Estate Planning Exam
All of the following statements concerning the use of 2503(b) and 2503(c) trusts (both with a minor as the beneficiary) are correct, EXCEPT:
Under a 2503(b) trust, the trust corpus must pass to the minor beneficiary by age 21.
All of the following are appropriate techniques that assure that property left to a surviving spouse will qualify for the marital deduction, EXCEPT:
Use of a trust that provides life-income for the spouse, with corpus distributed to the surviving spouse's grandchildren.
"A" and "B" are married. They bought a farm in 1980 for $100,000 and titled it in joint names with right of survivorship. Assume that in 2003 the property is worth $250,000 when "A" dies. "B" sells the property in 2006 for $270,000. If "A" and "B" did not use the farm as a residence, what is "B's" taxable gain?
$95,000
Which of the following trusts ensures the payment of federal estate taxes upon distribution of principal?
A Qualified Domestic Trust.
Why is a life insurance policy often a good item to give away?
A life insurance policy has a low value for gift tax purposes and a high value for estate tax purposes.
Which of the following is a general power of appointment for federal estate tax purposes?
A power exercisable in favor of the holder for the holder's happiness and well-being.
What type of trust becomes funded when the grantor becomes incapacitated?
A standby trust.
What will be the effect of the phrase "...to our children, per stirpes" in Hank and Mary Ann's Wills?
After Hank and Mary Ann have both died, the estate of the second to die will go in equal shares to Mel and Melanie.
All of the following statements concerning a self-cancelling installment note (SCIN) are correct, EXCEPT:
Any unreported capital gain does not need to be recognized when the note is cancelled or at the owner's death.
How is fair market value generally described for property interests?
Fair market value is the price a willing buyer would pay a willing seller, where both were free of compulsion and equally aware of the relevant facts of the transaction.
All of the following statements concerning intra-family loans are correct, EXCEPT:
Gift-splitting and use of parents' applicable credits cannot be used to offset any taxable gifts for forgiven loan amounts that exceed the $13,000 annual exclusion.
All of the following statements concerning gift-splitting are correct, EXCEPT:
Gift-splitting is a right of a married donor, and the consent of the donor's spouse is not necessary.
Which of the following statements concerning the Unser's planning for lifetime gifts to a qualified charity is correct?
If the Unsers made a bargain sale of appreciated stock from their jointly-owned portfolio, they would be required to report some capital gains.
Certain potential disadvantages pertain to the charitable remainder annuity trust as compared to the charitable remainder unitrust. These potential disadvantages include all the following, EXCEPT:
Investment income for the annuity trust may be substantially lower because of limitations as to the properties in which the trust can invest.
Which of the following statements correctly pertains to couples involved in non-traditional relationships?
Partners in non-traditional relationships cannot receive Social Security survivor benefits.
All the following statements concerning community property are correct EXCEPT:
Proceeds of life insurance are not taxable in the gross estate of a domiciliary in a community property state.
Which of the following would not be an important provision to be considered when revising Ann's Will?
Specific instructions with regard to funeral arrangements.
Carol O'Neil, age 61, has a profitable graphic arts business valued at $800,000 and personal property worth $250,000. Carol wants to retire from her business but she needs $3,000 per month in income. Her neice Sharon, a recent art school graduate, would like to buy Carol's business, but she doesn't have enough money to use as a down payment. What is the best technique that Carol could use to transfer the business to Sharon?
Structure the transfer of the business to Sharon as an installment sale.
A combination of a non-marital By-pass trust and a QTIP trust would logically be recommended to a wealthy client in all of the following circumstances, EXCEPT:
The client has confidence in the spouse's ability to manage finances.
All of the following statements concerning estate liquidity are correct, EXCEPT:
The sale of estate assets to the trust will decrease the estate's liquidity position.
All of the following methods are used to handle the affairs of an incompetent person, EXCEPT:
Written instructions.
