricky has decided not to prepare an estate plan because he believes that his surviving family members will divide up his assets appropriately. Which of the following is not a risk associated with failing to plan an estate? A. Ricky's estate could incur excessive transfer taxes. B. Ricky's favorite Corvette may not be transferred to his ex-wife, Carla. C. Ricky's insurance policy on his own life may not be paid out to the named beneficiary. D. Ricky's current wife, Lucille, may not provide for Ricky's children from a previous marriage.

The correct answer is c. The proceeds of insurance policies with named beneficiaries pass outside of probate via state contract law. Ricky's failure to plan his estate will not affect his insurance policy.

Although he has a vast fortune, Ricky has decided not to prepare an estate plan because he believes that his surviving family members will divide up his assets appropriately. Which of the following is not a risk associated with failing to plan an estate? A. Ricky's estate could incur excessive transfer taxes. B. Ricky's favorite Corvette may not be transferred to his ex-wife, Carla. C. Ricky's insurance policy on his own life may not be paid out to the named beneficiary. D. Ricky's current wife, Lucille, may not provide for Ricky's children from a previous marriage.

The correct answer is c. The proceeds of insurance policies with named beneficiaries pass outside of probate via state contract law. Ricky's failure to plan his estate will not affect his insurance policy.

Maxwell died August 8, 2017. Of the following transfers made during his life, which is included in his gross estate? A. The transfer of a whole life insurance policy on Maxwell's life to an ILIT on September 16, 2013. B. The sale of his term insurance policy to his brother, Donald, for fair market value on August 12, 2013. C. The transfer of a whole life insurance policy on Maxwell's life (face value $150,000) valued at $20,000 to his son on September 16, 2015. D. A gift of $14,000 to Maxwell's sister on August 7, 2017. No gift tax was due on the gift.

The correct answer is c. The transfer would be included in Maxwell's gross estate because transfers of life insurance on the decedent's life within three years of the decedent's date of death are included in the decedent's gross estate. Option a is incorrect because the transfer is not included in Maxwell's gross estate because the transfer was completed more than three years prior to Maxwell's date of death. Option b is incorrect because the sale of an insurance policy for fair market value removes the asset from the gross estate. Option d is incorrect because gifts, other than life insurance, within three years of the decedent's date of death are not included in the decedent's gross estate. Gift tax paid within three years of the decedent's date of death is included in the decedent's gross estate, but in this case no gift tax was paid.

Maxwell died August 8, 2017. Of the following transfers made during his life, which is included in his gross estate? A. The transfer of a whole life insurance policy on Maxwell's life to an ILIT on September 16, 2013. B. The sale of his term insurance policy to his brother, Donald, for fair market value on August 12, 2013. C. The transfer of a whole life insurance policy on Maxwell's life (face value $150,000) valued at $20,000 to his son on September 16, 2015. D. A gift of $14,000 to Maxwell's sister on August 7, 2017. No gift tax was due on the gift.

The correct answer is c. The transfer would be included in Maxwell's gross estate because transfers of life insurance on the decedent's life within three years of the decedent's date of death are included in the decedent's gross estate. Option a is incorrect because the transfer is not included in Maxwell's gross estate because the transfer was completed more than three years prior to Maxwell's date of death. Option b is incorrect because the sale of an insurance policy for fair market value removes the asset from the gross estate. Option d is incorrect because gifts, other than life insurance, within three years of the decedent's date of death are not included in the decedent's gross estate. Gift tax paid within three years of the decedent's date of death is included in the decedent's gross estate, but in this case no gift tax was paid.

You are a financial planner and you are preparing for a meeting with your new client, Anne. What would you be most likely to ask Anne to bring to the meeting with her? A. Pictures of her children. B. Her parents. C. Any will. D. Sales records for her ex-husband's business.

The correct answer is c. You would be most likely to ask Anne to bring any will with her. In addition, you would be likely to request copies of any other estate planning documents as well as tax documents.

Which of the following statements regarding SCINs is correct? A. If the seller outlives the SCIN term, the buyer continues to pay the SCIN payment until the seller's death. B. The payments received by the seller under a SCIN are treated as interest income. C. A SCIN can give the seller a collateral interest in the property sold. D. If the seller dies before the end of the SCIN term, the seller is deemed to have made a taxable gift to the buyer equal to the difference between the payments made and the total principal payments due on the SCIN.

The correct answer is c. Option a is incorrect because the buyer of a SCIN only makes payments until the earlier of (1) the seller's death or (2) the term set forth in the SCIN. Option b is incorrect because each pay- ments received by the seller consists of (1) interest income, (2) capital gain, and (3) return of adjusted basis. Option d is an incorrect statement. If the seller dies before the end of the term, the difference between the seller / decedent's adjusted basis and the face value of the note is deemed a transfer of the estate, and must be included as income on the estate's tax return.

Natalie and Ashley own farm land as Joint Tenants with Rights of Survivorship. Natalie contributed $60,000 and Ashley contributed $40,000. The land is currently valued at $1,000,000 and each of them has a 50% interest in the property. If Natalie died today, what amount of the value of the farm land would be included in her gross estate? A. $60,000. B. $500,000. C. $600,000. D. $1,000,000.

The correct answer is c. Property owned JTWROS follows the actual contribution rule for inclusion in the gross estate. Therefore, since Natalie contributed 60% of the property, her estate will include 60% of the Fair Market Value (60% x $1,000,000 = $600,000).

Which of the following are characteristics of a qualified disclaimer? 1) It may not direct the bequest to another person selected by the disclaimant. It must be received by the executor of the estate within 9 months of the death of the decedent. 2) It must be written and irrevocable. 3) The disclaimant may disclaim a part of an asset. A. 1 and 2. B. 1 C. 1 and 3 D. 1, 2, 3 D. 1, 2, 3

The correct answer is d. A qualified disclaimer must be written, irrevocable and received by the executor of the estate within 9 months. It must not direct the asset and can be for any interest partial or full.

Which of the following are characteristics of a qualified disclaimer? It may not direct the bequest to another person selected by the disclaimant. It must be received by the executor of the estate within 9 months of the death of the decedent. It must be written and irrevocable. The disclaimant may disclaim a part of an asset. A. 1 and 2. B. 1 C. 1 and 3 D. 1, 2, 3

The correct answer is d. A qualified disclaimer must be written, irrevocable and received by the executor of the estate within 9 months. It must not direct the asset and can be for any interest partial or full.

Which of the following states is not a community property state? A. Arizona. B. Idaho. C. Wisconsin. D. Florida.

The correct answer is d. All of the other answers name states that are community property states.

Which of the following assets would pass through probate? A. A life insurance policy with a named beneficiary. B. Assets held in trust. C. A pay-on-death account with a named beneficiary. D. Household goods.

The correct answer is d. All of the other options describe assets that do not pass through probate.

Which of the following constitute incidences of ownership in an insurance policy: The right to name or change the name of the beneficiary. The right to surrender the policy. The right to assign the policy. The right to borrow cash from the policy. A. 3 and 4. B. 2 and 3. C. 1, 2 and 4. D. 1, 2, 3 and 4.

The correct answer is d. All of these rights are incidences of ownership.

During the year, Edward created a trust for the benefit of his five children. The terms of the trust declare that his children can only access the trust's assets after the trust has been in existence for 20 years and the trust does not include a Crummey provision. If Edward transfers $100,000 to the trust during the year, what is his total taxable gift for the year? A. $0. B. $30,000. C. $60,000. D. $100,000.

The correct answer is d. Because the trust does not include a Crummey provision, the transfer to the trust is a gift of a future interest and is not qualified to be offset by the annual exclusion. Therefore, the entire transfer to the trust is subject to gift tax.

Charlotte is getting ready for her first meeting with her new financial planner, Samantha. What information does Charlotte not need to bring to this meeting? A. Previously filed income tax and gift tax returns. B. A copy of her current will. C. A detailed list of Charlotte's assets and liabilities. D. Charlotte should bring all of the above information to her first meeting with Samantha.

The correct answer is d. Charlotte should bring all of this information with her.

