CES CES Estate Settlement & Probate Process 2 — Questions and Answers
Question 1: Under the Uniform Probate Code, what is a 'small estate affidavit,' and when can it be used?
- A document used to contest a will in probate court
- A simplified procedure allowing heirs to collect assets without formal probate when the estate falls below a state threshold (Correct answer)
- A declaration by the executor that all debts have been paid
- An affidavit transferring real property without court involvement
Correct answer: A simplified procedure allowing heirs to collect assets without formal probate when the estate falls below a state threshold
A small estate affidavit allows heirs to collect probate assets without formal administration when the gross probate estate falls below the state's threshold, typically ranging from $10,000 to $200,000.
Question 2: What is the purpose of publishing a 'Notice to Creditors' during probate?
- To notify heirs of the decedent's death
- To give creditors a limited time to file claims against the estate (Correct answer)
- To transfer title of real property to heirs
- To notify the IRS of the estate opening
Correct answer: To give creditors a limited time to file claims against the estate
Publishing a Notice to Creditors in a local newspaper starts the statutory claims period, after which creditors who fail to file lose their right to collect from the estate.
Question 3: Which asset is NOT included in the probate estate?
- Real property titled solely in the decedent's name
- Bank account with a payable-on-death (POD) beneficiary (Correct answer)
- Personal property listed in the decedent's will
- Business interest owned solely by the decedent
Correct answer: Bank account with a payable-on-death (POD) beneficiary
A payable-on-death bank account passes directly to the named beneficiary by contract, bypassing probate entirely.
Question 4: What document must the executor file with the IRS within nine months of the decedent's death if the gross estate exceeds the applicable exclusion amount?
- Form 1041 (Fiduciary Income Tax Return)
- Form 706 (United States Estate Tax Return) (Correct answer)
- Form 709 (Gift Tax Return)
- Form 1099-INT
Correct answer: Form 706 (United States Estate Tax Return)
Form 706 must be filed within nine months of death (with a six-month extension available) when the gross estate exceeds the applicable exclusion amount, which is $13.61 million in 2024.
Question 5: What is the stepped-up basis rule, and how does it benefit heirs?
- It increases the estate tax exclusion for surviving spouses
- It resets the cost basis of inherited assets to fair market value at the date of death, reducing capital gains tax on a future sale (Correct answer)
- It allows the estate to deduct funeral expenses on the income tax return
- It permits the executor to sell assets without recognizing gain
Correct answer: It resets the cost basis of inherited assets to fair market value at the date of death, reducing capital gains tax on a future sale
Under IRC §1014, inherited assets receive a new basis equal to fair market value at the date of death, eliminating the unrealized capital gain that accrued during the decedent's lifetime.
Question 6: Which estate settlement strategy uses the marital deduction to defer estate taxes until the death of the surviving spouse?
- Generation-skipping transfer
- Qualified terminable interest property (QTIP) trust (Correct answer)
- Irrevocable life insurance trust (ILIT)
- Charitable remainder trust (CRT)
Correct answer: Qualified terminable interest property (QTIP) trust
A QTIP trust qualifies for the unlimited marital deduction, deferring estate taxes until the surviving spouse's death while allowing the first spouse to control the ultimate disposition of assets.
CES CES Estate Settlement & Probate Process 2
Under the Uniform Probate Code, what is a 'small estate affidavit,' and when can it be used?