All the following forms of ownership of property will result in transfer of property at death without the property being subject to probate EXCEPT:
tenancy in common by mother and daughter in their residence
Which of the following is an important purpose of electing QTIP treatment for estate property?
to assure qualification of some estate assets for the estate tax marital deduction
Which of the following estate planning objectives can be accomplished by execution of a will?
to provide for family income during the probate process
Assume Susan dies in 2012. Susan's gross estate is valued at $6 million which includes her IRA worth $400,000 that she is leaving to her nephew John. Her net federal estate tax liability is $308,000. Susan's net federal estate tax liability would be $168,000 if she did not include the value of the IRA in her estate. Assuming a lump-sum distribution of the IRA by John, what is the amount of the IRD deduction that John can take to reduce his income tax liability on the IRA he inherited from Susan?
$140,000
Mike Green recently inherited money from his uncle and made the following gifts in 2012. He bought his non-citizen wife a flower shop worth $160,000, he paid Boston University $35,000 for his daughter's tuition, he bought his son a new car worth $40,000, and he gave his sister the remainder interest in his Florida condo worth $100,000. What is the total amount of Mike's taxable gifts in 2012?
$148,000
"A" and "B" are brother and sister. In 1989, they bought corporate stock in joint names with right of survivorship at a cost of $5,000. "A" contributed the money. "A" died in 2002, and the stock was valued in his estate at $12,000. "B" sold the stock in 2006 for $14,000. What is "B's" taxable gain?
$2,000
"A" and "B" are brother and sister. In 2005 they bought corporate stock in joint names with right of survivorship at a cost of $5,000. "A" contributed the money. "A" died in 2009, and the stock was valued in his estate at $12,000. "B" sold the stock in 2012 for $14,000. What is "B's" taxable gain?
$2,000
If Hank and Mary Ann had decided to jointly make cash gifts to their grandchildren while they were both still alive, what is the largest amount they could have given before using their applicable credit amounts?
$26,000 per year to each grandchild
"X," a widower, made a cash gift to his son of $1,000,000 two years before he died and paid a $345,000 gift tax. What is included in his gross estate?
$345,000
Six years ago Barbara, who is married to Paul, bought a $60,000 life insurance policy on her mother's life and named her children as beneficiaries. When Barbara died in 2012 the replacement cost of the policy was valued at $12,000. Barbara did not have a will and her state law of intestacy gives the surviving spouse 50% of the assets included in her gross estate. What is the value of the marital deduction for the life insurance policy included in Barbara's gross estate in 2012?
$6,000
C" and "D" are brothers. In 1980, they purchased commercial real estate at a price of $10,000 and took ownership as tenants in common. "C" died in 2003, leaving his share of the property to "D." The property was valued at $100,000 at the date of death. "D" sold the property in 2006 for $120,000. What is "D's" taxable gain?
$65,000
A charitable lead trust designed as a grantor trust receives an income interest from the donor. Which of the following statements concerning a charitable lead trust created for a period of ten years or less is (are) correct? (I) It provides a large current deduction that will be advantageous to the taxpayer who has an unusually high-income year. (II) It provides for reversion of the principal to the taxpayer or other designated beneficiary. (III) It provides for a substantial reduction in income taxes for the taxpayer by shifting the tax liability to the trust.
(I) and (II) only
In contrast to the charitable remainder trust, a charitable lead trust designed as a grantor trust receives an income interest from the donor instead of a remainder interest. Which of the following statements concerning the advantages of the charitable lead trust created for a period of ten years or less is (are) correct? (I) It provides a large current deduction that will be advantageous to the taxpayer who has an unusually high-income year. (II) It provides for reversion of the principal to the taxpayer or other designated beneficiary. (III) It provides for a substantial reduction in income taxes for the taxpayer by shifting the tax liability to the trust.
