CTA Estate, Gift, and Trust Taxation 2

Question 1

An irrevocable life insurance trust (ILIT) is used primarily to:

Accepted Answer

Remove life insurance proceeds from the insured's taxable estate

Answer

An ILIT holds a life insurance policy outside the insured's estate, so death benefits pass to beneficiaries free of estate tax.

Question 2

What is the marital deduction in estate tax law?

Accepted Answer

An unlimited deduction for assets passing to a US citizen surviving spouse

Answer

The unlimited marital deduction allows estates to transfer an unlimited amount of assets to a surviving US citizen spouse free of estate tax.

Question 3

A Qualified Personal Residence Trust (QPRT) allows the grantor to:

Accepted Answer

Transfer a home out of the estate at a discounted gift tax value while retaining use for a term of years

Answer

A QPRT transfers a residence to heirs at a reduced gift tax value by retaining the right to live in the home for a specified term, leveraging the Section 7520 rate.

Question 4

Which trust structure allows a grantor to transfer assets while retaining an income stream, with the remainder passing to charity?

Accepted Answer

Charitable remainder trust (CRT)

Answer

A CRT pays an income stream (annuity or unitrust) to the grantor or other beneficiaries for a term, with the remainder going to charity.

Question 5

Portability of the estate tax exemption allows a surviving spouse to:

Accepted Answer

Use the deceased spouse's unused estate tax exemption in addition to their own

Answer

Portability allows the surviving spouse to elect to use any unused federal estate tax exemption of the predeceased spouse, effectively doubling the combined exemption.

CTA - Certified Tax Advisor Practice Test

CTA - Certified Tax Advisor Practice Test

CTA Estate, Gift, and Trust Taxation 2