Cannon Trust 2 Questions and Correct Answer

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Cannon Trust 2 Questions and Correct
Answers
Advantages of Portability Ans: Simplicity

2nd Step up in basis

Pay less income tax

Good for small non taxable estates

How to elect portability Ans: Timely file 706

With portability as option, why is a bypass trust still valuable?
Ans: It locks in the exemption amount

You can have growth beyond the estate tax free amount

Lock in the GST Exemption amount

What are the 3 components of what is transfer tax free? Ans:
Tuition and Medical Expense Exclusion

Annual Exclusion (gift amount) (17k)

Applicable Exclusion Amount (12,920,000)

3 types of General Power of Appointment (GPOA) Ans: Lifetime
GPA

Testamentary GPA


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5x5 Power

Two types of Limited Power of Appointment (LPOA) Ans:
Ascertainable Standard

Appoint to a Specified Class

3 types of Ascertainable Standard Ans: Language (like HEMS)

Consent of Adverse party (remainder bene approval)

Independent Trustee

Tax Consequence of Lifetime GPOA Ans: Income Tax = Grantor
Trust

Estate Tax = Includable in Owner's Estate

Tax Consequence of Testamentary GPOA Ans: Income Tax = N/A
because no power during life

Estate Tax = Includable in Owner's estate

Tax Consequence of 5x5 Power Ans: Income Tax = 5% Grantor
Trust

Estate Tax = 5% in Owner's Estate

Tax Consequence of Crummey Power Ans: Income Tax = partial
income tax to grantor

Estate Tax = Partially in estate



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