(I) and (II) only
Alex Fernandes created an irrevocable trust in which he placed securities valued at $1 million. His wife, Jeanette, will receive the income from the trust for her lifetime, and at her death, the trust assets will be divided between their sons Michael and Julien. Which of the following statements concerning the Fernandes trust is (are) correct? (I) Michael has a remainder interest in the trust. (II) Julien has a reversionary interest in the trust. (III) Jeanette has a life interest in the trust. (IV) Alex has a reversionary interest in the trust.
(I) and (III) only
Which of the following statements concerning a will are correct? (I) A will can be altered, amended, or completely rewritten at any time before a person's death. (II) A will cannot be rewritten but can be amended at any time by a codicil. (III) A will must be signed by the maker and usually must be witnessed by two or three people. (IV) A will assures a testator of orderly disposition of his or her property, because the will is effective as soon as it is signed and witnessed.
(I) and (III) only
Which of the following statements concerning the role of the financial planner in estate planning is (are) correct? (I) The planner can help the client to identify his or her financial problems. (II) The planner may offer a legal opinion as to the reliability of the estate plan. (III) The planner's participation in the estate planning process may range from little involvement to total involvement.
(I) and (III) only
Which of the following statements concerning the valuation of estate assets for federal estate tax purposes are correct? (I) Fair market value on date of death is used most frequently. (II) The alternate valuation date would reduce the taxable estate if stock prices increased substantially following the security owner's death. (III) The alternative valuation date is used only when the gross estate and the estate tax is reduced. (IV) The alternate valuation date corresponds to the date the estate tax is due, 9 months after the decedent's death.
(I) and (III) only
A residuary clause is typically included in a will for which of the following reasons? (I) To provide a method for distributing any portion of the remaining estate after payment of all debts, taxes, administrative expenses and specific bequests. (II) To prevent any portion of the remaining estate's assets from being distributed in a manner that is inconsistent with the testator's wishes. (III) To avoid partial intestacy with regard to particular items of property. (IV) To provide for disposition of property that is acquired after execution of the will.
(I), (II), (III) and (IV)
A residuary clause would logically be included in a will for which of the following reasons: (I) to provide a method for disposal of any portion of the estate remaining after payment of all debts, taxes, administrative expenses and specific bequests (II) to prevent any portion of the remaining estate's assets from being distributed in a manner inconsistent with the testator's wishes (III) to avoid partial intestacy with regard to particular items of property (IV) to provide for disposition of property that may be acquired after execution of the will
(I), (II), (III), and (IV)
Which of the following factors regarding property interests influence(s) selection of an appropriate estate planning technique for a client's estate? (I) the liquidity and marketability of the property (II) the effect of the death of the client on the value of the property (III) the difficulty in valuing the property (IV) whether the property has appreciated or depreciated in value
(I), (II), (III), and (IV)
Which of the following is (are) valid reasons for avoiding the use of joint and mutual wills? (I) Mutual wills may be unenforceable after the first decedent dies. (II) Joint wills between spouses may result in loss of the marital deduction. (III) Joint wills cannot be changed. (IV) These wills may not result in disposition of property as seems best to a testator under existing circumstances.
(I), (II), (III), and (IV)
Assuming George dies in 2012, which of the following items would be deductible from the gross estate in computing George's adjusted gross estate? (I) A $20,000 car loan (II) Funeral expenses of $7,500 (III) Medical bills of $8,000 from an appendectomy six months earlier
(I), (II), and (III)
Which of the following factors would generally necessitate changes in an estate plan? (I) the divorce of the client or the death or incapacity of a beneficiary (II) the increase or decrease of federal income taxes and the government's elimination of interest-free loans (III) the client's winning of the state lottery for $1.5 million
(I), (II), and (III)
If an estate tax return were filed for George based upon the case facts, which of the following assets would qualify either partially or entirely for the marital deduction if George died in 2012? (I) Life insurance death proceeds (II) Mutual fund account (III) Vested profit sharing plan (IV) Assets passing to the residuary trust
(I), (II), and (III) only
Which of the following is (are) among the exceptions to the general rule that property given within three years of death is excluded from the donor's gross estate for federal estate tax purposes? (I) Life insurance (II) Gift taxes paid on the value of a gift (III) Farm land gifted to a son or daughter (IV) A gift of securities in trust with a retained life-income
(I), (II), and (IV) only
Which of the following rights retained by a donor who gifts property during his or her lifetime will result in the inclusion of such property in the gross estate of the donor-decedent? (I) The right to the property's income for the donor's lifetime. (II) The right to revoke the transfer in case of financial need. (III) The right to a reversionary interest where the probability of reversion is less than 5%. (IV) The right to trust corpus for the donor's support and well-being.
