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Exam 25: Transfer Taxes and Wealth Planning of the Cfa Institute

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Question 51

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Ashley owns a whole-life insurance policy worth $25,000 that directs the insurance company to pay the beneficiary $500,000 on her death. Ashley pays the annual policy premiums and has the power to designate the beneficiary of the policy. What value of the policy, if any, would be included in Ashley's estate upon her death?

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Question 52

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A terminable interest in property is any interest that terminates during the current year.

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B) False

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Question 53

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Madison was married at the time of her death and her gross estate consisted of $22 million in stock and bonds. Madison left all of her property to her spouse. What is the result?

The probate estate consists of all property owned by the decedent that is excluded from the gross estate.

Last year Brandon opened a savings account with a deposit of $45,000. The account was in the name of Brandon and Melanie, joint tenancy with the right of survivorship. Melanie did not contribute to the account, but this year she withdrew $18,000. Has Brandon made a taxable gift to Melanie, and if so, in what amount?

A gratuitous transfer of cash to an individual who uses the cash to pay medical expenses is not subject to a gift tax.

This year Carlos and Hailey purchased realty for $480,000 and took title as equal tenants in common. However, Hailey was able to provide only $200,000 of the purchase price and Carlos paid the remaining $280,000. Has Carlos made a taxable gift to Hailey, and if so, in what amount?

The gross estate always includes the value of half of any real property owned by a decedent and another person in joint tenancy with the right of survivorship.

Adjusted taxable gifts are included when calculating the taxable estate but are not subject to double taxation because a tax credit is provided for taxes payable on adjusted taxable gifts.

Ava transferred $1.5 million of real estate into an irrevocable trust for her son, Luis. The trustee was directed to retain income until Luis' 21st birthday and then pay him the corpus of the trust. Ava retained the power to require the trustee to pay income to Luis at any time, and the right to the assets if Luis predeceased her. What amount of the trust, if any, will be included in Ava's estate if she died shortly after making the transfer?

Harold and Mary are married and live in a community property state. During the marriage Harold bought a parcel of real estate for $100,000 in community funds and titled the property in his name alone. Mary died on January 30th of this year and was survived by Harold who did not remarry. The parcel of real property was worth $250,000 on January 30th of this year but was only worth $220,000 at year end. What amount, if any, is included in Mary's gross estate?

Jayden gave Olivia a ring when she agreed to marry him. The ring is a family heirloom valued at $67,000. What is the amount of the taxable gift?

The gift-splitting election only applies to gifts made by taxpayers who reside in community property states.

The theft of property included in the gross estate is only deductible in calculating the taxable estate if the loss exceeds 10 percent of the decedent's adjusted gross estate.

Gabriel had a taxable estate of $6 million when he died in 2014. Calculate the amount of estate tax due (if any) if Gabriel made prior taxable gifts in 2005 totaling $1 million at which time he claimed a unified credit of $1 million and paid no tax. Gabriel was unmarried at his death.

At his death Tyrone's life insurance policy paid his estate $85,000. What amount, if any, is included in Tyrone's gross estate?

Which of the following is a true statement?

Christian transferred $60,000 to an irrevocable trust for the benefit of his three daughters. The three daughters share income equally for five years and then the corpus of the trust is to be divided equally between them. What is the amount of the taxable gifts, if any, made by Christian?

At her death Siena owned real estate worth $200,000 that was titled with her sister in joint tenancy with the right of survivorship. Siena contributed $50,000 to the total cost of the property and her sister contributed the remaining $75,000. What amount, if any, is included in Siena's gross estate?

Which of the following is a true statement?