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WorksheetsCannon Trust II
Total questions: 113
Worksheet time: 1hrs 1mins
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.
What kind of funding formula is the following?
"If my spouse, ____________, survives me, my Executor shall set aside the fractional share of my residuary estate that is hereinafter described. The numerator of the fraction shall be ... The denominator of the fraction shall be..."
Pecuniary
Pre-residuary
Residuary
Fractional
What is the following language called? "I give all the rest of my property, hereinafter referred to as "my residuary estate", to the Trustee(s) under the trust agreement dated ____________, between myself as grantor and ____________ as Trustee(s), to be added to the corpus of such trust and held, administered, and distributed by said Trustee(s) in accordance with the terms of such trust agreement.
A power of appointment
A pour over provision
A pecuniary bequest
A specific bequest
Under common law, a trustee may resign in which of the following situations?
If the language of the instrument allows it.
If at least a 30 day notice is given to all beneficiaries of such resignation.
If a majority of the adult beneficiaries consent in writing.
If no beneficiaries register an objection in writing.
"Upon the death of the grantor's wife, if she survives the grantor, trust "A" shall be held in trust hereunder, distributed to, or held in trust for such of the grantor's descendants, with such powers and in such manner and proportions as the grantor's wife may appoint in her will making specific reference to this power of appointment." This is an example of a:
limited power of appointment
general power of appointment
durable power of attorney
general power of attorney
A trust document gives a beneficiary the noncumulative annual right to withdraw the greater of $5,000 or 5% of the value of trust corpus in any calendar year. The existence of a "5 by 5" power will cause which of the following tax implications?
No tax implications, since the power is deemed de minimis
No tax implications, if the value of the power is less than $10,000.
The beneficiary will be taxed on the withdrawal portion only if the power is exercised.
The beneficiary will be taxed on the income from the withdrawal portion of the trust, whether or not the power is exercised.
Father's will creates a testamentary trust for Son. The trust provides for all income to be paid to Son during Son's lifetime. Son has the power to appoint in his will, specifically referring to the power, the trust property to a class consisting of his issue. What will be the estate tax consequences of this power to Son when Son dies?
Trust is included in Son's gross estate because he had the right to all of the income.
Trust is included in Son's gross estate because he had a general power of appointment.
Trust is included in Son's gross estate because he had a limited power of appointment.
Trust is not included in Son's gross estate.
As a rule, who should retain the power to ascertain grantor incapacity in a Revocable Living Trust?
Corporate trustee
Family member or physician
Only the court should have that power
The grantor of the trust.
Decedent dies with a taxable estate. However, the decedent's will fails to establish the source from which the estate tax liability will be paid. Therefore, the statutes within the decedent's state of residence will determine from which source(s) these taxes will be paid. These statutes are known as:
The appointment statutes.
The allocation of taxes statutes.
The intestacy statutes.
The apportionment statutes
Which of the following is TRUE with respect to general powers of appointment?
All general powers of appointment are similar to outright ownership of property.
All general powers of appointment allow the power holder to appoint the assets to his creditors.
All general powers of appointment have transfer tax consequences.
All general powers of appointment have income tax consequences.
Decedent's will states "Upon the death of my husband, such property shall be distributed to my siblings and their issue as he shall so appoint. If he fails to appoint, then in equal shares to my nieces and nephews then living." This is an example of which of the following?
A general power of appointment
A general power of attorney
A limited power of appointment
A limited power of attorney
Bob intends to make gifts to the following. Which of the following will qualify for the generation-skipping tax predeceased ancestor exception?
The children of his living children.
The child of his deceased child.
His grandnephew (whose parents are deceased).
His niece, if his brother is deceased.
Generation skipping transfers occur in which of the following circumstances?
Only between family members.
Only between non-family members.
Only between persons over 37 1/2 years apart in age.
Only when assets aren't subject to gift or estate tax in the middle generation.
Allocation of the generation skipping transfer tax exemption for an irrevocable trust subject to a taxable termination is made by which of the following?