(I), (II), and (IV) only
Which of the following transfers will be included in the donor's gross estate if gifted within three years of the donor's death in 2012? (I) Transfer of an owner/insured's life insurance policy. (II) Gift taxes paid on the value of a gift. (III) Farm land gifted to a son or daughter. (IV) A gift of securities in trust with a retained life-income.
(I), (II), and (IV) only
Which of the following statements concerning powers of appointment are correct? (I) A power to appoint to oneself the annual contributions to a trust is a general power. (II) A power to appoint to oneself the lesser of $5,000 or 5% of the assets of a trust is a special power of appointment. (III) Failure to exercise a power to appoint up to 10% of the trust assets to the grantor's children will not result in a taxable gift. (IV) Failure to exercise a power to appoint to oneself 5% of the trust assets will not result in a taxable gift.
(I), (III) and (IV) only
Which of the following statements concerning revocable and irrevocable trusts are correct? (I) An irrevocable trust may convey both a present interest and a future interest to the income or assets placed in the trust. (II) A revocable trust may convey only a future interest to the income or assets in the trust. (III) A revocable trust is not a completed gift because the assets can be taken back. (IV) An irrevocable trust can be either a testamentary trust or a living trust.
(I), (III) and (IV) only
Property transferred to which of the following trusts avoids probate? (I) Revocable living trust (II) Testamentary trust (III) Irrevocable inter vivos trust (IV) Spousal remainder trust
(I), (III), and (IV) only
"A" wishes to leave his Iowa farm land to his daughter from a previous marriage. "A" also wants to provide equitably for his present wife and the two children of that marriage. Under these circumstances, which of the following statements concerning Will substitutes is (are) correct? (I) "A" could disinherit his wife of the previous marriage only by Will substitutes. (II) Joint tenancy WROS with his daughter would avoid both costs of probate and the new wife's elective share. (III) "A" could place the farm land in a revocable living trust, but the trust will probably not be secret from his present wife.
(II) and (III) only
Which of the following statements concerning a property's step-up in basis for income tax purposes are correct? (I) No step-up occurs for property passing to a surviving spouse who was a joint tenant WROS. (II) A partial step-up occurs at death for the fractional interest in property held as Tenants in Common. (III) No step-up occurs for property transferred by deed before death. (IV) No step-up occurs when property is obtained by inheritance.
(II) and (III) only
Which of the following assets will be included in Hank's probate estate? (I) His interest in the family home. (II) The death proceeds of the term-to-age-65 life insurance policy. (III) The death proceeds of the $300,000 whole life policy. (IV) The condominium in Florida.
(II) and (IV) only
In her will Mary left an apartment house to her husband, Fred, in trust with income payable to Fred for life. The terms of the trust provided that Fred could appoint the property in his will to any of their five children. Under these circumstances, which of the following statements is (are) correct? (I) Fred has a general power of appointment. (II) The value of the apartment will be included in Fred's gross estate. (III) The value of the apartment will not be includible in Fred's gross estate. (IV) If Fred could appoint only according to an ascertainable standard, there would be no change as to the property being includible in his gross estate.
(III) and (IV) only
Which of the following statements concerning a client's estate is (are) correct? (I) An individual's estate consists of his or her real estate and interests in real property only. (II) The gross estate includes all property owned by a person at the time of death except property held in joint names. (III) The gross estate is defined by the federal estate tax laws and consists of all property interests owned by the decedent, including life insurance death benefits paid to a named beneficiary. (IV) The probate estate includes all property owned by the decedent, including property held in joint tenancy.
(III) only
Which of the following property interests will pass under intestacy laws? (I) Specific bequests of stock to the owner's children. (II) Real property that will pass under a residuary clause. (III) A car owned by the decedent and spouse in joint names with right of survivorship. (IV) All property in the name of an individual who dies leaving no will
(IV) only
Liz Thomas has a gross estate of $10.5 million. Her second husband Kyle has a gross estate of $2 million. Liz is planning her estate and would like Kyle to receive the right to a lifetime income from a trust that will qualify for the marital deduction in her estate. After Kyle's death, the trust is to be distributed to Liz's son from her first marriage. She would like to exclude a portion of the trust assets from Kyle's estate, while maximizing the use of her unified credit amount. Which trusts will accomplish Liz's objectives?
A By-pass trust and a Q-TIP trust.
The Unsers would like to do more to benefit the local orphanage. Samuel would also like to maintain Claudia's life style by providing her with income for life. In addition, Samuel would like to minimize taxes and transfer costs to accomplish these objectives. Given these objectives and constraints, which of the following lifetime gifts by Samuel and Claudia would be most appropriate?
A gift of stock to a charitable pooled income fund for the orphanage.
All of the following statements concerning guardians are correct, EXCEPT:
A guardian is an attorney-in-fact.
All of the following characteristics of a Qualified Personal Residence Trust (QPRT) are correct, EXCEPT:
A home that is rapidly appreciating in value is not a good choice of property to transfer into a QPRT.
All of the following forms of property ownership will transfer at death while avoiding probate, EXCEPT:
A residence held by mother and daughter as Tenants in Common.
Which of the following instruments and techniques would NOT provide effective planning for medical decisions that may accompany a terminal illness?
A standby trust.
The Websters have decided that they should consider making gifts to their children of property other than the commercial real estate interest. Which of the following statements concerning the selection of assets for gifts is correct?
An advantage of making a gift of the vacation condominium is that the condo will avoid ancillary probate.
Which one of the following statements is true concerning the corporate stock redemption?
Ann receives the stock redemption amount tax-free because it is treated as capital gain, and Ann's basis is stepped up at Martin's death.
Assume for purposes of this question that Samuel Unser's Will provides that Claudia is to receive all income from the trust and she can invade principal to the extent needed for her health, maintenance, and support. Which of the following statements concerning this trust is correct?
At Claudia's death, no amount attributable to the trust or her power of appointment will be includible in her gross estate.
Carl Darwin and his second wife own their residence valued at $700,000 as tenants by the entirety, and they own securities worth $250,000 as joint tenants with right of survivorship. Darwin also owns an apartment building titled in his name alone and valued at $1.2 million. Darwin wants to leave at least half of his property to his wife, and he wants to leave property to his two children, Michael and Denise, to take advantage of the applicable credit. Which of the following recommendations is most appropriate for Darwin?
Darwin can make lifetime gifts of interests in the apartment building to his children without his wife's consent and avoid her elective share.
The requirements for formal execution of a valid deed differ from the requirements of a valid will in all the following ways EXCEPT:
Deeds require witnesses; wills do not.
Assume Ann transfers her personal residence to a qualified personal residence trust (QPRT) with her three children as beneficiaries and retains a right to live in her home for ten years. Which statement correctly describes the consequence of this transfer?
If Ann survives the ten-year term, ownership of the home will pass to her children without any additional gift tax.
Assume for this question that George pays the annual premiums for the life insurance placed in the trust and that the trust is made irrevocable. Which of the following statements concerning this irrevocable trust is correct?
If Crummey powers are included in the trust document, the annual payment of premiums by George will qualify for the gift tax annual exclusion.
Which of the following statements correctly describes the probable consequences of making the life insurance trust irrevocable?
If George does not live more than three years, the proceeds of the policies will be includible in his gross estate for federal estate tax purposes if he dies after 2010.
