Trusts and Life Insurance
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Questions and Answers

Which of the following is NOT a tax characteristic of gifts made to a trust?

  • Gifts made to a trust are treated as gifts made to the trust beneficiaries (correct)
  • The $16,000 annual exclusion from gift tax is available for gifts of present interests in property made to an unlimited number of U.S. citizen donees
  • Gifts to U.S. citizen spouse: Unlimited marital deduction
  • Annual exclusion for gifts to a non-citizen spouse: 2022: $164,000

    • Which of the following is TRUE regarding the situs of a trust?

  • The situs of a trust is its legal home (correct)
  • The situs of a trust cannot be changed
  • The situs of a trust is determined by the location of the trustee
  • The situs of a trust has no impact on tax liabilities

    • What are some reasons why trusts are useful and necessary?

  • To exercise control over assets
  • To provide professional management and investment
  • To protect assets from creditors
  • All of the above (correct)

    • What are some advantages of living trusts?

    <p>All of the above</p> Signup and view all the answers

    Which of the following is a disadvantage of using a Bypass Trust?

    <p>No Basis Adjustment at Second Death</p> Signup and view all the answers

    Which of the following is a potential issue when using a Disclaimer Trust?

    <p>The surviving spouse may not follow through with the planning</p> Signup and view all the answers

    According to the text, how much can a married couple exclude from transfer taxes with proper planning?

    <p>$24.12 million</p> Signup and view all the answers

    Which of the following is a potential advantage of using a Bypass Trust?

    <p>Not Taxed at Second Death</p> Signup and view all the answers

    Which of the following is a requirement for a Generation-Skipping Trust to be exempt from the GST tax?

    <p>The trust must be created for the benefit of a single skip person</p> Signup and view all the answers

    What is the purpose of an irrevocable life insurance trust (ILIT)?

    <p>To remove life insurance policies from a client's taxable estate</p> Signup and view all the answers

    What is the Crummey power in relation to a trust?

    <p>A power to create a present interest in the trust</p> Signup and view all the answers

    What is the suggested limit for the annual Crummey withdrawal power?

    <p>$5,000 per beneficiary</p> Signup and view all the answers

    Which type of policy is designed to provide liquidity to pay estate taxes or other taxes and/or expenses at the second death?

    <p>Second to die policy</p> Signup and view all the answers

    What is the maximum duration of the non-charitable interest in a Charitable Remainder Trust?

    <p>20 years</p> Signup and view all the answers

    What is the minimum annual payout required for a Charitable Remainder Trust?

    <p>5%</p> Signup and view all the answers

    What is the purpose of drafting language in a trust that allows the trustee the discretion to make payments to the non-insured spouse during his or her lifetime?

    <p>To protect the non-insured spouse</p> Signup and view all the answers

    Which of the following is true about Charitable Remainder Trusts and S Corporation stock?

    <p>Charitable Remainder Trusts are not allowed to hold S Corporation stock.</p> Signup and view all the answers

    What determines the value of the donor's federal income tax deduction for gifts to a Charitable Remainder Trust?

    <p>The type of charitable remainderman and the kind of property contributed to the CRT.</p> Signup and view all the answers

    What is the gift tax consequence of transferring to a Charitable Remainder Trust?

    <p>A transfer to a CRT qualifies for the unlimited gift tax charitable deduction.</p> Signup and view all the answers

    Which of the following is NOT a characteristic of a beneficiary in a trust?

    <p>A beneficiary must be related to the grantor of the trust</p> Signup and view all the answers

    What is the distinction between 'income' and 'principal' in a trust?

    <p>Income is what is earned by the trust, while principal is what is paid out to the beneficiaries</p> Signup and view all the answers

    What is the difference between a simple trust and a complex trust?

    <p>A simple trust allows for the accumulation of income, while a complex trust requires the distribution of all income</p> Signup and view all the answers

    What is a grantor trust?

    <p>A trust that allows the grantor to remain in control while alive</p> Signup and view all the answers

    Which of the following is a requirement for a 'QTIP' trust?

    <p>All of the above</p> Signup and view all the answers

    Which of the following is true about a 'QTIP' trust?

    <p>All of the above</p> Signup and view all the answers

    Which of the following is a requirement for a Marital Deduction Trust for a Non-Citizen Spouse (Qualified Domestic Trust – 'QDOT')?

    <p>All of the above</p> Signup and view all the answers

    What happens if the parent is the transferor and custodian of a Uniform Gift to Minors Act or Uniform Transfer to Minors Act account, and dies while the account is still open?

    <p>The account balance is taxed in the parent's estate</p> Signup and view all the answers

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