AAMS AAMS Tax Planning & Wealth Transfer 2 — Questions and Answers
Question 1: Required Minimum Distributions (RMDs) from traditional IRAs must generally begin at age:
- 59½
- 65
- 70½
- 73 (Correct answer)
Correct answer: 73
Under the SECURE 2.0 Act, the RMD starting age was raised to 73 for individuals who reach age 72 after December 31, 2022.
Question 2: A Qualified Opportunity Zone (QOZ) investment provides a tax benefit by:
- Eliminating all capital gains tax on existing investments
- Deferring and potentially reducing capital gains taxes on reinvested gains (Correct answer)
- Providing a tax deduction equal to the amount invested
- Exempting dividends from ordinary income tax
Correct answer: Deferring and potentially reducing capital gains taxes on reinvested gains
Investing realized capital gains into a Qualified Opportunity Fund defers and may reduce capital gains tax while eliminating tax on appreciation if held for at least 10 years.
Question 3: Which charitable giving strategy allows a donor to make a large upfront contribution, receive an immediate deduction, and distribute funds to charities over time?
- Charitable remainder trust
- Donor-advised fund (Correct answer)
- Charitable lead trust
- Private foundation
Correct answer: Donor-advised fund
A donor-advised fund allows a lump-sum charitable contribution with an immediate tax deduction, while the donor recommends grants to charities over multiple years.
Question 4: The net investment income tax (NIIT) of 3.8% applies to taxpayers with modified adjusted gross income above certain thresholds on income including:
- Wages and salaries
- Capital gains, dividends, and interest (Correct answer)
- Qualified retirement plan distributions
- Social Security benefits
Correct answer: Capital gains, dividends, and interest
The 3.8% NIIT applies to the lesser of net investment income (dividends, interest, capital gains) or the amount by which MAGI exceeds the threshold.
Question 5: An irrevocable life insurance trust (ILIT) is primarily used to:
- Avoid income tax on policy dividends
- Keep life insurance death benefits outside the taxable estate (Correct answer)
- Replace lost income during the grantor's disability
- Fund a charitable bequest at death
Correct answer: Keep life insurance death benefits outside the taxable estate
An ILIT owns the life insurance policy, so death benefits are excluded from the grantor's taxable estate, reducing potential estate tax exposure.
Question 6: The unified credit against the federal estate and gift tax effectively exempts estates valued below approximately how much in 2024?
- $5.49 million
- $7.0 million
- $13.61 million (Correct answer)
- $25.0 million
Correct answer: $13.61 million
The federal estate and gift tax exemption for 2024 is $13.61 million per individual, sheltering estates below that threshold from federal estate tax.
AAMS AAMS Tax Planning & Wealth Transfer 2
Required Minimum Distributions (RMDs) from traditional IRAs must generally begin at age: