UNIT 15. EXAM ESTATE PLANNING FOR
HIGH NET WORTH CLIENTS
QUESTIONS AND ANSWERS WITH
SOLUTIONS 2024
Which of the following are the only exceptions to an estate transfer being subject to the GSTT when a
gratuitous completed inter vivos transfer is a generation-skipping transfer?
the transferor makes payments directly to the recipient for medical expenses
the transferor makes direct payments of medical expenses on behalf of the recipient
the transferor makes payments directly to the recipient for educational expenses
the transferor makes direct payments for tuition expenses on behalf of the recipient
II only
I and IV only
I and III only
II and IV only - ANSWER II and IV only
The transferor can qualify within the limited exception if direct payment is made for medical expenses in
addition to making direct payments for tuition expenses.
Use of the GSTT exemption for lifetime skips is
mandatory.
not mandatory.
allowed only for the wealthy.
,only applicable in $10,000 increments. - ANSWER not mandatory.
Unlike the applicable credit amount that is used to keep a taxpayer from having to pay gift or estate
taxes that would otherwise be due, use of the GSTT exemption for lifetime skips is not mandatory.
Which one of the following characteristics is common to both the federal gift tax and the federal estate
tax?
the tax exclusive nature of the tax.
the ability of one spouse to assume one-half of the transfers made by the other spouse.
the property receives a stepped-up income tax basis in the hands of the recipient of the transfer.
the ability to shield qualifying transfers to a qualified charity from the tax. - ANSWER the ability to shield
qualifying transfers to a qualified charity from the tax.
Both the gift tax and estate tax allow a charitable deduction for qualifying transfers.
Which one of the following statements regarding charitable remainder trusts that are qualified to receive
the estate tax charitable deduction is not true?
The charity must be given either an annuity or a unitrust interest.
The charity must be qualified.
The charity must be given the remainder interest in trust assets.
The trust may last for one or more persons' lifetimes. - ANSWER The charity must be given either an
annuity or a unitrust interest.
These terms are used to describe the income interest in such trusts; the charity gets the remainder
interest.
, Which one of the following statements regarding charitable lead trusts that are qualified for the
charitable deduction is not true?
The trust term can last either for a set period of years, or for the life or lives of a person or persons living
at the time the trust is established.
The charity receives the income interest.
A noncharitable beneficiary receives the remainder interest.
The charity receives a right to all of the income from trust assets. - ANSWER The charity receives a right
to all of the income from trust assets.
The charity must receive either an annuity or a unitrust interest, neither of which equates to a right to all
income from trust assets.
Which one of the following statements regarding a reverse gift transaction is not correct?
The property involved has a high basis in relation to its fair market value.
The primary purpose of this transaction is for the donor to get a stepped-up basis in the asset that is
gifted.
The donee cannot have a legal obligation to leave the property to the original donor (or spouse) at the
donee's death. - ANSWER The property involved has a high basis in relation to its fair market value.
The property used in a reverse gift transaction has a low basis in relation to its fair-market value. The
primary purpose of the reverse gift transaction is to eliminate this potential gain so that the asset can
then be sold without payment of a large capital gains tax.
Which one of the following statements regarding a net gift transaction is not correct?
The donee may be asked to pay the gift tax due on the gift.
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