Estate Planning: Legal Documents, Property, and Gift Tax
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Chapter 1: Who defines the practice of law?
Each state.
Chapter 1: What is the first step of the estate planning process?
Meet the client and gather information about family, assets, debts, documents, and wishes.
Chapter 1: Who usually belongs on the estate planning team?
Attorney, CPA, financial planner, and life insurance specialist as appropriate.
Chapter 1: What are risks of not having an estate plan?
Unwanted transfers, inadequate family support, liquidity problems, and higher transfer/administrative costs.
Chapter 1: What is estate planning?
Accumulating, managing, conserving, and transferring wealth while considering legal, tax, and personal objectives.
Chapter 1: What may a nonattorney financial planner typically do?
Gather data and assist with investment decisions; not draft wills or powers of attorney.
Chapter 1: Who typically calculates adjusted basis and handles tax issues?
A CPA.
Chapter 1: Does everyone need estate planning, even people with modest assets?
Yes. Incapacity and beneficiary wishes matter even without estate tax.
Chapter 1: What is an effective transfer?
Property reaches the intended person or institution.
Chapter 1: What is an efficient transfer?
Transfer costs are minimized while achieving the intended result.
Chapter 2: What is a codicil?
A legally executed amendment to an existing will.
Chapter 2: What is a residuary clause?
A will clause distributing property left after specific gifts and obligations.
Chapter 2: What is a specific bequest?
A gift of an identified item or amount to a named beneficiary.
Chapter 2: What is a durable power of attorney?
Authority for an agent that continues during the principal's incapacity; it ends at death.
Chapter 2: What is a springing power of attorney?
A power of attorney that takes effect upon a specified event.
Chapter 2: Which document appoints a medical decision-maker?
A durable power of attorney for health care.
Chapter 2: Which document states preferences about life support?
A living will.
Chapter 2: What is most important when choosing an attorney-in-fact?
Trustworthiness.
Chapter 2: What is a letter of instruction?
A nonbinding guide to contacts, document locations, assets, and personal/funeral wishes.
Chapter 2: What is a statutory will?
A will executed in compliance with applicable state law.
Chapter 2: What is a holographic will?
A handwritten will, recognized under varying state rules.
Chapter 2: What is a nuncupative will?
An oral will, recognized only in limited circumstances.
Chapter 2: What does per stirpes mean?
A deceased beneficiary's descendants inherit that family branch's share.
Chapter 2: What does HEMS stand for?
Health, Education, Maintenance, and Support.
Chapter 2: Is comfort by itself a HEMS ascertainable standard?
No. Comfort alone is not one of the four HEMS terms.
Chapter 2: What does an executor do?
Administers the estate, pays valid obligations, and distributes property.
Chapter 3: What is real property?
Land and permanent improvements, such as houses.
Chapter 3: What is tangible personal property?
Movable physical items such as a car or jewelry.
Chapter 3: What is intangible personal property?
Nonphysical rights such as stocks, bonds, and patents.
Chapter 3: What is sole ownership?
One person owns the asset outright.
Chapter 3: What is tenancy in common?
Co-ownership with potentially unequal shares and no automatic survivorship.
Chapter 3: What is JTWROS?
Joint tenancy with right of survivorship; a deceased owner's interest passes to surviving joint owners.
Chapter 3: What is tenancy by the entirety?
A spousal form of ownership recognized in some states.
Chapter 3: Can unmarried partners own as tenants by the entirety?
No; it is reserved for spouses.
Chapter 3: What is community property?
Generally, property acquired with earnings during marriage in a community-property state, owned equally by spouses.
Chapter 3: Is property inherited individually during marriage usually community property?
No; generally it remains separate property.
Chapter 3: What is a life estate?
A right to use or enjoy property during a specified person's lifetime.
Chapter 3: What is a remainder interest?
The future right to property after a prior interest ends.
Chapter 3: What is a term interest?
A right to use property for a fixed period.
Chapter 3: Does JTWROS property ordinarily pass under the deceased owner's will?
No; it passes by right of survivorship.
Chapter 3: What is the general estate inclusion rule for qualified joint property of spouses?
Usually one-half of the FMV is included in the deceased spouse's gross estate.
Chapter 3: For nonspouse JTWROS, what generally determines estate inclusion?
The decedent's contribution to the purchase price, subject to exceptions.
Chapter 3: If one brother paid 100% for nonspouse JTWROS property now worth $350,000 and dies, how much is generally included?
$350,000, absent proof of the survivor's contribution or another exception.
Chapter 3: Does avoiding probate automatically mean avoiding federal estate tax?
No. Nonprobate property may still be in the gross estate.
Chapter 5: Who is a donor?
The person giving property.
Chapter 5: Who is a donee?
The person receiving property.
Chapter 5: How are gross gifts generally valued?
At fair market value on the gift date.
Chapter 5: What is the annual exclusion used in the 2026 quiz questions?
$19,000 per donor per donee (use the amount specified by each question).
Chapter 5: What is gift splitting?
Spouses elect to treat a qualifying gift as made half by each spouse.
Chapter 5: How much can two spouses give one recipient under two $19,000 annual exclusions?