Which of the following statements correctly describes the advantages or disadvantages of including a sprinkling provision in the trust established by David Webster?
If one of the children suffers a health impairment, the trustee can direct most of the income and principal to that child instead of making equal distributions.
If David and Lucia established a 2503(b) trust and required the trustee to distribute income annually to their children, which of the following statements would be correct?
If the trustee distributes capital gains from the stock, the trust cannot obtain a deduction for such distribution.
In 2006 John bought a life insurance policy on his life with a death benefit of $2,000,000, and named his wife Lucy as beneficiary. In 2011 he created an irrevocable life insurance trust and transferred all incidents of ownership in the policy to the trust. The trust is named the beneficiary of the policy but Lucy has a general power of appointment over the trust corpus. John died in 2012 and the replacement cost value of the policy was $600,000. All of the following statements are correct, EXCEPT:
John's gross estate will include the policy's replacement cost value since John is the insured and the trust is the new owner.
Which of the following statements correctly describes potential problems with David Webster's current estate plan?
Joint ownership of most assets prevents David from taking full advantage of his applicable credit.
By the terms of his will, "K" gave his wife the right to live in their home until her death. "K's" daughter by a former marriage was to have the property upon Mrs. "K's" death. Under these circumstances, which of the following statements is correct if Mrs. "K" dies in 2012?
Mrs. "K" has a terminable interest in the home.
A marital deduction is available in the decedent spouse's estate in all of the following circumstances, EXCEPT:
Property interests that are disclaimed by the surviving spouse.
Assume for purposes of this question only that, in addition to his other assets, David inherited from his parents a portfolio of securities valued at $550,000 and that he had a child from a previous marriage to whom he would like to leave some assets after Lucia's death. David wants Lucia to have all of the income from his assets during her life, and he would like to minimize estate and gift taxes. Which one of the following techniques would be most appropriate to recommend to David to accomplish these objectives?
Revision of David's Will to include a QTIP trust
Ted Allerd, age 70, owns 1/6 interest in a ski resort in Vermont, which is currently valued at $2.5 million. The ski resort continues to appreciate every year, and Ted's estate is now worth $6.5 million. Ted would like to give his ski resort to his son Bob, a wealthy portfolio manager, to remove the resort from his estate. Ted has no retirement assets and needs an annual income stream for the rest of his life. Which of the following techniques could accomplish Ted's objectives?
Structure a transfer of the resort to Bob as a single life private annuity.
A donor transfers $100,000 into an irrevocable trust. The income will be distributed to his spouse for 15 years, and the remainder of the trust corpus will be distributed to his son. All of the following statements are correct, EXCEPT:
The donor can elect Q-TIP treatment on his gift tax return to obtain a marital deduction for the income interest his wife will receive.
Albert Soren is the sole owner of an operating farm. Soren has brought his sons into the farm operation, and they now manage much of the operation. The farm has appreciated in the past ten years to over $2.5 million, and the land by itself is worth at least $1.8 million. The farm will be approximately 75% of Soren's gross estate. Soren also owns 500 shares in Midwestern Feed Store, Inc., a closely held corporation. The 500 shares represent a 25% interest in the business. The business is valued at approximately $400,000, but there have been no transactions in the stock and no market for the stock. The farm land would qualify for special use valuation for all of the following reasons, EXCEPT:
The farm operation is the highest and best use of the land.
Mary and Doug lived in Massachusetts and bought a house with money Doug received as an inheritance. They sold their home in MA. and moved to California, using the proceeds of the sale to buy a new home in Los Angeles. Which statement correctly describes how the home will be treated at Doug's death?
The home will be treated as separate property in Doug's estate.
Which of the following statements concerning the amount attributable to the joint-and-survivor annuity that would be included in Samuel's gross estate is correct?
The includible amount is the present value of the future payments to Claudia.