Donor (or donor's estate) at the time the trust terminates.
Donee at the time the donee receives the property.
Donor (or donor's estate) at the time the trust is funded.
Donee at the time the trust is funded
The generation skipping transfer tax rules apply only to which of the following?
Property left in trusts that exceed the rule against perpetuity.
Property passing two or more generations below the grantor.
Family members of the decedent.
All persons 37 1/2 years younger than the grantor.
Which of the following BEST describes the rate at which the generation skipping transfer tax is applied?
At varying, progressive rates according to the unified transfer tax rate schedule applicable at the time
Only at the lowest estate tax rate applicable at the time
Only at the highest estate tax rate applicable at the time
Based on the size and nature of the transfer
Which of the following is TRUE of the GSTT Exemption?
The GSTT Exemption is not indexed for inflation
The GSTT Exemption is more than the Applicable Exclusion Amount
The GSTT Exemption is indexed for inflation
The GSTT Exemption is less than the Applicable Exclusion Amount
A client is looking to establish an irrevocable trust that provides income to his spouse for life, then income to his children for life, with the remainder interest passing to his grandchildren. This is an example of which of the following?
Crummey trust
Generation-skipping trust
Power of appointment marital deduction trust
Grantor retained annuity trust
Grandparents establish a trust for the benefit of children, children's spouses, and grandchildren. If the trustee pays $50,000 directly to Princeton University for a grandchild's tuition, this payment should be characterized as a $50,000:
Direct Skip
Taxable Distribution
Unlimited Exclusion Payment
Taxable Termination
On October 22, 1986, Grandmother became comatose. She died on January 1, this year. Her will gave each of her five grandchildren $2,000,000 outright. She also established a $20,000,000 trust for the benefit of her children, her children's spouses, and their issue. To which transfers should her executor allocate the generation-skipping transfer (GST) exemption?
To the direct skips, the $2,000,000 per grandchild gifts
To the $20,000,000 trust
One-half to the direct skip, one-half to the trust
None, because her estate is grandfathered and not subject to GST tax
A transferor funds a trust for benefit of her grandchildren. This is an example of which of the following types of transfers?
Taxable Distribution
Taxable Termination
Indirect Skip
Direct Skip
Which of the following statements is TRUE about transfer taxes in 2023?
The generation skipping tax exemption is $12,920,000.
The applicable exclusion amount for estate tax increased to $6,460,000.
The applicable credit amount for gift taxes is $6,460,000
The applicable credit amount for estate taxes is $12,920,000.
In 2023, the annual gift exclusion is:
10,000
17,000
32,000
12,920,000
To maximize both spouses use of the generation skipping exemption in an optimal marital deduction plan, what type of marital bequest must be used?
Outright
General power of appointment
Qualified terminable interest property trust
Qualified domestic trust
Which of the following BEST describes whether trust accounting income is subject to generation skipping transfer tax?
Generation skipping transfers do not include income distributions from a trust where the trustee had discretion to "sprinkle" the income.
Generation skipping transfers do include income distributions from a trust where the trustee had discretion to "sprinkle" the income.
Generation skipping transfers sometimes include income distributions from a trust where the trustee had discretion to "sprinkle" the income, determined by whether the distribution is made from income or principal.
Generation skipping transfers can only be made from distributions of principal
A grandparent establishes an irrevocable trust with income to her child for his life and then to his children. She funds the trust with assets valued at $4,000,000 and allocates $1,000,000 of her lifetime GST exemption. The inclusion ratio for this trust is:
0
25%
50%
75%
Which is the best definition of the “applicable rate” for GSTT?
Inclusion Ratio X maximum Estate Tax Rate
Maximum Estate Tax Rate
Inclusion Ratio X GSTT Exemption
Maximum Estate Tax Rate X Applicable Fraction
The maximum amount that an individual can shelter from federal estate tax (other than the marital or charitable deductions) is which of the following?
$10,000 as indexed for inflation
$1,000,000 as indexed for inflation.
$10,000,000 as indexed for inflation.
