#1
In estate planning, what is the primary purpose of a spousal transfer?
To reduce estate tax liability
ExplanationMinimize taxes by transferring assets to a surviving spouse.
#2
What is the annual gift tax exclusion amount for an individual in the United States?
$15,000
ExplanationAmount of gifts an individual can give tax-free each year.
#3
What is the primary advantage of using a Family Limited Partnership (FLP) in estate planning?
Provides control and management continuity within the family
ExplanationMaintains family control over assets and businesses.
#4
What is the purpose of a bypass trust (also known as a credit shelter trust) in estate planning?
To shelter a portion of the estate from estate taxes
ExplanationProtects assets from taxation upon the grantor's death.
#5
What is the purpose of a life insurance trust (ILIT) in estate planning?
To minimize estate taxes on life insurance proceeds
ExplanationAvoid or minimize estate taxes on life insurance payouts.
#6
Which term refers to the total value of a person's estate at the time of their death?
Gross estate
ExplanationThe total value of all assets and property.
#7
What is the unlimited marital deduction in the context of estate taxes?
A deduction for property left to the surviving spouse
ExplanationProperty passed to the spouse is not subject to estate tax.
#8
Which type of trust allows a surviving spouse to access the income generated by the trust during their lifetime?
Charitable remainder trust
ExplanationTrust where a charity receives the remainder of the assets.
#9
What is the significance of the 'step-up in basis' in the context of inherited assets?
It reduces the capital gains tax liability for the heir
ExplanationBasis of inherited assets is adjusted to market value.
#10
In the context of estate planning, what is a 'crummey trust' designed to accomplish?
Ensuring the right of withdrawal for gift tax exclusions
ExplanationAllows beneficiaries to withdraw gifts to qualify for exclusion.
#11
Which tax form is typically used to report estate taxes to the IRS?
Form 706
ExplanationIRS form for reporting estate taxes.
#12
What is the concept of 'portability' in estate tax law?
The ability to carry over the deceased spouse's unused estate tax exemption
ExplanationTransferring unused tax exemption to a surviving spouse.
#13
Which of the following is NOT a common estate planning tool for spousal transfers?
Living will
ExplanationLegal document regarding medical treatment, not related to transfers.
#14
What is the purpose of a Generation-Skipping Transfer (GST) tax?
To tax transfers to grandchildren and future generations
ExplanationTax on direct transfers to beneficiaries of a later generation.
#15
What is the concept of 'spousal portability' in relation to estate taxes?
The ability to carry over the deceased spouse's unused estate tax exemption
ExplanationTransfer of unused estate tax exemption to the surviving spouse.