Exam 14: Transfer Taxes and Wealth Planning

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.

The gift tax is imposed on inter vivos (lifetime) transfers.

The gross estate always includes the value of half of any real property owned by a decedent and another person in joint tenancy with the right of survivorship.

At his death in 2020, Nathan owned the following property: The real estate is subject to a $1,700,000 mortgage and Nathan made taxable gifts in 2009 totaling $2 million, at which time he offset the gift tax with an applicable credit (exemption equivalent of $2 million). Nathan has never been married. What is the amount of his estate tax due? (Use Exhibit 14-1.)

Which of the following is a true statement?

Matthew and Addison are married and live in Michigan, a common-law state. For the holidays Addison gave cash gifts of $41,500 to each of her two sons, and Matthew gave $41,800 to his daughter. What is the amount of Addison's taxable gifts if Matthew and Addison opt to gift-split?

Isaac is married and Isaac and his spouse agree that they want to transfer the maximum amount of cash to each of their two children and eight grandchildren. How much cash in total can Isaac and his spouse transfer to his children and grandchildren each year without creating any taxable gifts?

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?

An exemption equivalent is the amount of annual gifts that is automatically exempt from the gift tax.

Ava transferred $1.5 million of real estate into an irrevocable trust for her son, Luis. The trustee was directed to retain income until Luis' 21 ^st birthday and then pay him the corpus of the trust. Ava retained the power to require the trustee to pay income to Luis at any time, andretained the right to the assets if Luis predeceased her. What amount of the trust, if any, will be included in Ava's estate if she died shortly after making the transfer?

Ava transferred $1.70 million of real estate into an irrevocable trust for her son, Luis. The trustee was directed to retain income until Luis' 21^st birthday and then pay him the corpus of the trust. Ava retained the power to require the trustee to pay income to Luis at any time, and retained the right to the assets if Luis predeceased her. What amount of the trust, if any, will be included in Ava's estate if she died shortly after making the transfer?

Angel and Abigail are married and live in a common-law state. Angel and Abigail own a parcel of realty as joint tenants with the right of survivorship. In addition, Abigail owns another parcel of realty in her name alone. If Abigail should die when the jointly owned realty is worth $1 million and her own parcel of realty is worth $1.5 million, what is the total value of realty that would be included in Abigail's gross estate?

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 Nicholas earned $500,000 and used it to purchase land in joint tenancy with a right of survivorship with Nevaeh. Has Nicholas made a taxable gift to Nevaeh and, if so, in what amount?

The executor of Isabella's estate incurred administration expenses of $39,500 and paid $6,600 in funeral expenses. The executor charged the estate for $25,500 in fees. What is the maximum amount Isabella's estate can deduct in computing the adjusted gross estate?

A trust is a legal entity whose purpose is to hold and administer property for the benefit of beneficiaries.

Alexis transferred $400,000 to a trust with directions to pay income to her spouse, William, for his life. After William's death the corpus of the trust will pass to William's son. If the life estate is valued at $72,000, what is the total amount of the taxable gifts?

For 2020, the exemption equivalent for the estate tax is $11.58 million.

At his death Stanley owned real estate worth $345,000 with two other individuals as equal tenants in common. Stanley contributed $50,000 to the $100,000 total cost of the property. What amount, if any, is included in Stanley's gross estate?

Madison was married at the time of her death and her gross estate consisted of $22 million in stock and bonds. Madison left all of her property to her spouse. What is the result?