Unlimited
Tom Jones set up a irrevocable trust into which he transferred a piece of rental property, reserving the right to receive the income from it for the rest of his life. After his death, accumulated income and principal will go to his son, Steve. Which of the following is a gift tax implication of the transfer of trust?
There is no gift tax because the gift is one of a future interest.
There is a gift tax because the transfer of the irrevocable remainder interest in trust to Steve is a taxable transfer.
There is no gift tax because there has not been a completed gift.
There is a gift tax because the transfer of the accumulated income to Steve when the trust terminated is a completed gift.
9. The purpose of the valuation discount in an FLP or LLC is for:
Federal gift and estate tax purposes.
State income tax purposes.
Federal income tax purposes.
Sales and use tax purposes.
In order to establish the Deceased Spouse's Unused Exemption Amount (DSUEA) for the surviving spouse, which of the following must be true at the first spouse's death?
The first decedent spouse must have a taxable estate at death.
The surviving spouse must make an election within one year of the first spouse's death.
A timely filed estate tax return was filed.
No requirements except that all of the exemption was not, in fact, used at the first spouse's death.
Bonds that can be traded in for stock are known as
Convertible
Cumulative
Preferred
Callable
A company most likely will call bonds (assuming the bonds are callable) it had previously issued if:
Interest rates rise
interest rates fall.
interest rates remain the same
the company experiences difficult financial conditions
Betty wants to purchase an investment grade bond. The LOWEST Standard & Poor's rating that would qualify as investment grade is
AA
BBB-
BB
B
A Treasury bill is taxable by which of the following entities?
States only
Federal government only
States and municipalities
States, municipalities, and federal government
Compared to bonds, money market investments typically possess
lower liquidity and lower marketability.
higher liquidity and higher marketability.
greater price volatility
more sensitivity to interest rate changes
You manage a trust that holds zero-coupon bonds. To determine the income tax liability, you should:
report the full amount of the discount at maturity
report the annual accrual each year.
report semi-annual interest.
elect to defer income recognition until bonds mature.
If investors expect interest rates to increase they will
ladder bond maturities
decrease duration
increase duration
buy all long term bonds
8. A municipal bond issue secured by the income from a bridge or toll road is called a:
mortgage bond issue
debenture issue.
general obligation issue
revenue bond issue.
An investor in the 28% federal bracket and 6% state income tax bracket would have the highest after tax income from a(n):
6% municipal bond from your state.
6.5% treasury bill.
7% U.S. treasury note
7.5% corporate bond.
0. Your client is in the 28% federal tax bracket and 6% state tax bracket. Which of the following will provide the best after-tax return?
4% in state municipal bond
4.5% out of state municipal bond
6.5% US government bond
7% AAA corporate bond
Real estate investments consist of all of the following EXCEPT:
Residential
land
buildings
nuclear power plants
Advantages of investing in equity real estate investment trusts (REITs) include all of the following EXCEPT:
Long-term hedge against inflation
Potentially increasing cash flows
Guaranteed return of principal
Possibility for long-term capital appreciation
Natural resource equity prices have historically been sensitive to all of the following EXCEPT:
Economic upheaval
Political upheaval
Natural disasters
Bond Market Returns
Advantages of investing in precious metals include all of the following EXCEPT:
They are tangible, physical assets
Potentially high return
Low volatility
Long-term hedge against inflation.
6. The OCC and other regulators have concerns about unique and hard to value assets in all of the following areas except:
Valuations of the assets are accurate and up to date
Special accounting rules for the assets held.
Ability to produce income for distribution requirements.
Grantors decision to pass the asset on to beneficiaries
Disadvantages to investing in exchange-traded funds (ETFs) include
Higher expense ratios than mutual funds
Commissions
Less diversification than mutual fund in same index
Less liquidity than mutual fund
ETFs differ from open ended mutual funds on all of the following EXCEPT
May trade intraday at current prices.
Trade through a broker
May not charge early withdrawal fees.
