CE113, PART5 REVIEW QUESTIONS AND ANSWERS

T	F	1.	Of the three basic estate planning questions, who, how, and when, generally the easiest for the client to answer without significant professional advice is the first one.
T	F	2.	The primary estate planning reason for making lifetime gifts is to reduce the client’s estate tax base.
T	F	3.	The holder of a life estate in property owns all the ownership rights associated with the property.
T	F	4.	The term community property is used in some states as a synonym for tenancy in common.
T	F	5.	If Sam Smith and Jack Jones own a piece of property as joint tenants with right of survivorship, at the death of the first tenant his interest automatically passes to his wife.
T	F	6.	A tenancy by the entireties is a property interest that can be owned only by spouses.
T	F	7.	An example of a beneficial interest in property is the right of a person to current income distributions from a trust.
T	F	8.	A "pour-over" trust is created under the will of a testator to receive all of the testator’s assets.
T	F	9.	Living trusts may be set up to be either revocable or irrevocable.
T	F	10.	A living will is a document describing a person’s intentions in the event that he or she becomes seriously disabled and legally incapable of making decisions about health care steps to be taken for the continuance of his or her life.
T	F	11.	A deceased individual’s probate estate consists of all the property he or she owned jointly with his or her spouse at the time of death.
T	F	12.	The transfer of property at the death of a person who owns property with another as a joint tenant with right of survivorship is an example of a transfer by operation of law.
T	F	13.	Federal gift taxes will apply to a transfer of property only if there is a completed transfer and acceptance of property for less than full and adequate consideration.
T	F	14.	The transfer of services by one individual to another for less than adequate consideration constitutes a taxable gift for federal gift tax purposes.
T	F	15.	A married donor whose spouse joins in making the gifts is allowed to give up to $20,000 per year to each of several donees free of federal gift taxes as long as the gifts are of future interests.
T	F	16.	The unified credit under the federal transfer tax system provides for reductions of the transfer tax otherwise payable for transfers made during life, at death, or both.
T	F	17.	If the generation-skipping transfer tax applies, a transfer of property could be subject to a tax rate in excess of 100 percent of the value of the transferred property.
T	F	18.	Because state death taxes are generally applied at a lower rate than the federal estate tax, state death taxes are insignificant for most clients of a financial planner.
T	F	19.	Lifetime gifting of income-producing property can be used effectively to transfer the subsequent income to a lower tax bracket donee for federal income tax purposes.
T	F	20.	An objective underlying the use of Sec. 2503(b) and Sec. 2503(c) trusts is to restrict a minor donee’s access to gifted funds while still qualifying the gift as a gift of a present interest.
T	F	21.	The marital deduction can be used by a married couple to completely eliminate all federal estate taxes that would otherwise be payable at the death of the first spouse.
T	F	22.	As a general rule of thumb, property left by a decedent to his or her spouse will qualify for the marital deduction only if it will ultimately escape estate taxation in the estate of the spouse.
T	F	23.	Property left by a deceased to a surviving spouse through a QTIP marital-deduction trust will be in the estate of that spouse for federal estate tax purposes.
T	F	24.	Qualifying lifetime gifts of property to charities, if deducted for federal income tax purposes, must be added back into the donor’s gross estate for federal estate tax purposes.
T	F	25.	A charitable lead trust is a device used to donate to charity a remainder interest in property.
T	F	26.	A revocable life insurance trust is a useful device for removing life insurance policy proceeds from the gross estate of a deceased insured policyowner.

3.	A fee simple ownership provides the holder with all the ownership rights in the property. A life estate gives the holder only the right to possess and enjoy the property for a time period measured by the life of an individual, usually the holder.
4.	Community property and tenancy in common are distinctly different types of joint concurrent ownership interests in property.
5.	At the death of the first joint tenant, his interest automatically passes to the other joint tenant.
8.	A "pour-over" trust is created during the lifetime of a grantor to receive the assets at his or her death.
11.	A married person’s probate property is generally limited to his or her individually owned property.
14.	Only transfers of property, not services, are subject to federal gift taxation.
15.	To qualify for the federal gift tax annual exclusion the gifts must be of a present interest.
18.	State death taxes are important to consider, since more estates will be subject to these taxes than to the federal estate tax. Also, in large estates these taxes can take a large amount of money. Some planning techniques that may not reduce the federal estate tax can be used to reduce state death taxes.
22.	As a general rule property will qualify for the marital deduction only if it is anticipated to be includible in the taxable estate of the spouse at his or her death.
24.	Gifts of property to charity are both deductible for federal income tax purposes and removed from the gross estate for federal estate tax purposes.
25.	False. A charitable lead trust is used to donate to charity a current income interest, not a remainder interest.
26.	If the life insurance trust is revocable, the death proceeds will be in the gross estate of the insured policyowner because he or she retained incidents of ownership in the policy.