Your client, Albert, is 68-years old. He is interested in establishing a trust with a value of $6,000,000 for his family. He is aware of the Generation Skipping Transfer Tax, and he has asked you for your advice as to which of the following would be considered a skip person. Which of the following is a skip person? A. Albert's son Patrick, who is age 17. B. Albert's grandson Connor, age 14, whose mother (Albert's daughter) died in an auto accident this year. C. Albert's mother Thelma. D. A trust that Albert had established 3 years ago for Albert's favorite employee, Sam, who has just turned 20.

The correct answer is d. Due to the age difference of more than 37½ years and the non-related party status, the trust for Sam is a skip person. The reason Patrick is not a skip person is because he is a first generation descendant. Connor is not a skip person because his mother's death moves him up a generation (predeceased parent rule).

Maxine agrees to purchase Jacob's property utilizing a private annuity. Jacob's table life expectancy is ten years at the date of the agreement and the property has a fair market value of $400,000. The private annuity payment is $45,000 per year, and Maxine dies after making two payments. At Maxine's death, what amount is included in her gross estate with regards to the private annuity and the transferred property? A. $0. B. $90,000. C. $310,000. D. $400,000.

The correct answer is d. Maxine bought the property utilizing the private annuity. Maxine's gross estate will include the fair market value of the property purchased. The expected present value of the remaining private annuity payments will be a debt of the estate.

Reese donated $100 to her church and $300 to the United Way. Which of the following is true with regard to her contribution to the charitable organizations? A. Reese must file IRS Form 8283. B. Both her church and the United Way are required to send a confirmation of the contribution to Reese. C. Only her church is required to send a confirmation of the contribution to Reese. D. Only the United Way is required to send a confirmation of the contribution to Reese.

The correct answer is d. Option a is incorrect because IRS Form 8283 must be filed whenever the aggregate total of all non-cash contributions exceeds $500. Options b and c are incorrect because contemporaneous written acknowledgement by the donee organization is only required when an individual contributes cash or property valued at $250 or more. Therefore, Reese's church is not required to send a confirmation of Reese's donation.

Colin would like to use his recent inheritance of $200,000 to establish a charitable remainder trust. Colin would like to have the flexibility to make additional contributions to the charitable remainder trust in the future. Which of the following would you recommend for Colin? A. A Charitable Remainder Annuity Trust. B. A Charitable Gift Annuity. C. A Charitable Lead Unitrust. D. A Charitable Remainder Unitrust.

The correct answer is d. Option a is incorrect because additional contributions may not be made to a CRAT. Option c is incorrect because a CLUT is not a charitable remainder trust. Option b is incorrect because each donation is a separate annuity and the annuity it not a remainder trust.

Colin would like to use his recent inheritance of $200,000 to establish a charitable remainder trust. Colin would like to have the flexibility to make additional contributions to the charitable remainder trust in the future. Which of the following would you recommend for Colin? A. A Charitable Remainder Annuity Trust. B. A Charitable Gift Annuity. C. A Charitable Lead Unitrust. D. A Charitable Remainder Unitrust.

The correct answer is d. Option a is incorrect because additional contributions may not be made to a CRAT. Option c is incorrect because a CLUT is not a charitable remainder trust. Option b is incorrect because each donation is a separate annuity and the annuity it not a remainder trust.

Which of the following is not a reason that the proceeds of a life insurance policy would be included in a decedent's gross estate? A. The proceeds of the policy are payable to the estate. B. The decedent transferred the ownership of the policy to his daughter six years before his death, but retained the right to change the beneficiary of the policy. C. The decedent transferred the ownership of the policy to his son six months before his death. D. The decedent transferred the ownership of the policy to his wife four years ago.

The correct answer is d. Option a is incorrect because the proceeds of the policy would be included in the estate if the proceeds are payable to the estate. Option b is incorrect because the decedent is considered to have an incident of ownership in the policy if he retains the right to change the beneficiary of the policy. Option c is incorrect; under IRC section 2035, the proceeds of a policy transferred within three years of death are included in the gross estate of the transferor.