Less tax efficient
Dividend distributions from mutual funds are
not taxable until the fund is sold.
not taxable if reinvested back into the fund.
taxable as long-term gains.
taxable as ordinary income or qualified dividends depending on status
Open-end and closed-end investment companies differ in their
objectives
capitalization
techniques of management
method of computing net asset value
Investment companies must issue financial statements to their shareholders:
monthly
quarterly
semiannually
annually
The price an investor will pay today when purchasing an open-end investment company is determined from
yesterday's closing price.
today's closing price
the average closing price for the week.
the price at the time the order is entered.
Under the "conduit" theory, taxes payable on dividends and interest distributed by a regulated investment company are paid
by the investment company only
only by the shareholder
by both the investment company and the shareholder
only if distributions are made in cash.
The market price of shares of a closed-end investment company is:
determined by the supply and demand for the stocks held in the mutual fund's portfolio.
based on the net asset value per share of the investment company
fixed by the sponsor
determined by the supply and demand for the shares of the closed-end investment company.
Money market funds invest primarily in:
high yield securities.
short term fixed income securities.
intermediate fixed income securities.
a mixture of stocks and bonds.
Which of the following is NOT a form of real estate investment?
Real Estate Investment Trust
Real Estate Limited Partnership
Unimproved Land
Commodity Futures Contract
Which of the following best describes the distribution of property of a first trust to one or more second trusts or to modify the terms of the first trust?
Decanting
Distribution
Direct Skip
Termination
Each of the following may provide legal authorization to decant a trust EXCEPT:
Terms of the instrument
Written direction by a majority of the beneficiaries
Uniform Trust Decanting Act
Uniform Trust Code
All of these are valid reasons to decant a trust EXCEPT which of the following
To fix drafting errors or makes ambiguous terms clear
To move a trust to a state with more favorable laws
To eliminate a charitable beneficiary’s interest
To convert a trust to a special needs trust
Which of the following best describes what Trustees that are most successful in defending against abuse of discretion claims do consistently?
Do not apply a process when exercising discretion, instead just consider the request and the person
Apply a process when exercising discretion and document the reasons for their decisions
Apply a process when exercising discretion, but do not document the reasons because it leaves written evidence
Do not apply a process when exercising discretion, but document the reasons
Settlor’s intent is primarily expressed in the document as written guidance but may be influenced by all of the following factors except one. Which of the following is least influential?
Experience & Observation of settlor’s past practices
Protectors or Committees created by the document
Letter of Wishes or Purpose statement published with the document
valid need of the beneficiary even if not within the settlor’s expressed intent
The following language, “Travel has been a huge part of my life and is something I would do with our children if I were living; please make generous distributions for travel and educational opportunities. Even a pleasure trip can have tremendous advantages in terms of experience and maturity.” is an example of which of the following?
Precatory Language
General Power of Appointment
Limited Power of Appointment
Mandatory Distribution
When the document expressly states that the trustee has “Absolute or Uncontrolled Discretion” all of the following are true EXCEPT which of the following?
Case law and the Restatement provide that these terms are not interpreted literally
Trustee’s discretion is always subject to judicial review
Trustee’s discretion is no longer subject to judicial review
The trustee(s) are required to act honestly and in accordance with the settlor’s intent
When the beneficiary has a legitimate standard of living which exceeds the ability of the trust to maintain, what can be called a “wasting trust”, all of the following are appropriate EXCEPT which of the following?
Resign prior to the trust running out of money to avoid liability
Distribute to the standard, with at least annual documentation and communication of the consequences
Counsel beneficiary about sustainable withdrawal rates
As appropriate, communicate in advance with remainderpersons to set expectations
Under the Uniform Trust Code, a trustee may delegate duties and powers that a prudent trustee of comparable skills could properly delegate under the circumstances. The trustee is not liable to the beneficiaries or to the trust for an action of the agent to whom the function was delegated if the trustee exercises reasonable care, skill, and caution in each of the following EXCEPT which of the following?
