Cannon Trust II

H's will creates a QTIP marital trust for the benefit of his wife W. The trust provides that W will receive all of the trust income, and will receive trust principal for her health and support. W has limited power of appointment over the trust. Bank X is designated to serve as the sole trustee. At W's death, any income or principal she received from the trust will be included in her gross estate. H's executor will make a QTIP election for this trust on H's federal estate tax return. The marital trust:

• will be included in W's gross estate at her death because W had a limited power of appointment over the trust.

• will be included in W's gross estate at her death because she was entitled to receive distributions from trust principal for her health and support.

• will not be included in W's gross estate at her death because a QTIP election was made.

• will be included in W's estate because a QTIP election was made.

Which of the following is NOT a requirement of QTIP trust?

• All net accounting income to be paid to the surviving spouse at least annually.

• Principal to be distributed at the trustee's discretion for the surviving spouse's health education support or maintenance.

• the surviving spouse has the ability to require the trustee to convert non-income producing assets to income productive assets.

• The surviving spouse may be the only permissible distributee during their lifetime.

In a pro rata fractional formula, which trust is frozen during administration prior to funding?

• The marital trust

• The residual trust

• Neither, they must share the appreciation/depreciation.

• Both the marital and residual trusts.

Which of the following is MANDATORY to qualify the general power of appointment (GPA) marital deduction trust?

• Right to encroach upon corpus of the martial deduction share by surviving spouse during lifetime.

• Ultimate distribution to decedent's heirs.

• All net accounting income paid at least annually to the surviving spouse and surviving spouse is given either lifetime GPA or testamentary GPA.

• Surviving spouse has theright to make gifts from the marital deduction share during lifetime.

Which of the following is NOT a characteristic of a qualified domestic trust (QDT)?

• At least one trustee must be a U.S. Citizen or domestic corporation

• The executor of the donor's estate must irrevocably elect to have the trust treated at a QDT.

• The U.S. trustee must have the right to withhold federal estate taxes from any principal distribution.

• Upon termination of the trust, the U.S. trustee must file a final accounting with the IRS and a tax at the maximum estate tax rate of the current fair market value of the trust assets shall be assessed.

The duration of a life estate is BEST described as which of the following?

• A fixed term

• a life or the lives of one or more persons

• Potentially infinite

• Not to exceed 99 years

Husband is not a U.S. citizen but is a resident alien. Wife is a naturalized citizen. Husband dies leaving everything to his wife outright. How much of a marital deduction will his estate have?

• 100 Percent

• 0 percent because the property must be in qualified domestic trust.

• 0 percent because non-US not entitled to marital deductions.

• 0 percent because the property must be in a qualified terminable interest property (QTIP) trust.

Your 50 year old customer has a $17,000,000 estate. He has three children by his first wife. His second wife, 49 years old, has two children by a previous marriage. Your customer wants to provide exclusively for his wife during her life, pay no federal estate taxes at his death, minimize federal estate taxes at his wife's death, and ensure that when his wife dies, his estate will go tohis children, not hers. You suggest that your customer ask his lawyer about establishing a credit shelter bypass trust to be funded with the full exemption equivalent amount, with his wife as income beneficiary and his children as remainder beneficiaries. He could then put the balance of his estate in a trust that would qualify for the marital deduction and pass to his children at his wife's death. To accomplish this, you should recommend a(n):

• Grantor Retained Income Trust (GRIT)

• estate trust

• Qualified Terminable Interest Property (QTIP) trust.

• testamentary general power of appointment marital trust

Which of the following would not qualify for the federal estate tax marital deduction?

• A qualified terminable interest property (QTIP) trust.

• Royalty rights from the publication of a book.

• A bequest of tangible personal property.

• A life estate conditioned on no remarriage.

Which of the following is typical of a marital deduction trust?

• income is distributed at the trustee's discretion

• the grantor's children can exercise a power of appointment over principal.

• the surviving spouse has the unrestricted right to receive income.

• the surviving spouse is not entitled to any income.