Deck 15: Preserving Your Estate

Question 1

Which of the following leads to the breakup of an estate?

A)Death-related costs
B)The presence of probate estates
C)The proper use of vehicles of transfer
D)Highly liquid assets
E)The availability of a will

Answer 1

A

Question 2

A unified transfer tax (UTT)credit is unique to an individual.

Answer 2

False

Question 3

A trustee is the person who writes a will.

Answer 3

False

Question 4

Joint ownership of assets is an effective substitute for a will.

Question 5

The insurance policy transferred to a life insurance trust will reduce the transfer taxes.

Question 6

The taxable estate is less than the adjusted gross estate.

Question 7

People planning means providing sustenance and resources for family members by anticipating their future needs.

Question 8

To minimize the transfer tax on the transfer of a life insurance policy, individuals must transfer it to their siblings.

Question 9

A credit shelter trust produced the same effect as the portability rule.

Question 10

The gross estate includes all property you own that is subject to federal estate taxes at your death.

Question 11

Insufficient capital can cause problems in estate planning.

Question 12

Which of the following statements about the review of estate plans is true?

A)Estate planning and review is a very simple process that doesn't require professional assistance.
B)Periodic reviews and revisions are required to update the plan.
C)Life events like disability and job change do not influence the review of estate plans.
D)Estates are exempted from taxes when there is an intestacy, which makes a review process redundant.
E)Transfer costs are not applicable to the transfer of estates and, therefore, will not affect the review plan.

Question 13

Charitable contributions given during one's lifetime provide an income tax deduction and remove property from the estate.

Question 14

Since 2011, a surviving spouse cannot use the unused unified transfer tax (UTT)credit of the deceased spouse.

Question 15

The objective of estate planning is to:

A)avoid the disposition of assets to the possible beneficiaries.
B)maximize the taxes involved in the transfer of assets.
C)create a situation of intestacy.
D)determine how to invest the estate's assets after your death.
E)maximize the usefulness of people's assets during their lives.

Question 16

_____ would be a first-level death-related cost.

A)Funeral expenses
B)Federal estate taxes
C)Probate expenses
D)Inheritance taxes
E)Administrative costs

Question 17

The primary purpose of life insurance is to replace lost income upon the death of the insured or to provide cash to pay a transfer tax at death and for other end of life expenses.

Question 18

When the first spouse dies, then any unused applicable exclusion is lost and cannot be used.

Question 19

Liquidity is important in an estate to pay for death costs and possible taxes.

Question 20

Estate planning requires the knowledge of wills, trusts, and taxes.

Question 21

A document that precisely states the treatments a person wants if he or she becomes terminally ill is called a(n):

A)living will.
B)ethical will.
C)memorandum.
D)letter of instructions.
E)codicil.

Question 22

Which of the following statements about the portability of the unified transfer tax credit is true?

A)When the first spouse dies, then any unused applicable exclusion amount will carry over to the other spouse.
B)When the first spouse dies, then any unused applicable exclusion amount will carry over to the government.
C)When the first spouse dies and is left with an excess amount after using the applicable exclusion, then the excess amount will carry over to a trust.
D)It is a method of reducing gift taxes with the consent of the other spouse in which the gift can be treated as if each had been given one-half of it.
E)It is a method of transferring assets between spouses, either by gift or through estate.

Question 23

A letter of last instructions is a(n):

A)legal document that authorizes another person to take over someone's financial affairs and act on his or her behalf.
B)document that precisely states the treatments a person wants if he or she becomes terminally ill.
C)written power of attorney authorizing an individual to make health care decisions on behalf of the principal when the principal is unable to make such decisions.
D)informal memorandum that is separate from a will and contains suggestions or recommendations for carrying out a decedent's wishes.
E)personal statement left for family, friends, and community that shares your values, blessings, life's lessons, and hopes and dreams for the future.

Question 24

A grantor is also called the:

A)heir.
B)beneficiary.
C)joint owner.
D)settlor.
E)attorney.

Question 25

In 2018, James gave his son John a $5,000,000 term life insurance policy taken on James' life. At the time of the gift, James was in good health, and the value of the term insurance policy for gift tax purposes was less than the $14,000 annual exclusion amount. However, James died in 2019. Which of the following statements is true?

A)In 2019, the $5,000,000 gift will be included in James' gross estate for estate tax purposes.
B)In 2019, the $5,000,000 payout will not be included in James' gross estate for estate tax purposes as he had outlived the transfer by more than 1 year.
C)James will get an annual exclusion of $50,000, i.e., 1% of the gift amount in 2019.
D)In 2019, James will be eligible for a unified tax credit of $500,000, i.e., 10% of the gift amount, as he has outlived the transfer by more than 1 year.
E)James cannot avail the charitable deduction in 2019 as he did not outlive the transfer by more than 1 year.

Question 26

You have a spouse, two children, three brothers, one grandchild, and a living father. If you died without a valid will, the person(s)most likely to receive the proceeds of your estate would be your:

A)grandchildren.
B)spouse.
C)parents.
D)brothers.
E)friends.

Question 27

The transfer of an estate (after death)by an individual to the _____ of the individual will result in the most favorable tax treatments.

A)children
B)spouse
C)parents
D)employer
E)siblings

Question 28

A form of joint ownership that may exist only between husband and wife is:

A)joint tenancy.
B)joint tenancy with right of survivorship.
C)joint tenancy without right of proprietorship.
D)tenancy in common.
E)tenancy by the entirety.

Question 29

A trust that provides for management continuity and income flow even after the grantor's death and allows assets to bypass probate, but which provides no income or estate tax advantages, is a(n)_____ trust.

A)revocable living
B)ethical living
C)testamentary
D)charitable lead
E)credit shelter

Question 30

A document that legally modifies a will without revoking it is called a(n):

A)codicil.
B)letter of last instructions.
C)living will.
D)ethical will.
E)memorandum.

Question 31

Your gross estate is reduced by the _____ to determine the adjusted gross estate.

A)state death tax credit
B)orphan's deduction
C)marital deduction
D)funeral and administrative expenses
E)previous year's income tax

Question 32

A written and legally enforceable document expressing how a person's property should be distributed upon his or her death is known as a(n):

A)will.
B)ethical paper.
C)memorandum.
D)letter of last instructions.
E)power of attorney.

Question 33

The unified rate schedule applies to federal _____ taxes.

A)sales and gift
B)gift and service
C)gift and estate
D)infrastructure and estate
E)estate and professional

Question 34

A _____ gives the rights of survivorship to the other owner of a property.

A)joint tenancy
B)grantor property
C)tenancy in common
D)tenancy by the beneficiary
E)community property

Question 35

The disposition of property involves:

A)distributing residual assets after specific gifts have been made.
B)allocating the burden of taxes to the beneficiaries.
C)signing the will to prevent fraud.
D)creating a situation of intestacy.
E)appointing the executors.

Question 36

_____ has no right of survivorship.

A)A co-owner tenancy
B)A joint tenancy
C)A tenancy in common
D)A settlor tenancy
E)A tenancy by the entirety

Question 37

Which of the following is an advantage of giving gifts?

A)Gifts avoid depreciation in value.
B)Gift tax exclusion attracts more estate tax.
C)Marital deduction allows gifts to be tax free.
D)The annual inclusion amount increases with gifts.
E)There is no tax exemption for charitable contributions.

Question 38

The applicable exclusion amount from estate tax for 2018 was:

A)$2,410,000.
B)$3,780,000.
C)$5,430,000.
D)$7,820,000.
E)$11,180,000.

Question 39

A trust designed to help couples gain full use out of each spouse's applicable exclusion amount is the _____ trust.

A)crummey
B)credit shelter
C)charitable lead
D)special needs
E)charitable remainder

Question 40

Which of the following best describes a situation of intestacy?

A)George has insufficient medical insurance to cover the cost of medical treatment he needs.
B)Jill died without heirs.
C)Eduardo became physically challenged after he was injured in a car accident.
D)Lily died without a valid will.
E)Mason died without any probate property.

Question 41

The tax base for the transfer tax is:

A)fair market value.
B)book value.
C)tax credit value.
D)net realized value.
E)gross gift value.

Question 42

If the ownership of a closely held company is less than 50% of the stock, then the ownership is termed a:

A)minority interest.
B)majority interest.
C)marketable asset.
D)block asset.
E)blockage discount.

Question 43

A _____ is applied to reduce estate tax when a large amount of real estate is for sale in one area.

A)marketability discount
B)minority discount
C)blockage discount
D)property discount
E)land discount

Question 44

You could gift any number of people _____  per year without having to pay any gift taxes.

A)$36,000
B)$12,000
C)$25,000
D)$5,000
E)$15,000

Question 45

The unified tax credit can be applied against the:

A)total income of the beneficiary of a will.
B)tentative tax on the estate tax base.
C)adjusted gross estate.
D)total estate taxes.
E)gross estate.

Question 46

The unused unified transfer tax (UTT)credit can be used by the:

A)spouse.
B)siblings.
C)children.
D)parents.
E)grantor.

Question 47

If the amount of stock in the gross estate represents a substantial holding in a company, then the value subject to the tax will be reduced by the:

A)marketability discount.
B)minority discount.
C)blockage discount.
D)property discount.
E)stock discount.

Question 48

The person setting up a trust is called the:

A)grantor.
B)trustee.
C)attorney.
D)beneficiary.
E)owner.

Question 49

Jane and Arthur Patrikson are happy that their daughter is graduating from high school. They gift their daughter $25,000, with $12,500 being paid out of Mr. Patrikson's account and the remaining from Mrs. Patrikson's account. What will be the gift tax payable by the Patriksons on account of the above transaction?

A)$2,800
B)$1,800
C)$1,000
D)$400
E)$0

Question 50

You could give an unlimited amount of assets to your _____ without incurring any gift taxes.

A)children
B)spouse
C)friends
D)charity trust
E)relatives

Question 51

A trust that comes into existence only after the will is probated is known as a _____ trust.

A)testamentary
B)living
C)tenancy
D)codicil
E)revocable