Selecting an agent
Establishing the scope and terms of the delegation, consistent with the purposes and terms of the trust
Periodically reviewing the agent’s actions in order to monitor the agent’s performance and compliance with the terms of the delegation
Ensuring that the agent performed as well as any other agent would have done so in the same circumstances, and reimbursing the trust for any shortfall
Which of the following is NOT a requirement of a Pet Trust under the Uniform Trust Code?
The pet is living during the settlor’s life and survives the settlor
The trust terminates upon the death of the pet
The trust is precatory in nature
The trust may only hold assets sufficient to carry out its purpose
Which of the following best defines an Incentive Trust?
Trust to take care of a pet after the owner’s death
Trust with distributions tied to specified events
Trust for impoverishing the settlor to qualify for government benefits
Trust that beneficiaries are not informed of
Which of the following best defines a Silent Trust?
Trust that is hidden from the regulators
Trust with distributions tied to specified events
Trust for impoverishing the settlor to qualify for government benefits
Trust that beneficiaries are not informed of
The intention in creating a silent trust is generally to do any of the following EXCEPT
Keep knowledge of a trust from being a disincentive for young beneficiaries to productive activities like education and work
Maintain family business privacy
Shelter the trustee from liability
Shelter assets and information from potential creditors
Which of the following best defines a Blind Trust
Trust for vision impaired beneficiaries
Trust for impoverishing the settlor to qualify for government benefits
Trust that beneficiaries are not informed of
Trust intended to avoid conflicts of interest
Which of the following best defines a Medicaid Qualifying Trust?
Trust with distributions tied to specified events
Trust for impoverishing the settlor to qualify for government benefits
Trust that beneficiaries are not informed of
Trust intended to avoid conflicts of interest
A trust created in another state to save state income taxes on undistributed earnings is best known as which of the following?
DING - Domestic Irrevocable Non-Grantor trust
RLT – Revocable Living Trust
CLT – Charitable Lead Trust
ILIT – Irrevocable Life Insurance Trust
Irrevocable trust is out of the estate but still taxes its income to the grantor rather than at the “compressed” rates of a complex trust is referred to as which of the following?
RLT – Revocable Living Trust
QTIP – Qualified Terminable Interest Property trust
DING - Domestic Irrevocable Non-Grantor trust
IDGT – Intentionally Defective Grantor Trust
An Irrevocable trust is created to receive taxable gifts from one spouse to another which utilizes the Applicable Exclusion Amount (AEA) of the donor, thus “freezing” the gift and grandfathering the amount should tax credits reduce in the future with the done spouse being a potential beneficiary. Which of the following does this arrangement describe?
CRAT – Charitable Remainder Annuity Trust
DING - Domestic Irrevocable Non-Grantor trust
SLAT – Spousal Lifetime Access Trust
BDIT – Beneficiary Defective Irrevocable Trust
Which of the following is best described as an irrevocable trust with grantor trust status with respect to one or more of the beneficiaries?
DING - Domestic Irrevocable Non-Grantor trust
BDIT – Beneficiary Defective Irrevocable Trust
RLT – Revocable Living Trust
CLT – Charitable Lead Trust
Under the Cy Pres doctrine, if a charitable purpose becomes unlawful, impracticable, impossible to achieve, or wasteful, which of the following best describes the result?
The trust fails, in whole or in part
The trust property reverts to the settlor or the settlor’s successors in interest
The court may modify or terminate the trust by directing that the trust property be applied or distributed in a manner consistent with the settlor’s charitable purposes
The trust distributes as the trust is written anyway because it was the express wish of the settlor
In 2023, the annual gift tax exclusion is:
$17,000 per donee for gifts of present interest
$34,000 per donee for gifts of present interest.
$15,000 per donee for all gifts, present or future interest
$5,000 or 5% of the corpus, whichever is greater.
In 2019, having made no prior gifts, Don began making annual gifts to his son of $250,000. What is the first tax year for which he will have to file a gift tax return?
2019
2020
2021
2022
Which of the following is TRUE of lifetime taxable gifts?
The unified credit may not be used in whole or in part
Taxes due as a result of the gift are the responsibility of the donee.
