Estate Planning Objectives Flashcards
7 cards from real CRPC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Estate Planning Objectives flashcards as text
An irrevocable life insurance trust (ILIT) is primarily used to:
Answer: Keep life insurance proceeds out of the insured's taxable estate
An ILIT owns a life insurance policy so that the death benefit is excluded from the insured's gross estate, reducing potential estate taxes.
The annual gift tax exclusion allows an individual to give how much per recipient in 2024 without using their lifetime exemption?
Answer: $18,000
For 2024, the annual gift tax exclusion is $18,000 per recipient, indexed for inflation in $1,000 increments.
What is a generation-skipping transfer (GST) tax designed to prevent?
Answer: Avoidance of estate taxes by skipping a generation of heirs
The GST tax imposes an additional tax on transfers made to individuals two or more generations below the transferor to prevent estate tax avoidance.
Which estate planning strategy involves transferring appreciating assets to family members now so future growth occurs outside the taxable estate?
Answer: Grantor retained annuity trust (GRAT)
A GRAT allows the grantor to transfer assets to a trust, retain an annuity for a term, and if growth exceeds the IRS hurdle rate, the excess passes to heirs gift-tax free.
A special needs trust is established primarily to:
Answer: Provide for a disabled beneficiary without disqualifying them from government benefits
A special needs trust supplements — but does not replace — government benefits, ensuring the beneficiary retains eligibility for programs like Medicaid and SSI.
When is a step-up in cost basis most beneficial in estate planning?
Answer: When heirs inherit highly appreciated assets, eliminating capital gains on growth during the decedent's life
Assets inherited at death receive a step-up in basis to the fair market value on the date of death, eliminating the capital gains tax on appreciation during the decedent's lifetime.
What is the primary disadvantage of an outright bequest to a minor child under age 18?
Answer: A court-appointed guardian of the property must manage the assets until the child reaches majority
Minors cannot legally own significant property outright, so a court-appointed guardian (or conservator) must oversee the assets, which can be costly and restrictive.