Which type of property does NOT receive a full step-up in basis at death in a community property state?
Separate property owned individually by the decedent (such as inherited assets) only receives a step-up on the decedent’s portion, not both halves.
How can a tenancy by the entirety be terminated?
By mutual agreement of both spouses, by death of either spouse, or by divorce.
What transfers are pulled back into the gross estate under the 3-year rule?
Gift taxes paid within three years of death.
What is the first consideration when a client wants to make gifts to family members?
Determine whether the client can afford to make the gift.
If a spouse is terminally ill and most assets are owned by the other spouse, which assets should be transferred to the ill spouse’s revocable trust?
Low basis assets so they receive a step-up in basis at death.
If a beneficiary has the power to invade corpus for another person’s HEMS needs, what is the estate tax effect for the power holder?
The power does not cause the trust assets to be included in the power holder’s estate and is not treated as a taxable gift.
If an irrevocable trust pays income to a beneficiary currently, who pays the tax on that income?
The beneficiary receiving the income pays the tax.
Which business entities operate under the conduit principle for taxation?
Sole proprietorships, partnerships, and LLCs taxed as pass-through entities.
If an attorney for a beneficiary asks an investment manager to change the trust portfolio allocation, who must authorize the change?
The trustee.
If a trust beneficiary requests a distribution but the trustee refuses to approve it, what should the advisor do?
Deny the request because only the trustee has authority to approve distributions.
What estate planning strategy helps married couples minimize estate taxes over two deaths?
Fund a bypass (credit shelter) trust with the exemption amount at the first death.
To control a spouse’s spending in a bypass trust, should the trust be simple or complex and what access provisions are appropriate?
Complex trust with HEMS provisions and no 5-and-5 withdrawal rights.
If a parent is concerned children might not attend college, what trust is typically best for education gifting?
A Crummey trust.
What is a key rule of a 2503(c) minor’s trust?
Trust assets must become available to the beneficiary when they reach age 21.
What trust type is commonly used for minors when assets must be managed until adulthood?
A 2503(c) trust.
How long can a trust last under the common rule against perpetuities?
Lives in being plus 21 years.
Which charitable trust must pay a fixed percentage (at least 5%) of trust assets each year?
Charitable Remainder Unitrust (CRUT).
If a donor wants guaranteed income from a charitable gift, which strategy should be used?
A charitable gift annuity.
How can a family limited partnership help with estate planning gifts?
It allows valuation discounts for lack of control and lack of marketability.
If a client owns income-producing real estate but still needs the income, what estate planning strategy may transfer ownership while retaining income?
Installment sale to a family member or trust.
Who qualifies as a generation-skipping transfer (GST) skip person?
An individual who is two or more generations below the transferor (e.g., grandchildren).
When trust income is paid to one beneficiary and the remainder goes to the next generation at death, what GST event occurs?
Taxable termination.
Which of the following is NOT considered income in respect of a decedent (IRD)?
Depletion.
When a person inherits stock and sells it shortly after death, what basis is used?
The stepped-up basis equal to the fair market value on the date of death.
