EP | Chapter 1

Question 1

Effective Transfer

Answer 1

• a transfer of a person’s assets to the person(s), business or charitable institutions intended by that person

Question 2

Efficient Transfer

Answer 2

• a transfer in which costs of the transfer are minimized consistent with the greatest assurance of effectiveness

Question 3

Estate Planning

Answer 3

• the process of accumulation, management, conservation, and transfer of wealth considering legal, tax, and personal objectives

Question 4

Probate Process

Answer 4

• the legal proceeding that oversees the:
  
  • validity of existing wills
  • orderly distribution of decendent’s assets to the heirs
  • protects creditors by insuring that valid debts are paid
  • provides the estate with liquidity to pay for common costs around death:
    
    • ​taxes
    • funeral expenses
    • outstanding medical costs

Question 5

Transfer Costs

Answer 5

• includes gift and estate tax
• includes costs of estate planning and strategy:
  
  • ​document preparation
  • planning, trusts, and professional fees such as:
    
    • attorney fees
    • CPA fees

Question 6

Transferee

Answer 6

• a person who receives a transfer
• important distinction as:
  
  • ​a donee receives a gift
  • a buyer receives property
  • a legatee or heir receives property

Question 7

Transferor

Answer 7

• a person who makes a transfer
• important distinction as:
  
  • ​a donor makes a gift
  • a seller transfers property
  • a decedent leaves property to others

Question 8

Estate Planning Objectives

Answer 8

• fufill property transfer wishes
• minimize transfer costs
• minimize transfer taxes
• maximize net assets to heirs
• provide needed liquidity at death
• fufill healthcare decisions

Question 9

Risks in Failing to Plan an Estate

Answer 9

• decedent’s property wishes will not be followed
• transfer taxes will be excessive
  
  • ​NOT an efficient transfer
• transfer costs will be excessive
  
  • ​NOT an effective transfer
  • the costs of planning were wasted
• decedent’s family will not be properly provided for financially
• insufficient liquidity to cover client’s debts, taxes, and costs at death (funeral, medical…)

Question 10

Information and Documents Required for Estate Planning

Answer 10

• current financial statements
• list of assets and liabilities detailing:
  
  • ​FMV, adjusted basis, expected growth rate, title being held, and date acquired
• family information including relations age and health
• copies of medical, disability, and long-term care insurance policy
• copies of current life insurance policies indentifying
  
  • ​policy owner, named insured, designated beneficiaries
• copies of annuity contracts
• copies of previous wills and trusts
• identification of power of attorney and general power of appointment
• copies of previous income, gift, and estate tax filings
• identification of assets previously transferred to loved ones

Question 11

Common Estate Planning Transfer Objectives

Answer 11

• transfer property as decedent desired
• minimize estate and transfer taxes
• maximize net assets received by heirs
• use lifetime transfers - gifts
• meet liquidity needs at death
• plan for children
• plan for incapacity of the transferor
• provide for needs of surviving spouse
• fulfill the transferor’s charitable intentions