$30,000 annual present interest exclusion per donee is available.
The unified credit may be used to the extent available to eliminate or reduce the tax due.
Gifts to which of the following trusts will NOT qualify as a gift of present interest for the annual exclusion?
Irrevocable trusts with Crummey provisions
2503(c) trusts for minors
Simple Trust
Complex Trust
Since the Gift and Estate Tax rates are unified which of the following best describes the relative advantages of gift versus estate taxes?
There are no tax advantages to making lifetime gifts.
There are tax advantages to making lifetime gifts.
There are tax advantages to making lifetime gifts only within three years of death of the donor.
There are tax advantages to making lifetime gifts only when made more than three years before death of the donor.
To qualify for the annual gift tax exclusion, the gift can NOT be made in which of the following forms?
In fee simple
To a simple trust
To a 2503(c) trust
To a grantor retained annuity trust
Which of the following is characteristic of a gift under the uniform gift to minors act?
Property must be available to the child at the age specified under state law.
The gift money's earnings are not subject to the "kiddie" tax.
The gift is revocable
The gift must pay out all income to the minor in order for the gift to qualify.
. A married couple wishes to gift as much as possible to their four children without making any taxable gifts or using any of their applicable credit. What is the total amount they can give in 2023?
$17,000
$34,000
$68,000
$136,000
A widower wants to gift as much as possible to his three children without making taxable gifts and without using any of his applicable credit. What is the total amount he can give in 2023?
$17,000
$51,000
$68,000
$85,000
Your client does not live in a community property state and does not elect gift splitting. This year, she made the following gifts of separate property?
$53,000 to her son to help buy a house
$60,000 to her spouse for a boat
$40,000 to her church as a donation
$75,000 of jewelry to her daughter (cost basis of $24,000
What is the amount of her taxable gifts for 2023?
$52,000
$72,000
$94,000
$102,000
1. Assets purchased and owned by a decedent in a common law state are as follows: Home owned as joint tenants with rights of survivorship with spouse Cost Basis: $240,000 Date of Death Value: $800,000 Rental property bought by decedent and owned as joint tenants with rights of survivorship with son Cost Basis: $50,000 Date of Death Value: $150,000 The cost basis to the beneficiaries is which of the following?
Home $240,00/Rental $50,000
Home $520,00/Rental $50,000
Home $520,00/Rental $75,000
Home $520,00/Rental $150,000
Which of the following assets can NOT be used to fund a credit shelter trust?
Residence
Joint tenancy property
Employee benefit plan
Life Insurance policy
Your client owns a $200,000 home in joint tenancy, a $15,000 car in his own name, an $8,000 CD in his name alone, and a $100,000 life insurance policy with a cash value of $10,000, payable to his wife. What is the value of his probate estate?
$23,000
$33,000
$223,000
$333,000
Bob and Sue are married and live in a common law state. They put $100 in joint names with survivorship rights. When Sue dies, before Bob, it has grown to $150. How much is includable in Sue's gross estate?
$0
$50
$75
$100
When making the reverse QTIP election, it is best to do which of the following?
Pay the GSTT tax now and use portability of the GSTT exemption to apply at the surviving spouse’s death.
Not to make the QTIP election for Estate Tax purposes either.
Make the reverse QTIP election on a fraction of the trust.
Split the QTIP trust to achieve a zero inclusion ratio on the reverse QTIP portion.
Qualified terminable interest property does not qualify for the marital deduction unless the executor does which of the following?
Elects to qualify it by listing the QTIP on the marital deduction schedule of the Estate Tax Return
Files a formal petition with the court.
Gets certain beneficiaries to disclaim.
Gets unanimous, written consent of all present and future beneficiaries.
Mary and Bill own a house as joint tenants with rights of survivorship. When Mary dies, which of the following best describes the result?
Mary's share passes through her will to her heirs.
Mary's share passes by law to her heirs, not through her will.
Mary's share passes to the surviving joint tenant regardless of what her will says.
The asset must be sold and the estate gets 1/2 of the proceeds.
