NAB Estate and Tax Planning 2 — Questions and Answers
Question 1: What is the annual gift tax exclusion amount per recipient for 2024?
- $15,000
- $17,000
- $18,000 (Correct answer)
- $20,000
Correct answer: $18,000
The IRS set the annual gift tax exclusion at $18,000 per recipient for 2024, up from $17,000 in 2023.
Question 2: Which trust allows a grantor to retain an annuity interest for a fixed term while transferring remaining assets to heirs at a reduced gift tax cost?
- Charitable Remainder Trust
- Grantor Retained Annuity Trust (GRAT) (Correct answer)
- Qualified Personal Residence Trust
- Irrevocable Life Insurance Trust
Correct answer: Grantor Retained Annuity Trust (GRAT)
A GRAT lets the grantor receive fixed annuity payments for a set term; any growth above the IRS hurdle rate passes to heirs gift-tax free.
Question 3: A Charitable Remainder Unitrust (CRUT) pays income beneficiaries what type of distribution?
- A fixed dollar amount each year
- A fixed percentage of the trust's fair market value each year (Correct answer)
- A lump sum at the end of the trust term
- A variable amount at trustee discretion
Correct answer: A fixed percentage of the trust's fair market value each year
A CRUT pays a fixed percentage of the trust's annually revalued assets, so distributions fluctuate with investment performance.
Question 4: Which trust type is specifically designed to hold life insurance policies outside the insured's taxable estate?
- Revocable Living Trust
- Charitable Remainder Trust
- Irrevocable Life Insurance Trust (ILIT) (Correct answer)
- Qualified Domestic Trust (QDOT)
Correct answer: Irrevocable Life Insurance Trust (ILIT)
An ILIT owns the policy, so death proceeds are excluded from the insured's gross estate while still providing liquidity to heirs.
Question 5: For a gift to qualify for the annual gift tax exclusion, it must be which type of interest?
- Future interest
- Present interest (Correct answer)
- Testamentary interest
- Contingent interest
Correct answer: Present interest
Only present-interest gifts—where the recipient has immediate use and enjoyment—qualify for the annual exclusion.
Question 6: What is the primary estate planning purpose of a Qualified Personal Residence Trust (QPRT)?
- Avoid probate on retirement accounts
- Transfer a personal residence to heirs at a reduced gift tax value (Correct answer)
- Provide an income stream to a charity
- Minimize generation-skipping transfer taxes
Correct answer: Transfer a personal residence to heirs at a reduced gift tax value
A QPRT freezes the gift value of a residence at a discounted present value, reducing the taxable gift when ownership transfers to heirs at term end.
Question 7: Which IRS election allows a married couple to treat a gift made by one spouse as if made equally by both spouses?
- Portability election
- Gift splitting (Correct answer)
- Annual exclusion doubling
- Marital deduction election
Correct answer: Gift splitting
Gift splitting, elected on Form 709, lets spouses combine their annual exclusions, effectively doubling the tax-free gift from one spouse.
NAB Estate and Tax Planning 2
What is the annual gift tax exclusion amount per recipient for 2024?