Estate Planning Exam 3 questions
with complete solutions
Explain the theory behind the unlimited marital deduction. - correct answer ✔✔ -A married
couple is treated as one singular unit (so it eliminates transfer tax)
List three benefits of the unlimited marital deduction. - correct answer ✔✔ -reduces estate tax
due
-defers payment of estate tax
-helps ensure the SS has sufficient assets to maintain lifestyle
Discuss the following statement: "The use of the unlimited marital deduction does not avoid
estate tax, it merely postpones it." - correct answer ✔✔ Using the deduction avoids taxes on
the decedent's estate but whatever is not consumed by the SS, will be included in their gross
estate
List the three most common methods of leaving property to a spouse and qualifying the
transfer for the marital deduction. - correct answer ✔✔ -Outright transfers
-General Power of Appointment Trusts
-QTIP Trusts.
What are the requirements for a transfer of property to qualify for the unlimited marital
deduction? - correct answer ✔✔ -Spouses must be married at date of death AND US Citizens
-Asset must be included in the decedent's gross estate (initially)
-Must be transferred in a manner that allows it to be consumed by the SS or included in the SS's
gross estate
-SS interest cannot be a terminable interest
,Define terminable interest - correct answer ✔✔ -Interest in property that will terminate in the
future due to passage of time or a contingency (could go to someone else)
List the exceptions to the terminable interest rule. - correct answer ✔✔ -Six-month survival
contingency
-Terminable interest where SS has general power of appointment
-QTIP Trust
-SS is the only non-charitable beneficiary
Since community property is owned between a married couple, will it receive an automatic
allocation of the unlimited marital deduction on the federal estate tax return? - correct answer
✔✔ No, not automatically. Community property does not typically have a survivorship feature
attached to it.
Outright bequest - correct answer ✔✔ -DO qualify for marital deduction
One spouse transfers property to other:
-by will
-beneficiary designation
-JTWROS or tenancy by entirety
Identify the requirements necessary for a General Power of Appointment (GPOA) Trust to
qualify for the unlimited marital deduction. - correct answer ✔✔ -The spouse has general
power: the right to appoint trust property to himself, his estate, his creditors at any time during
life or at death
*limited power does NOT qualify
-Assets are included in SS gross estate
*AKA "A Trust"
, Qualified Terminable Interest Property Trust (QTIP) - correct answer ✔✔ -Allows decedent to
qualify for the marital deduction BUT still control the ultimate disposition of the asset
-ex) asset goes to ss but when ss dies, goes where decedent wants it to
-Asset is included in gross estate of surviving spouse
Identify the requirements necessary for a QTIP Trust to qualify for the unlimited marital
deduction. - correct answer ✔✔ -spouse must be entitled to all trust income for life and the
income must be paid at least annually
-spouse may compel trustee to sell/replace any non-income-producing assets
-during spouse lifetime, no one may appoint property to anyone other than spouse
-executor must file election on Form 706
***Must meet ALL requirements
-"C Trust"
Discuss the alternatives available for paying the estate taxes incurred at the death of the
surviving spouse attributable to the QTIP Trust property. - correct answer ✔✔ Unless otherwise
directed by the surviving spouse's will, the estate tax attributable to the QTIP Trust property is
paid from the QTIP Trust
Planning for Non-Citizen Spouse (how to do it, limits) - correct answer ✔✔ -Unlimited marital
deduction is not available for non-US citizen
-UNLESS:
-they become a US citizen before the due date of the return
-OR utilize a QDOT
-There is also a super annual exclusion for non-citizen spouse
Identify the requirements necessary for a Qualified Domestic Trust (QDOT) to qualify for the
unlimited marital deduction. - correct answer ✔✔ -At least one US trustee
with complete solutions
Explain the theory behind the unlimited marital deduction. - correct answer ✔✔ -A married
couple is treated as one singular unit (so it eliminates transfer tax)
List three benefits of the unlimited marital deduction. - correct answer ✔✔ -reduces estate tax
due
-defers payment of estate tax
-helps ensure the SS has sufficient assets to maintain lifestyle
Discuss the following statement: "The use of the unlimited marital deduction does not avoid
estate tax, it merely postpones it." - correct answer ✔✔ Using the deduction avoids taxes on
the decedent's estate but whatever is not consumed by the SS, will be included in their gross
estate
List the three most common methods of leaving property to a spouse and qualifying the
transfer for the marital deduction. - correct answer ✔✔ -Outright transfers
-General Power of Appointment Trusts
-QTIP Trusts.
What are the requirements for a transfer of property to qualify for the unlimited marital
deduction? - correct answer ✔✔ -Spouses must be married at date of death AND US Citizens
-Asset must be included in the decedent's gross estate (initially)
-Must be transferred in a manner that allows it to be consumed by the SS or included in the SS's
gross estate
-SS interest cannot be a terminable interest
,Define terminable interest - correct answer ✔✔ -Interest in property that will terminate in the
future due to passage of time or a contingency (could go to someone else)
List the exceptions to the terminable interest rule. - correct answer ✔✔ -Six-month survival
contingency
-Terminable interest where SS has general power of appointment
-QTIP Trust
-SS is the only non-charitable beneficiary
Since community property is owned between a married couple, will it receive an automatic
allocation of the unlimited marital deduction on the federal estate tax return? - correct answer
✔✔ No, not automatically. Community property does not typically have a survivorship feature
attached to it.
Outright bequest - correct answer ✔✔ -DO qualify for marital deduction
One spouse transfers property to other:
-by will
-beneficiary designation
-JTWROS or tenancy by entirety
Identify the requirements necessary for a General Power of Appointment (GPOA) Trust to
qualify for the unlimited marital deduction. - correct answer ✔✔ -The spouse has general
power: the right to appoint trust property to himself, his estate, his creditors at any time during
life or at death
*limited power does NOT qualify
-Assets are included in SS gross estate
*AKA "A Trust"
, Qualified Terminable Interest Property Trust (QTIP) - correct answer ✔✔ -Allows decedent to
qualify for the marital deduction BUT still control the ultimate disposition of the asset
-ex) asset goes to ss but when ss dies, goes where decedent wants it to
-Asset is included in gross estate of surviving spouse
Identify the requirements necessary for a QTIP Trust to qualify for the unlimited marital
deduction. - correct answer ✔✔ -spouse must be entitled to all trust income for life and the
income must be paid at least annually
-spouse may compel trustee to sell/replace any non-income-producing assets
-during spouse lifetime, no one may appoint property to anyone other than spouse
-executor must file election on Form 706
***Must meet ALL requirements
-"C Trust"
Discuss the alternatives available for paying the estate taxes incurred at the death of the
surviving spouse attributable to the QTIP Trust property. - correct answer ✔✔ Unless otherwise
directed by the surviving spouse's will, the estate tax attributable to the QTIP Trust property is
paid from the QTIP Trust
Planning for Non-Citizen Spouse (how to do it, limits) - correct answer ✔✔ -Unlimited marital
deduction is not available for non-US citizen
-UNLESS:
-they become a US citizen before the due date of the return
-OR utilize a QDOT
-There is also a super annual exclusion for non-citizen spouse
Identify the requirements necessary for a Qualified Domestic Trust (QDOT) to qualify for the
unlimited marital deduction. - correct answer ✔✔ -At least one US trustee
