CFP5_M3_CH3
1. reduce gross estate
2. increase deductions
3. maintain estates status for possible credits - correct answer-There are three basic
ways to lower a client's estate tax bill:
marital deduction, the charitable deduction, and the applicable credit amount. -
correct answer-The three most powerful tools in dealing with estate taxes are the:
overqualified - correct answer-An estate in which all or part of the applicable credit
amount is wasted because too much property has qualified for the marital deduction
is said to be "_________" for the marital deduction.
qualifying income interest (QII)
The recipient spouse must have a Lifetime, Annual, Mandatory, and Exclusive right
to the trust income. - correct answer-If the income is paid to the spouse during his or
her lifetime, it must be what is known as a __________. The requirements for this
term can be memorized by the acronym LAME.
QTIP; bypass - correct answer-The ______ and ______ trusts give the grantor
spouse control over who receives the trust assets at the surviving spouse's death,
while the power of appointment and estate trusts do not.
The Power of Appointment Trust - correct answer-In this marital trust, the recipient
spouse is given a qualifying income interest for life and a general power of
appointment over the corpus exercisable during life or at death
estate trust - correct answer-Property placed in an _________ qualifies for the
marital deduction because the recipient spouse is the sole beneficiary of the trust:
any trust income or corpus not actually distributed to the recipient spouse during his
or her lifetime is paid to the recipient spouse's estate upon his or her death.
Mandatory payment of income - correct answer-___________ is a requirement for
both the power of appointment trust and the qualified terminable interest property (or
QTIP) trust
The Qualified Terminable Interest Property (QTIP) Trust - correct answer-the interest
given to the recipient spouse in this trust is a terminable interest, but it also qualifies
as one of the four exceptions to the terminable interest rule. Like the power of
appointment trust, this trust gives the recipient spouse control over trust income by
giving him or her a qualifying income interest
, bypass planning - correct answer-The purpose of ________ is achieved by disposing
of the decedent's estate in a manner that will result in a taxable estate that, when
added to the decedent's adjusted taxable gifts, will produce a tax base at least equal
to the estate tax applicable exclusion amount available in the year of death.
bypass trust; bypass - correct answer-A trust that gives the recipient spouse a
terminable interest (and one that is not eligible for the QTIP election) is called a
_______ because the trust assets will "_____" the recipient spouse's gross estate.
make the surviving spouse one of several (versus the exclusive) income
beneficiaries and/or to make distribution of trust income discretionary (versus
mandatory) with the trustee. - correct answer-the most common ways to ensure that
a trust will not qualify for the marital deduction is to:
pg 97-98 - correct answer-pg 97-98
present value - correct answer-If the life estate holder is someone other than the
decedent's spouse, the allowable charitable deduction will be the________ of the
charity's remainder interest
charitable lead trust (CLT) - correct answer-A person may want to leave assets to a
charity at his or her death but have those assets be transferred to other beneficiaries
after a period of time.
income interest. - correct answer-The decedent's estate is entitled to a charitable
deduction for the present value of the charity's _________
a charitable remainder trust (CRT) - correct answer-If a person wants to leave part of
her estate to charity but wants a noncharitable beneficiary to benefit from the asset
first, ____________ is used.
charitable remainder annuity trust or CRAT;
charitable remainder unitrust or CRUT - correct answer-The income interest must be
payable either as a sum certain that is not less than 5% of the initial fair market value
of all trust assets (known as a __________), or as a fixed percentage that is not less
than 5% of the net fair market value of the trust assets, valued annually (known as a
_____________).
5% probability of exhaustion test - correct answer-requires a charitable remainder
annuity trust
(CRAT) to have a more than 5% chance that the annuity payments will not exhaust
the trust before the income beneficiary(ies) death(s), thereby leaving nothing for the
charity,
1. reduce gross estate
2. increase deductions
3. maintain estates status for possible credits - correct answer-There are three basic
ways to lower a client's estate tax bill:
marital deduction, the charitable deduction, and the applicable credit amount. -
correct answer-The three most powerful tools in dealing with estate taxes are the:
overqualified - correct answer-An estate in which all or part of the applicable credit
amount is wasted because too much property has qualified for the marital deduction
is said to be "_________" for the marital deduction.
qualifying income interest (QII)
The recipient spouse must have a Lifetime, Annual, Mandatory, and Exclusive right
to the trust income. - correct answer-If the income is paid to the spouse during his or
her lifetime, it must be what is known as a __________. The requirements for this
term can be memorized by the acronym LAME.
QTIP; bypass - correct answer-The ______ and ______ trusts give the grantor
spouse control over who receives the trust assets at the surviving spouse's death,
while the power of appointment and estate trusts do not.
The Power of Appointment Trust - correct answer-In this marital trust, the recipient
spouse is given a qualifying income interest for life and a general power of
appointment over the corpus exercisable during life or at death
estate trust - correct answer-Property placed in an _________ qualifies for the
marital deduction because the recipient spouse is the sole beneficiary of the trust:
any trust income or corpus not actually distributed to the recipient spouse during his
or her lifetime is paid to the recipient spouse's estate upon his or her death.
Mandatory payment of income - correct answer-___________ is a requirement for
both the power of appointment trust and the qualified terminable interest property (or
QTIP) trust
The Qualified Terminable Interest Property (QTIP) Trust - correct answer-the interest
given to the recipient spouse in this trust is a terminable interest, but it also qualifies
as one of the four exceptions to the terminable interest rule. Like the power of
appointment trust, this trust gives the recipient spouse control over trust income by
giving him or her a qualifying income interest
, bypass planning - correct answer-The purpose of ________ is achieved by disposing
of the decedent's estate in a manner that will result in a taxable estate that, when
added to the decedent's adjusted taxable gifts, will produce a tax base at least equal
to the estate tax applicable exclusion amount available in the year of death.
bypass trust; bypass - correct answer-A trust that gives the recipient spouse a
terminable interest (and one that is not eligible for the QTIP election) is called a
_______ because the trust assets will "_____" the recipient spouse's gross estate.
make the surviving spouse one of several (versus the exclusive) income
beneficiaries and/or to make distribution of trust income discretionary (versus
mandatory) with the trustee. - correct answer-the most common ways to ensure that
a trust will not qualify for the marital deduction is to:
pg 97-98 - correct answer-pg 97-98
present value - correct answer-If the life estate holder is someone other than the
decedent's spouse, the allowable charitable deduction will be the________ of the
charity's remainder interest
charitable lead trust (CLT) - correct answer-A person may want to leave assets to a
charity at his or her death but have those assets be transferred to other beneficiaries
after a period of time.
income interest. - correct answer-The decedent's estate is entitled to a charitable
deduction for the present value of the charity's _________
a charitable remainder trust (CRT) - correct answer-If a person wants to leave part of
her estate to charity but wants a noncharitable beneficiary to benefit from the asset
first, ____________ is used.
charitable remainder annuity trust or CRAT;
charitable remainder unitrust or CRUT - correct answer-The income interest must be
payable either as a sum certain that is not less than 5% of the initial fair market value
of all trust assets (known as a __________), or as a fixed percentage that is not less
than 5% of the net fair market value of the trust assets, valued annually (known as a
_____________).
5% probability of exhaustion test - correct answer-requires a charitable remainder
annuity trust
(CRAT) to have a more than 5% chance that the annuity payments will not exhaust
the trust before the income beneficiary(ies) death(s), thereby leaving nothing for the
charity,
