Estate Planning Test 3 Review
questions and answers
True or False: A life insurance policy transferred to an irrevocable trust is a gift of a future
interest. - correct answer ✔✔ True
Trust beneficiaries have a future interest unless they are given Crummey powers.
True or False: An IRS Form 709 must be filed when a married couple elects to split gifts,
regardless of the amount of the taxable gift. - correct answer ✔✔ True
True or False: A husband who gifts his wife terminable interest property can take a marital
deduction to reduce the taxable gift to zero by making a QTIP election on his gift tax return. -
correct answer ✔✔ True
The consequence is that the value of the TIP will be included in his wife's estate at her death.
True or False: A parent can take an annual exclusion for the remainder interest gifted to a child
in a § 2503(b) trust. - correct answer ✔✔ False
Annual exclusions are not available for remainder interest gifts.
True or False: When a parent transfers $80,000 (in 2022, now $85,000 in 2023) to a § 529 plan,
the parent cannot take additional annual exclusions to reduce taxable gifts made to the same
beneficiary for the next five years. - correct answer ✔✔ True
,True or False: The kiddie tax applies to earned income and unearned income a dependent child
receives. - correct answer ✔✔ False
Kiddie tax rules apply only to unearned income received by a dependent child.
True or False: Professor Cornfield loves 529 plans because they are a multi-generational tax
advantaged way to pay for college. - correct answer ✔✔ True
True or False: The UGMA and UTMA accounts provide an alternative to the section 2503( c )
trust and frequently used for larger gifts. - correct answer ✔✔ False
True or False: The gift tax and the estate tax are both cumulative and progressive. - correct
answer ✔✔ True
True or False: When a donor makes a taxable gift of more than $16,000 (in 2022, now $17,000
in 2023) there is no need to file a gift tax return if the individual knows they will not have a
taxable estate. - correct answer ✔✔ False
Craig owns an apartment building that has appreciated substantially in the last several years. He
wants to remove this property and all future appreciation from his sizeable estate by
transferring the building to his eight-year-old son, Tucker. Craig does not want the income from
the apartment rentals distributed to Tucker now, but he wants Tucker to take ownership of the
building and the undistributed income when he turns 21. Their state's statutory age of majority
is age 18.
How should Craig transfer the building to Tucker?
A. Transfer the building into a § 2503(b) trust.
B. Transfer the building into a § 2503(c) trust.
, C. Transfer the building into a UGMA account.
D. Transfer the building into a UTMA account. - correct answer ✔✔ B. Transfer the building into
a § 2503(c) trust.
A section 2503(c) trust can accumulate income until all
income and principal must be distributed at age 21. With a § 2503(b) trust, the income must be
distributed every
year. UGMA accounts cannot hold real estate, and although a UTMA can hold real estate, the
building would be transferred to Tucker at age 18, the state's age
of majority.
Elliot and Jean jointly established a trust for their children: Rachael, age 18; and Greg, age 21.
All income will be distributed to
Rachael for the next six years to pay for her undergraduate and
graduate school expenses. Greg will receive the remainder interest in the trust.
Which of the following statements is/are correct?
A. Elliot and Jean can take annual exclusions to offset the taxable
gifts they made to both Rachael and Greg.
B. Elliot and Jean have established a § 2503(b) trust.
C. Elliot and Jean have established a § 2503(c) trust.
questions and answers
True or False: A life insurance policy transferred to an irrevocable trust is a gift of a future
interest. - correct answer ✔✔ True
Trust beneficiaries have a future interest unless they are given Crummey powers.
True or False: An IRS Form 709 must be filed when a married couple elects to split gifts,
regardless of the amount of the taxable gift. - correct answer ✔✔ True
True or False: A husband who gifts his wife terminable interest property can take a marital
deduction to reduce the taxable gift to zero by making a QTIP election on his gift tax return. -
correct answer ✔✔ True
The consequence is that the value of the TIP will be included in his wife's estate at her death.
True or False: A parent can take an annual exclusion for the remainder interest gifted to a child
in a § 2503(b) trust. - correct answer ✔✔ False
Annual exclusions are not available for remainder interest gifts.
True or False: When a parent transfers $80,000 (in 2022, now $85,000 in 2023) to a § 529 plan,
the parent cannot take additional annual exclusions to reduce taxable gifts made to the same
beneficiary for the next five years. - correct answer ✔✔ True
,True or False: The kiddie tax applies to earned income and unearned income a dependent child
receives. - correct answer ✔✔ False
Kiddie tax rules apply only to unearned income received by a dependent child.
True or False: Professor Cornfield loves 529 plans because they are a multi-generational tax
advantaged way to pay for college. - correct answer ✔✔ True
True or False: The UGMA and UTMA accounts provide an alternative to the section 2503( c )
trust and frequently used for larger gifts. - correct answer ✔✔ False
True or False: The gift tax and the estate tax are both cumulative and progressive. - correct
answer ✔✔ True
True or False: When a donor makes a taxable gift of more than $16,000 (in 2022, now $17,000
in 2023) there is no need to file a gift tax return if the individual knows they will not have a
taxable estate. - correct answer ✔✔ False
Craig owns an apartment building that has appreciated substantially in the last several years. He
wants to remove this property and all future appreciation from his sizeable estate by
transferring the building to his eight-year-old son, Tucker. Craig does not want the income from
the apartment rentals distributed to Tucker now, but he wants Tucker to take ownership of the
building and the undistributed income when he turns 21. Their state's statutory age of majority
is age 18.
How should Craig transfer the building to Tucker?
A. Transfer the building into a § 2503(b) trust.
B. Transfer the building into a § 2503(c) trust.
, C. Transfer the building into a UGMA account.
D. Transfer the building into a UTMA account. - correct answer ✔✔ B. Transfer the building into
a § 2503(c) trust.
A section 2503(c) trust can accumulate income until all
income and principal must be distributed at age 21. With a § 2503(b) trust, the income must be
distributed every
year. UGMA accounts cannot hold real estate, and although a UTMA can hold real estate, the
building would be transferred to Tucker at age 18, the state's age
of majority.
Elliot and Jean jointly established a trust for their children: Rachael, age 18; and Greg, age 21.
All income will be distributed to
Rachael for the next six years to pay for her undergraduate and
graduate school expenses. Greg will receive the remainder interest in the trust.
Which of the following statements is/are correct?
A. Elliot and Jean can take annual exclusions to offset the taxable
gifts they made to both Rachael and Greg.
B. Elliot and Jean have established a § 2503(b) trust.
C. Elliot and Jean have established a § 2503(c) trust.
