Question 1

A married couple with 2 children and 5 grandchildren has an estate valued at $4 million.They decide to use gifts as a means to transfer some of their wealth to their family now and lower the value of their estate.If for a five-year period the couple give the maximum tax-free gift to each of their children and grandchildren,the value of their estate would be reduced to

Accepted Answer

The maximum tax-free gift that can be given to each individual per year is $15,000 (as of 2021). The couple has 2 children and 5 grandchildren, so they would be able to give a total of $15,000 x 7 = $105,000 per year. Over a five-year period, this would amount to $525,000. If we subtract this amount from the initial estate value of $4 million, we get $3,475,000. Therefore, the value of their estate would be reduced to $3,475,000, which is closest to answer choice C.

Question 2

A will is a legal document that describes how you want your property to be transferred to others.

Accepted Answer

This statement is true. A will is a legal document that outlines how a person wants their property and assets to be distributed after their death.

Question 3

How can you use the unlimited marital deduction to your advantage?

Accepted Answer

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Question 4

Outline the steps in calculating estate taxes.

Accepted Answer

The answer of Outline the steps in calculating estate taxes....

Question 5

An attestation and witness clause is an attachment to a will that alters or amends a portion of the will signed in front of two witnesses.

Accepted Answer

An attestation and witness clause is a statement typically found at the end of a will, indicating that the will was signed in the presence of witnesses, but it does not alter or amend any portion of the will.

Question 6

Provide some common sense approaches to estate planning.

Accepted Answer

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Question 7

Your estate tax burden can be reduced by giving gifts to your heirs prior to your death.This has the effect of reducing the value of your estate and thus lowering your tax obligation.As of 2011,each spouse can give up to $________ each year to ________.

Accepted Answer

As of 2011, each spouse can give up to $14,000 each year to as many people as they like without incurring gift tax. This is known as the annual gift tax exclusion. By utilizing this exclusion, married couples can potentially give up to $28,000 each year to each of their children and grandchildren without any gift tax implications, thus reducing the value of their estate and lowering their potential estate tax burden.

Question 8

A living will allows you to state your wishes regarding medical treatment in the event of an illness or injury that renders you unable to make decisions regarding your health care.

Accepted Answer

A living will is a legal document that allows an individual to express their desires about medical treatment if they become unable to communicate or make decisions due to an illness or injury. It is also known as an advance directive.

Question 9

Pat and John want to reduce the size of their by gifting their four grandchildren and two children the maximum tax free amount per year for the next five years.How much can they gift,tax free,each year?

Accepted Answer

As of the last update in 2023, the annual gift tax exclusion allows an individual to gift up to $15,000 per recipient without having to pay gift tax or report the gift to the IRS. For a married couple, this amount doubles to $30,000 per recipient because each spouse can gift $15,000. Pat and John can therefore gift $30,000 to each of their six relatives (four grandchildren and two children) every year. Multiplying $30,000 by 6 equals $180,000, which is the total amount they can gift tax-free each year.

Question 10

Pat and John want to reduce the size of their by gifting their four grandchildren and two children the maximum tax free amount per year for the next five years.How much can they reduce their taxable estate by over this five years?

Accepted Answer

As of 2021, the maximum tax-free annual gift amount is $15,000 per recipient. If Pat and John gift this amount to each of their six family members (4 grandchildren and 2 children), they will reduce their taxable estate by $90,000 each year ($15,000 x 6). Over five years, this adds up to a reduction of $450,000. However, the question asks for the maximum amount they can reduce their taxable estate by, so we need to remember that there is also a lifetime gift tax exemption (which is currently $11.7 million). Therefore, they can actually gift up to $11.7 million over their lifetime without incurring gift taxes. This means that even if they gift $90,000 per year to their family members, they will still have a significant amount of lifetime gift tax exemption left over. Thus, they can reduce their taxable estate by the full $450,000 over the five years without worrying about gift taxes. Therefore, the correct answer is C.

Question 11

The unified tax credit

Accepted Answer

The unified tax credit essentially nullifies the taxes on the first $5.49 million of an estate. This means that any amount below $5.49 million can be passed down tax-free to heirs.

Question 12

In 2017,a husband and wife could each exempt ________,therefore eliminating taxes of an estate of ________.

Accepted Answer

In 2017, the estate tax exemption was $5.49 million for each individual. Therefore, a husband and wife could each exempt $5.49 million, totaling $10.98 million for the estate. This means that any estate valued at $10.98 million or less would not have to pay estate taxes. Choice B is the only option that includes these numbers.

Question 13

The introductory statement of a will identifies whose will it is and revokes any prior wills.

Accepted Answer

The introductory statement of a will typically begins by identifying the person making the will and often includes language that revokes any prior wills or codicils.

Question 14

The executor is the individual who is responsible for carrying out the provisions of your will.

Accepted Answer

The executor is appointed by the testator (the person who writes the will) and is responsible for managing the estate, including distributing assets to beneficiaries, paying off any outstanding debts, and settling any other obligations specified in the will.

Question 15

What steps would you take in the estate planning process?

Accepted Answer

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Question 16

The main purpose of probate is to make sure the beneficiaries are treated equally.

Accepted Answer

The main purpose of probate is to administer and distribute the assets of the deceased according to their will or state law. While equality among beneficiaries may be a factor, it is not the primary purpose of probate.

Question 17

A will created by an attorney cannot be contested.

Accepted Answer

A will created by an attorney can still be contested by anyone who has legal standing and can provide sufficient evidence to prove that the will is invalid or should be changed.

Question 18

Describe the typical funeral and administrative expenses.

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Question 19

Individuals to whom you have willed your property are known as executors.

Accepted Answer

Individuals to whom you have willed your property are known as beneficiaries. Executors are the individuals responsible for carrying out the instructions in your will, including distributing your property to the beneficiaries.

Question 20

Probate is the legal process of distributing an estate's assets.

Accepted Answer

Probate is the legal process of distributing an estate's assets after a person has died. It involves proving the validity of the deceased person's will, identifying and valuing their assets, paying any outstanding debts or taxes, and distributing the remaining assets to their beneficiaries.

Quiz 16: Estate Planning: Saving Your Heirs Money and Headaches