CES Taxation of Estates & Trusts

Question 1

What is the primary goal of estate taxation?

Accepted Answer

To collect taxes on the deceased’s assets.

Answer

The primary goal of estate taxation is to collect revenue for the government by taxing the transfer of wealth from a deceased individual's estate to their heirs. It is a tax on the privilege of transferring property at death, not a punishment for beneficiaries or solely for wealth redistribution.

Question 2

What is the estate tax exemption amount?

Accepted Answer

The exemption amount is periodically adjusted by the government.

Answer

The estate tax exemption amount, which is the value of an estate that can pass to heirs free of federal estate tax, is not fixed. It is periodically adjusted by the government, often for inflation or through legislative changes. This dynamic nature means the threshold for taxable estates can vary significantly over time.

Question 3

Which of the following is taxable under estate taxes?

Accepted Answer

All assets owned by the deceased at the time of death.

Answer

Under estate tax law, the 'gross estate' includes all assets owned by the deceased at the time of their death, regardless of their form. This encompasses real estate, bank accounts, stocks, bonds, personal property, business interests, and certain life insurance proceeds, not just specific types of assets.

Question 4

What is the difference between estate tax and inheritance tax?

Accepted Answer

Estate tax is paid by the deceased, inheritance tax is paid by the beneficiaries.

Answer

The key difference lies in who bears the tax burden. Estate tax is a federal tax (and some states have it) levied on the deceased person's entire estate before it is distributed to heirs. In contrast, inheritance tax is a state-level tax paid by the beneficiaries on the assets they receive from the estate.

Question 5

When must estate taxes be filed?

Accepted Answer

Within nine months after the decedent’s death.

Answer

Federal estate tax returns (Form 706) must generally be filed within nine months after the decedent’s date of death. An extension of six months can be requested, but this only extends the filing deadline, not the payment deadline for any taxes due.

(CES) Certified Estate and Trust Specialist Practice Test

(CES) Certified Estate and Trust Specialist Practice Test

CES Taxation of Estates & Trusts