All of the following statements concerning the factors to consider in selecting an appropriate subject of a gift are correct, EXCEPT:
The income tax bracket of the donor and donee are unimportant in considering gifts, since gifts are income-tax-free to donees.
Which of the following circumstances is LEAST likely to indicate a need to change a will?
The maker of the will has been committed and found mentally incompetent.
All of the following statements describe a prerequisite for qualifying the transfer of property for the gift tax marital deduction EXCEPT:
The property transferred is includible in the donor's gross estate.
Dennis Mennis owns commercial real estate with his wife as Tenants by the Entirety. Mennis would like to leave the property to his daughter, Emily, but his wife and daughter are not talking to one another. Mrs. Mennis wants the property to go to their son, who will also receive the family business. What problem does Mennis face as a result of this form of property ownership?
The property will pass to the surviving tenant regardless of the terms of Mennis' will.
All of the following rights are examples of incidents of ownership in a life insurance policy, EXCEPT:
The right to exclude an interpolated terminal reserve.
All of the following items will be included in "M's" gross estate at his death EXCEPT:
The right to the income for his lifetime derived from a Kansas wheat farm willed to "M" by his father.
A QTIP trust may be used to qualify property for the marital deduction. All of the following statements concerning the requirements that must be met for an effective QTIP trust are correct, EXCEPT:
The surviving spouse must be given a general power of appointment over the principal at the time of death.
A QTIP trust may be used to qualify property for the marital deduction. All the following statements concerning the requirements that must be met for an effective QTIP trust are correct EXCEPT:
The surviving spouse must be given a general power of appointment over the principal at the time of death.
The Pastinos own a popular bakery in the neighborhood. Their daughter, Maria, is a divorced mother of two children who is struggling to make ends meet. The Pastinos would like to remove the value of their building and land from their estate while continuing to operate the bakery. They also wish to give Maria $20,000 a year in additional support, however they are "cash poor" since all of their wealth is tied into their business. What estate planning strategy would best accomplish their goals?
Transfer their building and land into an irrevocable trust with Maria as beneficiary, and transfer periodic lease payments into the trust for the bakery's use of the building and the land, to distribute to Maria.
If Ann decides to make gifts to each of her 6 grandchildren, which one of the following statements is NOT true?
Transfers to trusts for the benefit of the grandchildren that will only be available to a grandchild upon reaching age 21 will not qualify for the $13,000 exclusion because it is a gift of a future interest.
All of the following statements concerning planning for couples in non-traditional relationships are correct, EXCEPT:
Unmarried partners have the same recourse as spouses to take an elective share against the will if property is not bequeathed to them.
Max Stevens, age 59, owns 100% of the common stock in a rapidly growing software company valued at $4 million. He would like to remove some of the value of this business from his estate by gifting $1 million shares of the company to his two children who work for him. Max wants all income from the business and wants to maintain total management control after the transfer. However, he also wants his children to have some ownership in the company and benefit from the stock's future appreciation. His adviser recommended a preferred stock recapitalization. All of the following statements concerning a preferred stock recapitalization are correct, EXCEPT:
With a "qualified payment" the value of the common stock he gifts to his children is actually valued at the entire value of his company or $4 million, because Max has a retained interest of zero.
John Smith is a widower with four children all over the age of 21, college graduates, with middle management positions. He is 59, in good health, and has a life expectancy of 21 years. He has a gross estate of $1.9 million. Most assets are in his name, with two residences titled in joint tenancy with his oldest son. In which of the following areas is the estate planner not provided information needed for selection of estate planning techniques?
financial needs
Reginald Rich owns a parcel of commercial real estate worth $500,000. He has an estate valued at $2 million. He has a son, age 25, by his first marriage and two daughters by his present wife. Mr. Rich would like to see his son receive the real estate but does not want his present wife and daughters to cause a scene over the property being given to his son or left in his will. He knows his wife will check the records and will want to see his will when it is written. What will substitute can Mr. Rich use most appropriately to achieve his objective?
irrevocable trust of the real estate with his son as beneficiary
