Exam 27: Family Tax Planning

When one spouse predeceases the other,the credit for prior transfers does not apply. a.Why? b.Under what circumstances might the credit apply?

After being diagnosed with a terminal illness,Jude (a widower) makes gifts of all of his assets (over $6 million in value) to family members and dies shortly thereafter.Based on these facts,comment on the following assumptions. a.Because the Federal gift tax is imposed on the donor and Jude has no assets,any gift tax that is due is avoided. b.Because Jude died without any assets,the Federal estate tax is avoided.

To make the election to split gifts under § 2513,spouses must file a Form 709 (Federal gift tax return).

Classify each statement appropriately. a.Deductible from the gross estate in arriving at the taxable estate.b.Not deductible from the gross estate in arriving at the taxable estate. -Casualty loss to property already distributed to an heir.

Harry and Brenda are husband and wife.Using her funds,Brenda purchases real estate which she lists as: "Harry and Brenda,joint tenants with right of survivorship." If Brenda dies first,all of the value of the real estate will be included in her gross estate.

Peggy gives $200,000 to her grandson.This is an example of a direct skip for purposes of the GSTT (generation-skipping transfer tax).

Distributions from retirement plans and proceeds from life insurance plans usually are not subject to probate. a.Why are they not part of the probate estate? b.When might they be included in the probate estate?

Which,if any,of the following items is subject to indexation (adjusted to reflect inflation)?

Classify each statement appearing below. a.No taxable transfer occurs b.Gift tax applies c.Estate tax applies -Using his own funds,Horace establishes a savings account designating ownership as follows: "Horace and Nadine as joint tenants with right of survivorship." Nadine predeceases Horace.

Sometimes also known as transaction taxes,Federal gift and estate taxes are excise taxes.

Classify each of the independent statements appearing below. a.Some or all of the interest included in the decedent's gross estate.b.None of the interest included in the decedent's gross estate. -Proceeds of an insurance policy on decedent's life.Decedent's son purchased the policy and is its owner and beneficiary.

For gift tax purposes,a property settlement in consideration of marriage (i.e. ,prenuptial agreement) is treated the same as a property settlement incident to a divorce.

If the value of the gross estate is lower on the alternate valuation date than on the date of death,the date of death valuation cannot be used.

Classify each of the independent statements appearing below. a.Some or all of the interest included in the decedent's gross estate.b.None of the interest included in the decedent's gross estate. -Ten cemetery lots purchased by decedent prior to death for use by himself and his family.

The purpose of the marital deduction is to place married decedents in common law states on par with those in community property jurisdictions.

Frank owns an insurance policy on the life of Cynthia,with Leon as the designated beneficiary.Upon Cynthia's prior death,Frank is treated as making a gift of the insurance proceeds to Leon.

Classify each statement appropriately. a.Deductible from the gross estate in arriving at the taxable estate.b.Not deductible from the gross estate in arriving at the taxable estate. -State death tax imposed on the estate.

Calvin's will passes $800,000 of cash to his widowed sister,Muriel.The estate tax attributable to the cash is $110,000.Muriel dies five years later,and the estate tax generated by the $800,000 is $100,000.How much of a credit for tax on prior transfers will Muriel's estate be allowed?

Gerald and Pat are husband and wife and live in New York.In 2005,they purchase an insurance policy (joint ownership) on Gerald's life and designate their daughter,Marie,as the beneficiary.The policy has a maturity value of $4,000,000 and lists ownership as tenants in common.Gerald dies first in 2015 and the insurance proceeds are paid to Marie.As to the proceeds:

The death of a tenant in common will defeat his or her interest in the property.