ChFC Estate Planning

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ChFC Estate Planning
2013-01-26 22:15:50

Exam 1 of the 2012 Estate Planning ChFC exam
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  1. What  terms refer to the property of a decedent reverting to his or her state of domicile?
  2. What interest in real property gives the owner of the interest the most control over the property?
    a fee simple estate

    The holder of a life estate, remainder interest, or retained interest does not own the property in all events since some possessory term in the property belongs to another interest holder.
  3. A father and son have been farming land owned by the father for the past 12 years. Just prior to his death the father was offered $3 million for his farm because of its possible use as a shopping center. The son would like to continue to farm the land if it can be included in his father's estate at its current-use value. Additional facts are as follows:• Average annual gross rentals from nearby farms of similar acreage are $160,000.• Average annual state and local real estate taxes on the farm are $32,000.• The interest rate for loans from the Federal Land Bank is 8 percent.For federal estate tax purposes, the farm-method valuation formula would result in a current-use value for the farm of

    • The current-use value is calculated as follows :Net comparable income  ($160,000 less $32,000)= $ 128,000
    • Capitalized net income $128,000=$1,600,000 .08
  4. The following are facts concerning a decedent's estate:
    Gross estate$5,800,000
    Funeral and administrative expenses $75,000
    Marital deduction $400,000
    Post-1976 adjusted taxable gifts $50,000
    State estate tax $48,000

    The tentative tax base for this estate is

    • The tentative tax base is computed as follows:
    • Gross estate $5,800,000
    • Less deductions: 0  
    • Funeral and administration( 75,000) 
    • Marital deduction             (400,000) 
    • State death tax deduction  ( 48,000)  =(523,000)
    • 5,800,000- 523,000= 5,277,000

    Plus post-1976 adjusted taxable gifts 50,000  

  5. A decedent died on January 1, 2011. The facts concerning the decedent's estate are as follows::
    Estate tax payable before credits                     $2,465,000
    Funeral and administrative expenses                       75,000
    Applicable credit amount                               1,730,800
    State death taxes paid                                            15,900
    Based on the above information, the net federal estate tax payable is

    • The net federal estate tax payable is calculated as follows:
    • Estate tax before credits $2,465,000
    • Less basic credit amount(1,730,800) 
    • EQUALS $734,200
  6. A husband and wife own an office building as joint tenants with the right of survivorship. The building has an estate tax value of $1.5 million. If they dissolve the joint tenancy and retitle the property in the name of the husband as sole owner, which of the following statements is (are) correct?

    I. If the husband dies first and leaves the office building outright to his wife, there will be no federal estate tax attributed to its inclusion in his gross estate.

    II. If the wife dies first, their children, as sole heirs, will get a stepped-up tax basis for the property at their father's subsequent death.
    Both I and II are correct.
  7. Believing that his death was imminent, a widower gave his daughter some real estate 2 years ago and filed a timely gift tax return. The widower died on January 1 of this year. Additional facts are these:
    Widower's basis in the real estate
    Value of real estate when gifted $1,710,000
    Value of real estate on date of death
    Amount of gift tax paid by widower
    Assuming the widower made no additional gifts to his daughter,the daughter's income tax base is.... 
    The daughter's income tax basis is not stepped up to the date-of-death value since she received it by gift before the transferor's death.
  8.  One of the disadvantages of probate is... 
     that the decedent's will becomes a matter of public record.
  9. A mortgage is what kind of property? 
    A mortgage is intangible personal property.
  10. A trust is created by... 
    the action of a grantor (settlor).
  11. Concerning the unlimited estate tax marital deduction

    State laws vary, and some states don't...
    exempt transfers to a surviving spouse for death tax.