Chapter 07:Transfers During Life and at Death

Which of the following statements regarding private annuities is correct?

A private annuity cannot give the seller a security interest in the property.

Which of the following assets are not generally counted for Medicaid planning eligibility purposes?

Primary Residence.

During the year, Shiloh created a trust for the benefit of her five children. The terms of the trust declare that her children can only access the trust’s assets after the trust has been in existence for 15 years and the trust does not include a Crummey provision. If Shiloh transfers $85,000 to the trust during the year, what is his total taxable gifts for the year?

$85,000.

In 2025, Laila paid Badlaw University $12,000 for her nephew’s tuition and gave her nephew $26,000 in cash. Laila is single and did not make any other gifts during the year. What is the amount of Laila's taxable gifts for the year?

$7,000.

In an effort to keep any of its future appreciation out of her gross estate, Gretchen, a 73-year-old widow, transferred her home into a Qualified Personal Residence Trust (QPRT) naming her only son as the remainder beneficiary. Which of the following statements regarding a QPRT is false?

ies during the term of the QPRT, her gross estate will include the value of her home at the date of the transfer to the QPRT.

Of the following statements regarding a Qualified Personal Residence Trust (QPRT), which is true?

At the end of the QPRT term, the grantor must begin paying rent to the remainder beneficiaries of the QPRT if he continues to live in the residence.

Medicaid is primarily for those people who meet the following eligibility requirements:

Low Income.

Which of the following statements regarding installment sales is correct?

At the death of the seller, the principal balance of the installment sale is included in the seller’s gross estate.

Todd purchased his mother’s home through use of a SCIN. Under the terms of the SCIN, Todd was to pay his mother $20,000, plus interest, and a SCIN premium, per year for 10 years. If Todd’s mother died after 4 payments were made, what would be Todd’s adjusted basis in the home?

$200,000.

Which of the following does not transfer property at death by operation of law?

Property owned tenancy in common.

Which of the following techniques will not help an individual lower his gross estate?

Pay-on-Death Arrangement (POD).

Which of the following does not transfer property at death by contract?

Tenancy by the entirety.

Perry’s father sold the family business to him using a private annuity. The private annuity was structured such that Perry would pay his father $40,000 per year plus interest, for the remainder of his father’s life. At the date of the sale, Perry’s father’s life expectancy was 20 years and Perry’s father was in great health. After six years, Perry’s father died of a heart attack and Perry sold the business for $2,000,000 six months after his father’s death. What is Perry’s capital gain/loss on the transaction?

$1,760,000.

Jocelyn, age 60, owns 400 shares of ABC Corporation, which she expects to increase 300% over the next four years. Jocelyn eventually wants to transfer the stock in ABC Corporation to her son, Stevie, but Stevie is currently incapable of managing the stock or the income from the stock. Jocelyn expects Stevie to be responsible in five years. Of the following, which transfer method would work best to remove the expected appreciation of the stock from Jocelyn’s gross estate and protect the property for Stevie?

GRAT

Mork and his wife, Mindy, want to establish a family limited partnership (FLP) and transfer their business to the FLP. The value of the business interest is $4,000,000. They want to make use of the annual exclusion and have been advised that a 25% discount is appropriate for gifting a minority interest of limited partnership shares. The general partnership interest (1%) is valued at $40,000. They have eight family members (children and grandchildren) to whom to transfer limited partnership interests. Mork and Mindy are unwilling to utilize any of their lifetime exemptions. Presuming the annual exclusion remains the same and the value of the business interest remains unchanged in the future, how many years does it take them to transfer all of the limited partnership interest?

10 years.

Which of the following statements regarding a Grantor Retained Annuity Trust (GRAT) is correct?

The remainder interest of a GRAT is payable to a noncharitable beneficiary.

Which of the following statements regarding self-cancelling installment notes (SCINs) is correct?

If the buyer dies before the end of the SCIN term or the death of the seller, his gross estate includes a debt equal to the present value of the remaining payments

Which of the following statements regarding Family Limited Partnerships (FLPs) is correct?

Transfers of the limited partnership interests in the FLP are usually eligible for minority and lack of marketability valuation discounts.

Kane transferred $5,500,000 to a GRAT naming his two children as the remainder beneficiaries while retaining an annuity valued at $500,000. If this is the only transfer Kane made during the year, what is Kane’s total taxable gift for the year?

$5,000,000.

Medicare is primarily for those people who meet the following eligibility requirements:

Elderly

Before her death, Meg loaned Ryan $400,000 in return for a note. The terms of the note directed Ryan to make monthly payments including interest at the applicable federal rate. If Meg dies before the note is repaid, which of the following affects the valuation for Meg’s gross estate?

1. Ryan’s inability to make payments timely
2. The market rate of interest
3. The remaining term of the note
4. Meg forgives the note as a specific bequest in her will

1, 2, and 3.