Which of the following can NOT be disposed of through a provision in a decedent's will?
The decedent's final paycheck.
The decedent's portion of joint tenancy property.
The decedent's portion of property held as tenants in common.
Property in which the decedent holds a testamentary general power of appointment.
Your customer is married with two adult children and has a net worth of $18,000,000, which includes a house the couple owns jointly worth $2,500,000. She has a simple will. The customer would like to reduce her estate taxes. You suggest that she ask her lawyer about:
getting a power of attorney.
leaving her estate directly to her two children.
incorporating a credit shelter trust provision in her will
transferring ownership of the house to her spouse
Assume the client inherits from his parent stock that was purchased by the parent at $50 per share and appreciated to $75 per share by the date of the parent's death. At the time the estate was settled one year later, the stock had declined to $65 per share. What is the client's tax basis in the stock?
$50 per share
$65 per share
$75 per share
$0 per share
Which of the following statements about a QTIP trust is false?
An executor has the ability to elect, partially elect, or not elect to qualify for QTIP treatment any part of the martial trust property.
The spouse beneficiary need not have the ability to control the ultimate disposition of the trust property.
The grantor spouse's GST exemption cannot be allocated to trust property.
To have a valid QTIP interest, the spouse must be entitled to all of the net income from the trust property.
How are death benefits from a life insurance policy regarded for tax purposes?
Not subject to federal income tax
Not subject to federal estate tax
May not be used to pay federal estate tax without losing the unified credit.
Which of the following is true of jointly held property and its estate tax treatment?
All jointly held property is subject to estate tax to the extent of 50% its value unless the parties show the contributions to be otherwise.
No jointly held property is subject to estate tax to the extent of 50% its value unless the parties show the contributions to be 50% each.
Jointly held property may be subject to the extent of 50% or 100% depending on who the joint owners are.
All jointly held property is subject to estate tax to the extent of 100% its value unless the parties show the contributions to be otherwise.
Your client is a US citzen and her spouse is a non-resident alien. She desires to leave outright to her non-resident alien husband the maximum amount possible at her death without estate tax being imposed. How much may she leave him outright?
Nothing
the amount of the gift tax annual exclusion
An unlimited amount
The applicable exclusion amount
Which of the following is TRUE of the taxation of an individual holding a testamentary general power of appointment?
She will be taxed on a percentage of the income only if the power is exercised.
She will be taxed on a fraction or Percentage of both the ordinary income and capital gains for the period of time the power is available but not exercised.
She will not be taxed on income as a result of the power, but the full value of the property subject to the power will be included in her estate.
She will be taxed on a fraction or percentage of both the ordinary income and capital gains for the period of time the power is available only if exercised.
Which of the following powers is not a general power of appointment?
A power to appoint to one's creditors
A power to appoint to one's estate
A power to appoint property to pay estate taxes.
A power to appoint to one or more charitable organizations.
Grandmother and grandfather established a trust for the benefit of their five grandchildren in 1982. January 1995, granmother and grandfather contributed another $100,000 to the trust. How much exemption should they have allocated to this transfer to protect it from generation skipping transfer tax?
None, because the trust was created before the generation skipping transfer tax was imposed, the trust is exempt.
None, because direct skips qualify for the $10,000 annual exclusion.
$50,000 since there are only five grandchildren, only half is protected by the annual exclusion.
$100,000 because the transfer does not meet the exemption for certain transfers in trust.
H's will provides that upon his death, $1 million will be held in a trust for the benefit of his wife W. This trust provides that W will receive all of the trust income and will receive distributions of prinpal in the form of an annuity for her lifetime. At W's death, the remaining trust assets will be distributed to a designated charity. H's executor intends to make a QTIP election for this trust. Will the legacy to the trust, or any part thereof, be deductible by H's estate, and if so why?
Yes: the entire $1 million will qualify for the estate tax marital and charitable deductions.
NO: none on the $1 million will qualify for the estate tax marital or charitable deductions
Yes: the entire $1 million will qualify for the estate tax marital deduction.
