Taxation in Estate Planning Flashcards
7 cards from real AEP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Taxation in Estate Planning flashcards as text
Which of the following best describes the concept of 'portability' under federal estate tax law?
Answer: Allowing a surviving spouse to use the deceased spouse's unused estate tax exemption
Portability allows a surviving spouse to elect to use any unused federal estate tax exemption of the first deceased spouse by filing a timely estate tax return.
Under the special use valuation rules of IRC §2032A, qualifying real property used in a farm or closely held business can be reduced in value by a maximum of:
Answer: $1,390,000 (2024 indexed amount)
IRC §2032A permits qualifying real property to be valued at its actual use rather than highest-and-best use, with the reduction capped at an annually indexed amount (approximately $1,390,000 in 2024).
A Qualified Personal Residence Trust (QPRT) removes the value of a home from a grantor's taxable estate by:
Answer: Transferring the remainder interest to heirs at a discounted gift tax value
A QPRT transfers a discounted remainder interest to heirs gift-tax-efficiently because the present value of the future remainder is less than the current fair market value of the home.
For gift tax purposes, which of the following transfers qualifies for the annual exclusion under IRC §2503(b)?
Answer: A gift of a present interest in property
The annual gift tax exclusion applies only to gifts of present interests—those where the donee has an immediate right to use, possess, or enjoy the property.
An irrevocable life insurance trust (ILIT) keeps life insurance proceeds out of the insured's gross estate primarily because:
Answer: The insured holds no incidents of ownership in the policy
Under IRC §2042, life insurance is included in the gross estate if the decedent held any incident of ownership; an ILIT ensures the trust, not the insured, owns the policy.
Which of the following is a primary benefit of a Spousal Lifetime Access Trust (SLAT) in estate planning?
Answer: It allows a spouse to benefit from assets while removing them from the taxable estate
A SLAT allows the grantor to remove assets from their taxable estate while the beneficiary spouse retains indirect access to trust assets during life.
Which tax form is used by the executor of an estate to report the federal estate tax?
Answer: Form 706
Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, is filed by the executor within nine months of the decedent's death (with extensions available).