Deck 15: Preserving Your Estate

Question 1

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

Answer 1

False

Question 2

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

Answer 2

True

Question 3

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

Answer 3

False

Question 4

A trustee is the person who writes a will.

Question 5

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

Question 6

Insufficient capital can cause problems in the payment of estate taxes.

Question 7

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

Question 8

Estate planning is designed to:

A)avoid the disposition of assets to the possible beneficiaries.
B)minimize the taxes involved in the transfer of assets.
C)create a situation of intestacy.
D)increase the taxable income.
E)enhance the market value of the assets.

Question 9

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 10

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

Question 11

The gross estate includes all property subject to federal estate taxes at a person's death.

Question 12

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

A)Estate planning and review is a very simple process without any legal hassles.
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

_____ 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 14

The taxable estate is less than the adjusted gross estate.

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

A credit shelter trust is used to save estate tax by using the unused unified transfer tax (UTT)credit.

Question 20

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

Question 21

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 22

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 23

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 24

The applicable exclusion amount from estate tax for 2015 was:

A)$500,000.
B)$1,000,000.
C)$2,000,000.
D)$3,500,000.
E)$5,430,000.

Question 25

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)memoradnum
D)letter of last instructions
E)power of attorney

Question 26

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 27

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

A)When the first spouse dies,then any unused applicable exclusion amount (AEA 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 28

You have a spouse,two children,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 29

Which of the following best describes a situation of intestacy?

A)Having insufficient medical insurance during a period of illness
B)Dying without heirs
C)Being physically challenged
D)Dying without a valid will
E)Dying without any probate property

Question 30

_____ 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 31

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 32

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 33

In 2015,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 the year 2016.Which of the following statements is true?

A)In 2016,the $5,000,000 gift will be included in James' gross estate for estate tax purposes.
B)In 2016,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 one year.
C)James will get an annual exclusion of $50,000 i.e.1 percent of the gift amount in 2016.
D)In 2016,James will be eligible for a unified tax credit of $500,000,i.e.10 percent of the gift amount,as he has outlived the transfer by more than one year.
E)James cannot avail the charitable deduction in 2016 as he did not outlive the transfer by more than one year.

Question 34

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 35

A letter of last instructions is:

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

Question 36

Which of the following is an advantage of giving gifts?

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

Question 37

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 38

The disposition of property involves:

A)the distribution of residual assets after specific gifts have been made.
B)transferring the burden of taxes to the government.
C)determining which county should have legal jurisdiction to revoke the will.
D)creating a situation of intestacy.
E)a witness signing the will on behalf of the testator to evade estate taxes.

Question 39

A "grantor" is also called the:

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

Question 40

A document that precisely states the treatments a person wants if he or she becomes terminally ill is called a _____.

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

Question 41

The transfer of a life insurance policy to the trust must be at least __________ years before death or it is ignored,in which case the life insurance benefits are included in the taxable estate. ​

A)three
B)four
C)five
D)six

Question 42

__________ is applied to reduce estate tax when a large amount of real estate is for sale in one area,the value will be reduced solely because of the efforts required to sell the asset. ​

A)Marketability discount
B)Minority discount
C)Blockage discount
D)Property discount

Question 43

If the ownership of a closely held company is less than 50 percent of the stock,then the ownership is termed as a __________. ​

A)minority interest
B)majority interest
C)marketable asset
D)block asset

Question 44

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

A)testamentary
B)living
C)letter of instructions
D)codicil

Question 45

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

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

Question 46

The person setting up a trust is called the __________. ​

A)grantor
B)trustee
C)attorney
D)beneficiary

Question 47

The tax base for the transfer tax is __________. ​

A)fair market value
B)book value
C)tax credit value
D)net realized value

Question 48

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

A)$36,000
B)$14,000
C)$25,000
D)$5,000

Question 49

When the first spouse dies,if the executor so elects on a couple's estate tax return,then any unused applicable exclusion amount will carry over to the other spouse.This is referred to as __________. ​

A)portability
B)gift splitting
C)marital deduction
D)the unified tax liability

Question 50

Jane and Arthur Patrikson are happy that their daughter is graduating from high school.They gift their daughter $28,000,with $18,000 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 51

The unused unified transfer tax (UTT)credit can be used by the __________. ​

A)spouse
B)sibling
C)children
D)parent

Question 52

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

Question 53

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