Estate Planning Objectives Flashcards

What is the concept of 'titling' assets and why does it matter in estate planning?

Answer: It determines how assets are owned and therefore how they transfer at death — by will, by operation of law, or by contract

How an asset is titled (solely, jointly, in trust, with beneficiaries) controls whether it passes through probate, by survivorship, or directly to a named beneficiary.

Which type of joint ownership includes the right of survivorship automatically?

Answer: Joint tenancy with right of survivorship (JTWROS)

JTWROS means that when one owner dies, their share passes automatically to the surviving joint owner(s) outside of probate.

A Qualified Personal Residence Trust (QPRT) is used to:

Answer: Transfer a home to heirs at a reduced gift tax value while the grantor retains the right to live there for a term

A QPRT transfers the remainder interest in a home to heirs at a discounted gift tax value, with the grantor retaining the right to occupy the home for a specified term.

What is 'per stirpes' distribution in the context of estate planning?

Answer: Distribution by branch of the family tree so a deceased heir's share passes to their descendants

Per stirpes means 'by the branch' — if a beneficiary predeceases the decedent, that beneficiary's share passes to their own descendants.

Which of the following is NOT an objective commonly addressed in estate planning?

Answer: Minimizing income taxes during the client's working years

While income tax minimization is a financial planning goal, the primary objectives of estate planning center on asset transfer, tax efficiency at death, and heir protection — not current income tax planning.

What distinguishes a testamentary trust from a revocable living trust?

Answer: A testamentary trust is created by the will and only takes effect after death, requiring probate

A testamentary trust is established within a will, meaning it does not exist until the will is admitted to probate after the testator's death.

When a client has a taxable estate, which combination of planning tools most effectively reduces estate taxes while benefiting heirs?

Answer: An ILIT combined with bypass trust planning and annual gifting

Combining an ILIT (to remove insurance from the estate), bypass (credit shelter) trust planning (to use both spouses' exemptions), and systematic annual gifting addresses multiple estate tax reduction strategies simultaneously.