$38,000.00
Chapter 5: How do you calculate taxable gifts?
Gross gifts minus annual exclusions and applicable marital and charitable deductions.
Chapter 5: Is a taxable gift automatically a gift tax payment?
No; available lifetime exemption can offset gift tax.
Chapter 5: Do direct qualifying tuition payments to a school count as taxable gifts?
No, if paid directly to the educational institution for tuition.
Chapter 5: Do qualifying medical bills paid directly to a provider count as taxable gifts?
No, if paid directly to the medical provider.
Chapter 5: Does cash given to a student to pay tuition qualify for the direct-tuition exclusion?
No; paying the student is not paying the school directly.
Chapter 5: What is the general marital deduction for outright gifts to a U.S. citizen spouse?
Unlimited.
Chapter 5: Which form reports federal gift tax?
Form 709.
Chapter 5: When is a calendar-year gift tax return generally due?
April 15 of the following year, subject to extensions.
Chapter 5: What kind of gift usually qualifies for the annual exclusion?
A present-interest gift.
Chapter 5: What is a Crummey power?
A temporary withdrawal right that may allow a trust contribution to qualify as a present-interest gift.
Chapter 5: What is the usual basis of appreciated property received by gift?
The donor's adjusted basis, potentially increased for gift tax attributable to appreciation.
Chapter 5: What is the dual-basis rule for depreciated gifted property?
Donor basis for gain; gift-date FMV for loss; sale between them yields no gain or loss.
Chapter 5: Donor basis $60,000, gift FMV $30,000, sale $45,000: recognized gain or loss?
$0, because the sale price lies between the two bases.
Chapter 5: What is a net gift?
A gift in which the donee agrees to pay the gift tax associated with the transfer.
Chapter 5: Does funding a revocable trust normally complete a gift?
No, when the grantor retains the power to revoke.
Chapter 5: What is the basic idea behind below-market family-loan gift rules?
Forgone interest can be treated as a gift, subject to special exceptions.
Chapter 6: What is the federal gross estate?
The value of assets and certain property interests included for estate-tax purposes at death.
Chapter 6: What is the taxable estate?
Gross estate less allowable deductions.
Chapter 6: What are examples of estate tax deductions?
Qualifying funeral and administration costs, debts, charitable transfers, and marital transfers.
Chapter 6: What is Form 706?
The federal estate tax return.
Chapter 6: When is Form 706 generally due?
Nine months after death; a filing extension may be available.
Chapter 6: What is the general inherited-property basis rule?
Basis generally adjusts to FMV at death.
Chapter 6: Original basis $50,000; FMV at death $300,000; heir sells for $320,000: gain?
$20,000, assuming date-of-death FMV basis.
Chapter 6: What special basis rule can apply to community property at a spouse's death?
Both halves may receive an FMV basis adjustment if requirements are met.
Chapter 6: What is the three-year gift-tax inclusion rule?
Gift tax paid on certain gifts within three years of death is generally added to the gross estate.
Chapter 6: What happens to a revocable trust at the grantor's death for estate-tax purposes?
Its assets are generally included in the grantor's gross estate.
Chapter 6: What happens if the grantor gives property away but keeps lifetime income?
The property may be included in the gross estate under retained-enjoyment rules.
Chapter 6: What is a general power of appointment?
A power exercisable in favor of oneself, one's estate, or one's creditors, generally causing estate inclusion.
Chapter 6: What is a limited power of appointment?
A power restricted to permitted beneficiaries, generally not causing inclusion solely because of the power.
Chapter 6: What is the general estate-tax marital deduction for a U.S. citizen spouse?
Unlimited for qualifying transfers.
Chapter 7: What is a GRAT?
Grantor Retained Annuity Trust: grantor retains fixed annuity payments; remainder goes to beneficiaries.
Chapter 7: What is a GRIT?
Grantor Retained Income Trust: grantor retains income for a term; remainder goes to beneficiaries.
Chapter 7: What is a GRUT?
Grantor Retained Unitrust: grantor retains payments based on a percentage of periodically valued trust assets.
Chapter 7: What is a QPRT?
Qualified Personal Residence Trust: grantor retains the right to use a home for a term.
Chapter 7: What happens if a QPRT grantor dies during the retained term?
The residence is generally included in the gross estate.
Chapter 7: What is a SCIN?
Self-Canceling Installment Note: the remaining note balance cancels if the seller dies during its term.
Chapter 7: What is a private annuity?
A property transfer in exchange for periodic payments usually lasting for the seller's life.
Chapter 7: What is an installment sale?
A sale in which purchase payments are received over time.
Chapter 7: What is an FLP?
Family Limited Partnership: an entity used to own and manage family assets and transfer partnership interests.
Chapter 7: What is the difference between Medicare and Medicaid?
Medicare is primarily age/disability-based federal health insurance; Medicaid generally has financial eligibility requirements.
Chapter 7: How does a life insurance beneficiary designation generally transfer proceeds?
By contract, outside the will if a valid beneficiary is named.
Chapter 7: How does JTWROS property transfer at death?
By operation of law to surviving joint owners.