Exam 25: Transfer Taxes and Wealth Planning

This year Alex's friend Kimberly was disabled.Alex paid $30,000 to Kimberly's doctor for medical expenses.In addition,Alex also paid $25,000 to Kimberly directly so that her son could afford tuition at State University this year.Has Alex made taxable gifts,and if so,in what amounts?

Ethan owned a vacation home at the time of his death.Which of the following is a true statement if Ethan was married to Emma and resided in a common-law state at the time of his death?

Last year Brandon opened a savings account with a deposit of $45,000.The account was in the name of Brandon and Melanie,who have joint tenancy with the right of survivorship.Melanie did not contribute to the account,but this year she withdrew $18,000.Has Brandon made a taxable gift to Melanie,and if so,in what amount?

This year Don and his son purchased real estate for an investment.The price of the property was $500,000,and the title named Don and his son as joint tenants with the right of survivorship.Don provided $320,000 of the purchase price and his son provided the remaining $180,000.Has Don made a taxable gift and,if so,in what amount?

Which of the following is a true statement?

Aiden transferred $2 million to an irrevocable trust with income to Valeria for her life and the remainder to Jocelyn (or her estate).Calculate the value of the remainder and the life estate if Valeria's age and the prevailing interest rate result in a Table S discount factor for the remainder of 0.47.

For 2019,the exemption equivalent for the estate tax is $11.4 million.

The gross estate will not include the value of clothes and other personal items owned by the decedent at the time of death.

A gratuitous transfer of property made during the lifetime of the donor is called:

An applicable credit is subtracted in calculating both the gift tax and the estate tax.Why doesn't this calculation have the effect of increasing the total applicable credit amount?

A gratuitous transfer of cash made directly to an individual who uses the entire amount of the cash to pay medical expenses is not subject to a gift tax.

Ashley owns a whole-life insurance policy worth $25,000 that directs the insurance company to pay the beneficiary $500,000 on her death.Ashley pays the annual policy premiums and has the power to designate the beneficiary of the policy.What value of the policy,if any,would be included in Ashley's estate upon her death?

Last year Diego transferred a life insurance policy worth $75,000 to an irrevocable trust with directions to distribute the corpus of the trust to his grandson,Juan,upon his graduation from college,or to Juan's estate upon his death.Diego paid $5,000 of gift tax on the transfer of the policy.Early this year,Diego died and the insurance company paid $600,000 to the trust.What amount,if any,is included in Diego's gross estate?

Life insurance is an asset that can be used to fund a trust to support a surviving spouse and yet may not be included in the decedent's gross estate.

Proceeds of life insurance paid to the decedent's estate due to the death of the decedent are included in the decedent's gross estate even if the decedent had no ownership rights in the policy at the time of death.

Adjusted taxable gifts are added to the taxable estate to accomplish which of the following objectives?

Property is included in the gross estate at the value a willing buyer would pay a willing seller,neither being under any compulsion to buy or to sell,and both having reasonable knowledge of the relevant facts.

The gross estate may contain property transfers that are not included in the probate estate.

At her death Tricia had an adjusted gross estate consisting of $8 million of property.Which of the following is a true statement about Tricia's estate or estate tax?

The annual exclusion applies to cumulative gifts made to each donee over the course of the year.