Estate Planning Flashcards

Which payment qualifies for the unlimited gift tax exclusion under §2503(e)?

Answer: Tuition paid directly to a university for a grandchild

The education exclusion covers tuition paid directly to the institution, not books, room, or board.

A grandparent wants to front-load a 529 plan contribution without using lifetime exemption. What election allows this?

Answer: Treating the gift as made ratably over 5 years

Section 529(c)(2)(B) allows a contribution of up to five times the annual exclusion to be spread over 5 years on Form 709.

What is required for spouses to elect gift-splitting under §2513?

Answer: Both spouses must consent, generally on a filed Form 709

Gift-splitting requires consent of both spouses, who must be U.S. citizens or residents, shown on a gift tax return.

Why do Crummey withdrawal powers allow gifts to an irrevocable trust to qualify for the annual exclusion?

Answer: They convert the gift into a present interest

The beneficiary's temporary right to withdraw the contribution creates a present interest eligible for the annual exclusion.

An individual transfers an existing life insurance policy to an ILIT and dies 2 years later. What is the estate tax result?

Answer: The death benefit is included in the gross estate under §2035

Transfers of life insurance within 3 years of death pull the proceeds back into the gross estate under §2035.

What is a common way to avoid the 3-year rule when funding an ILIT with life insurance?

Answer: Have the trustee buy a new policy with cash gifted to the trust

If the trust applies for and owns the policy from inception, the insured never held incidents of ownership to transfer.

Which retained power causes life insurance proceeds to be included in the insured's estate under §2042?

Answer: The power to change the policy beneficiary

Holding any incident of ownership, such as the right to change beneficiaries, causes estate inclusion under §2042.