Estate Planning Flashcards
7 cards from real CIM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Estate Planning flashcards as text
What is the federal estate tax effect of placing assets in a revocable living trust?
Answer: Assets remain included in the grantor's gross estate
Because the grantor retains the power to revoke, the assets stay in the gross estate under IRC Section 2038.
An insured transfers an existing life insurance policy to an ILIT and dies two years later. What is the estate tax result?
Answer: The death benefit is included in the insured's gross estate
Under IRC Section 2035, a life insurance policy transferred within three years of death is pulled back into the gross estate.
Why are Crummey withdrawal powers commonly included in an irrevocable life insurance trust?
Answer: To make gifts to the trust qualify as present-interest gifts for the annual exclusion
A temporary right of beneficiaries to withdraw contributions converts future-interest gifts into present-interest gifts eligible for the annual exclusion.
A spendthrift clause in a trust primarily serves to:
Answer: Prevent beneficiaries' creditors from reaching trust assets before distribution
Spendthrift provisions bar beneficiaries from assigning their interests and generally shield undistributed trust assets from their creditors.
Which statement best describes an intentionally defective grantor trust (IDGT)?
Answer: Assets are excluded from the grantor's estate, but the grantor pays income tax on trust income
An IDGT is drafted to be a completed gift for transfer-tax purposes while remaining a grantor trust for income tax, so the grantor's tax payments further shrink the estate.
In a zeroed-out grantor retained annuity trust (GRAT), what passes to the remainder beneficiaries free of gift tax?
Answer: Appreciation exceeding the IRS Section 7520 hurdle rate
When the annuity's value equals the contribution, the taxable gift is near zero and any growth above the 7520 rate passes to remainder beneficiaries.
To qualify for the marital deduction, a QTIP trust must give the surviving spouse:
Answer: All trust income, payable at least annually, for life
A QTIP requires that the surviving spouse receive all income at least annually for life, while the first spouse controls the remainder beneficiaries.