Which of the following transfers would result in gift tax? A. Bob gifts $11,000 to his daughter Barbie. B. Elroy gifts $50,000 to his wife, Elizabeth, who is a U.S. citizen. C. Adam gives his favorite employee, Aaron, a new car at Aaron's retirement worth $20,000. D. Pete transfers $20,000 to his ex-wife, Patricia. Pete and Patricia were divorced five years ago.

The correct answer is d. Option a would not result in gift tax because the gift does not exceed the annual exclusion. Option b is incorrect because a person can gift an unlimited amount to his or her spouse without incurring gift tax. Option c is incorrect because transfers in a business setting are presumed to be compensation. If Pete had transferred $20,000 to Patricia pursuant to a divorce decree, there would be no taxable gift, but transfers to an ex-spouse five years after the divorce was final are not considered "transfers pursuant to a divorce decree."

Which of the following statements is incorrect? A. When a decedent's taxable estate is less than the applicable estate tax credit equivalency, the estate is said to be overqualified. B. When too few assets pass to a decedent's surviving spouse, and as such the decedent's taxable estate is greater than the applicable estate tax credit equivalency, the decedent's estate is said to be underqualified. C. An ABC Trust arrangement utilizes a General Power of Appointment Trust, a QTIP Trust, and a Bypass Trust to maximize the use of a decedent's applicable estate tax credit. D. The remainder beneficiary of a QTIP Trust is chosen by the surviving spouse.

The correct answer is d. Option d is incorrect because the ultimate beneficiary of a QTIP Trust is chosen by the grantor of the QTIP Trust. All of the other statements are correct.

Which of the following statements is incorrect? A. When a decedent's taxable estate is less than the applicable estate tax credit equivalency because of the overuse of the marital deduction, the estate is said to be overqualified. B. When too few assets pass to a decedent's surviving spouse, and as such the decedent's taxable estate is greater than the applicable estate tax credit equivalency, the decedent's estate is said to be underqualified. C. An ABC Trust arrangement utilizes a General Power of Appointment Trust, a QTIP Trust. and a Bypass Trust to maximize the use of a decedent's applicable estate tax credit. D. The ultimate beneficiary of a QTIP Trust is selected by the surviving spouse.

The correct answer is d. Option d is incorrect because the ultimate beneficiary of a QTIP Trust is chosen by the grantor of the QTIP Trust. All of the other statements are correct.

The Generation Skipping Transfer Tax (GSTT) has all the following characteristics, except: A. GST gifts to direct skips qualifying for the annual exclusion are not subject to the tax. B. Assets transferred to a trust that has a grandchild as the sole beneficiary may be subject to both gift and generation skipping transfer tax. C. If all the children of a trust are grandchildren (whose parents are living) of the grantor then the trust is subject to GSTT. D. A 'skip person' is a person who is one or more generations younger than the transferor.

The correct answer is d. Options a, b, and c are true but in the case of option d, a grandchild whose parent has died has moved up a generation with regard to skip-person considerations. A skip beneficiary is generally a person who is two or more generations younger than grantor.

Which of the following does not qualify as a charitable organization? A. The State of Louisiana. B. The City of New Orleans. C. The Red Cross. D. The Democratic National Committee.

The correct answer is d. Political organizations are not qualifying charitable organizations. The other options are all considered qualified charitable organizations under Section 170(c).

Kent, age 38, recently came to you for estate planning advice. He has never executed any estate planning documents. During the client interview, you learned that Kent has never been married and has a six-year-old daughter, Kerstin, with his previous girlfriend, Karen. Karen is Kerstin's custodial parent and Kent sees Kerstin every other weekend. While Kent and Karen are cordial, the relationship was recently strained when Karen began dating Kent's business partner, Bobby. Kent is in good health and participates regularly in automobile racing competitions. While Kent often wins in competitions, he has wrecked his car several times and has been seriously injured. Because Kent has had so many wrecks, he invested a majority of his $500,000 net worth in a closely held company to develop a revolutionary steel product that will not bend, crumble or catch fire. Kent and his business partner, Bobby, are sure that all race car companies will buy the steel product because their initial tests established that nine out of ten times a car made with the product that was in a wreck did not even get a dent. Although they plan to take their product to market in a few months, Kent and his partner have had several disagreements. Which of the following statements is true? A. If Kent died today, there would not be any liquidity issues because Kent's share of the closely held company could easily be sold for fair market value. B. Since the value of Kent's net worth is below $5,4910,000, there is no need for estate planning. C. Amounts given to Karen for Kerstin's support are deductible on Kent's income or gift tax return. D. If Kent were to die today, his assets would transfer via state intestacy laws with Kerstin being the most likely heir.

The correct answer is d. Since Kent has not executed any estate planning documents, his estate will transfer via state intestacy laws. When an individual is not married, their children are generally the next in line to inherit under state intestacy laws. Option a is incorrect because the ability to quickly sell a closely held business for fair market value is always questionable regardless of how good the products are. Option b is incorrect because Kent's net worth is irrelevant as to whether he needs estate planning. He has a child that needs to be cared for and assets that will need to be transferred, thus he needs estate planning. Option c is incorrect because the amounts given for Kerstin's support are not deductible on the income or gift tax return.

Death benefit proceeds from a life insurance policy are included in a decedent's gross estate in which of the following circumstances: The decedent gave the policy to his father four years ago, but retained the right to change the name of the beneficiary. The policy beneficiary is a grantor trust of the decedent but the policy is owned by a closely-held corporation. The decedent gave the policy to a charity seven years ago. The decedent transferred the policy to an irrevocable life insurance trust five years ago with no retained incidents of ownership. A. 1 and 4. B. 2 and 3. C. 3 and 4. D. 1 and 2.

The correct answer is d. Statement 1 is included because the decedent retained an ownership right and statement 4 was transferred more than 3 years ago.

Maxwell and Jim have resided together for several years but are not married. Maxwell is concerned that if he dies first, his family may contest the transfer of his assets to Jim through his will so he wants to avoid any transfers through his will. Of the following options, which transfer arrangements would ensure that Maxwell's assets will be transferred to Jim at Maxwell's death? 1.A Qualified Personal Residence Trust (QPRT). 2.An Irrevocable Trust. 3.A Revocable Living Trust. 4.A Testamentary Trust. A. 2 only. B. 1 and 3. C. 2 and 4. D. 1, 2, and 3.

The correct answer is d. The QPRT, Irrevocable Trust, and Revocable Living Trust would ensure that Jim would receive Maxwell's assets at Maxwell's death because the assets will transfer per the trust docu- ment. Maxwell's family will not be able to contest the transfers from the trust. A testamentary trust will not ensure that Jim will receive Maxwell's assets because a testamentary trust would be first created in Maxwell's will. The family could contest the will and block the transfer to the testamentary trust. In such a case, Jim would not receive the assets. They could consider marrying.

In 2016, Lori assigned a paid-up whole life insurance policy to an Irrevocable Life Insurance Trust (ILIT) for the benefit of her three children. The ILIT contained a Crummey provision for the benefit of each child. At the time of the transfer, the whole life insurance policy was valued at $200,000, and since Lori had not made any other taxable gifts during her lifetime, she did not owe any gift tax. Lori died in 2017, and the face value of the whole life insurance policy of $2,000,000 was paid to the ILIT. Regarding this transfer, how much is included in Lori's gross estate at her death? A. $0. B. $164,000. C. $964,000. D. $2,000,000.

The correct answer is d. The death benefit of a life insurance policy transferred within three years of the decedent's date of death is included in the decedent's gross estate. In this case, Lori transferred the policy one year before her death, so the full death benefit of $2,000,000 is included in her gross estate.

Kevin transferred $4,000,000 to a GRAT naming his four children as the remainder beneficiaries. Kevin retained an annuity from the GRAT valued at $1,500,000. If this is his only transfer during the year, what is Kevin's total taxable gifts for the year? A . $1,444,000. B. $1,500,000. C. $2,444,000. D. $2,500,000.

The correct answer is d. The transfer of the remainder interest is a gift to his children. Because it is a gift of a future interest, it is not eligible for the annual exclusion - thus, Kevin's taxable gifts for the year are $2,500,000 ($4,000,000 - $1,500,000).