CEA Taxation & Legal Considerations 4 — Questions and Answers
Question 1: The generation-skipping transfer (GST) tax applies when assets pass to a 'skip person.' Which of the following is a skip person?
- The transferor's child
- The transferor's sibling
- The transferor's grandchild (Correct answer)
- The transferor's spouse
Correct answer: The transferor's grandchild
A skip person is generally a natural person at least two generations below the transferor, such as a grandchild.
Question 2: A decedent owned a vacation home with a spouse as joint tenants with right of survivorship (JTWROS). How much of the property's FMV is included in the decedent's gross estate?
- 0%, because jointly held property avoids estate tax entirely
- 25%, the minimum inclusion fraction
- 50%, regardless of contribution (Correct answer)
- 100%, because the decedent is the first to die
Correct answer: 50%, regardless of contribution
For property held as JTWROS between spouses, IRC § 2040(b) includes exactly 50% in the first spouse's gross estate regardless of who paid for it.
Question 3: Which of the following transfers triggers the three-year lookback rule that could pull the asset back into the gross estate under IRC § 2035?
- Transfer of a rental property to an irrevocable trust
- Relinquishment of a retained life estate within 3 years of death (Correct answer)
- Gift of cash to a grandchild 4 years before death
- Assignment of a copyright to a family member 2 years before death
Correct answer: Relinquishment of a retained life estate within 3 years of death
IRC § 2035 recaptures transfers made within three years of death where the decedent had previously retained § 2036–2038 interests such as a life estate.
Question 4: A surviving spouse inherits an IRA. Which option is unique to spousal IRA beneficiaries and not available to non-spouse beneficiaries?
- Taking a lump-sum distribution
- Rolling the inherited IRA into their own IRA (Correct answer)
- Disclaiming the IRA within 9 months
- Taking required minimum distributions
Correct answer: Rolling the inherited IRA into their own IRA
Only a surviving spouse can roll an inherited IRA into their own IRA, effectively treating it as their own account and deferring RMDs until their own age-73 trigger.
Question 5: Under the SECURE 2.0 Act, the required beginning date for required minimum distributions (RMDs) from most retirement accounts is age:
- 70½
- 72
- 73 (Correct answer)
- 75
Correct answer: 73
SECURE 2.0 moved the RMD starting age to 73 for individuals who turn 72 after December 31, 2022, with a further increase to 75 scheduled for 2033.
Question 6: An estate advisor recommends a grantor retained annuity trust (GRAT). Which scenario best describes a successful GRAT outcome?
- The grantor dies during the GRAT term, passing assets at full FMV
- Assets inside the GRAT earn less than the § 7520 hurdle rate
- Assets inside the GRAT appreciate faster than the § 7520 rate, passing excess to heirs gift-tax-free (Correct answer)
- The grantor retains the right to revoke the trust at any time
Correct answer: Assets inside the GRAT appreciate faster than the § 7520 rate, passing excess to heirs gift-tax-free
A GRAT succeeds when trust assets outperform the IRS § 7520 hurdle rate; the excess appreciation passes to remainder beneficiaries with little or no gift tax.
Question 7: Which of the following is NOT a requirement for a gift to qualify for the annual gift tax exclusion under IRC § 2503(b)?
- The gift must be of a present interest
- The recipient must be a U.S. citizen (Correct answer)
- The donor must give up dominion and control
- The gift must be completed during the calendar year
Correct answer: The recipient must be a U.S. citizen
The annual exclusion applies to gifts of present interests regardless of the recipient's citizenship; citizenship is irrelevant for this exclusion.
CEA Taxation & Legal Considerations 4
The generation-skipping transfer (GST) tax applies when assets pass to a 'skip person.' Which of the following is a skip person?