RFC Estate Planning & Wealth Transfer 2

Question 1

A client wants to remove appreciating assets from their taxable estate while retaining an income stream for a fixed term. Which trust is BEST suited for this goal?

Accepted Answer

Grantor Retained Annuity Trust (GRAT)

Answer

A GRAT allows the grantor to transfer appreciation in excess of the IRS Section 7520 hurdle rate to heirs gift-tax free after retaining annuity payments for a fixed term.

Question 2

Under the step-up in basis rules for inherited property, the cost basis of an asset held in a decedent's taxable estate is generally adjusted to:

Accepted Answer

The fair market value at the date of death

Answer

IRC §1014 steps up (or down) the basis of inherited property to its fair market value on the decedent's date of death, eliminating unrealized capital gains accrued during the decedent's lifetime.

Question 3

A surviving spouse wishes to use a deceased spouse's unused federal estate tax exemption. Which portability election deadline applies?

Accepted Answer

Filing an estate tax return within the time limit (generally 9 months, extendable to 15 months)

Answer

Portability is elected on a timely filed estate tax return (Form 706) due nine months after death, with an automatic six-month extension available, giving a maximum 15-month window.

Question 4

Which valuation discount is most commonly applied when a minority interest in a closely held family limited partnership (FLP) is transferred as a gift?

Accepted Answer

Discount for lack of control (minority interest discount)

Answer

A minority interest discount reflects that a non-controlling FLP interest lacks the ability to force distributions or liquidate assets, reducing its fair market value below proportional net asset value.

Question 5

For federal gift tax purposes, what is the annual exclusion amount per donee in 2024?

Accepted Answer

$18,000

Answer

The annual gift tax exclusion is $18,000 per donee for 2024, indexed for inflation in $1,000 increments, allowing tax-free gifts up to that amount without using the lifetime exemption.

(RFC) Registered Financial Consultant Practice Test

(RFC) Registered Financial Consultant Practice Test

RFC Estate Planning & Wealth Transfer 2