AAMS Module 9: Estate Planning for Investment Clients Questions and Answers (100% Pass)
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Module
AAMS
Institution
AAMS
AAMS Module 9: Estate Planning for
Investment Clients Questions and
Answers (100% Pass)
Types of Estates - Answer️️ -Probate Estate and Gross Estate.
Estate planning is the process of planning the accumulation, conservation,
and distribution of an estate to effectively and efficiently acco...
AAMS Module 9: Estate Planning for
Investment Clients Questions and
Answers (100% Pass)
Types of Estates - Answer✔️✔️-Probate Estate and Gross Estate.
Estate planning is the process of planning the accumulation, conservation,
and distribution of an estate to effectively and efficiently accomplish both
tax and non-tax objectives. Good estate planning ensures a person's wishes
with regard to their assets and medical care are carried out both while they
are alive and after their death. In fact, virtually everyone needs some basic
estate planning documents. With rare exceptions, everyone needs a will,
springing durable powers of attorney for financial and medical matters,
and a living will.
The probate estate involves all property interests that do not automatically
transfer to beneficiaries under applicable state law or via contract
provisions and are therefore subject to the state-prescribed process of
notification and transfer known as probate. These assets include both those
transferred according to the decedent's valid will provisions and those
transferred by the state's own system of distribution, as embodied in its
intestate succession statutes. The gross estate includes all property that is
subject to the federal estate tax. Everything in the probate estate is included
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in the gross estate; however, the gross estate usually includes many assets
that are not in the probate estate, such as assets that are held in a will
substitute form, that pass outside of the probate process.
Estate Transfer - Answer✔️✔️-Estate transfer is the act of conveying title to
property interests from one person to another. Property interests can be
transferred either during the lifetime of the owner (inter vivos) or after the
owner's death (testamentary). A person who gives property away
gratuitously during life is often called a donor, while the person receiving
the property is often called a donee.
Estate Planning Team - Answer✔️✔️-- attorney
- CPA
- life insurance consultant
- trust officer
- financial planner
There must be one of these professionals spearheading the entire thing;
usually, this falls on the financial planner. Constant communication of
changes is required in order to move properly.
Unauthorized Practice of Law - Answer✔️✔️-Because the practice of law is
forbidden to all but licensed attorneys, all non-attorney professionals on
the estate planning team must understand what constitutes the practice of
law. Unfortunately, this is not a topic that can be discussed with precision,
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and the definition of what constitutes the practice of law varies from state
to state.
There are two actions that usually constitute the practice of law in every
state:
drafting documents that will affect the property or legal rights of someone
else, whether for compensation or not, and
advising another person to take actions that will affect their property or
legal rights.
Valuation - Answer✔️✔️-All three federal transfer taxes—the gift tax, the
estate tax, and the generation-skipping transfer tax—impose a tax on a
gratuitously transferred value. The amount of the tax is determined, on the
one hand, by the tax rate to be applied and, on the other hand, by the value
transferred.
FMV is typically used at the time of transfer.
Gifts. The valuation date for gifts is the date on which the transfer is
completed.
Note: The IRS has only three years to challenge the value of adequately
disclosed gifts. This underscores the necessity to report all taxable gifts,
and perhaps even some noncash gifts that are close to being taxable
because of their value, or if there is some doubt about their entitlement to
deductions to prevent them from being taxable.
Estates. The valuation date for property included in a decedent's gross
estate is either the date of the decedent's death or six months after the
decedent's death.
Alternative Valuation Date & Valuation - Answer✔️✔️-The executor may
elect to value the property included in the gross estate as of the alternate
valuation date, but only if there is an estate tax to pay, and only if that
estate tax is reduced by use of the alternate valuation date. The alternate
value of the property is the value it has six months after the date of the
decedent's death. Sometimes using the alternate valuation date on estate
assets is more beneficial than using the date of death value, especially
when the decedent's estate includes a large percentage of property that has
depreciated rapidly in value after their death—such as marketable
securities that have declined in value.
1. If the alternate valuation date is elected, it is applied to all eligible
property in the estate, not just specific assets. However, an estate cannot
take advantage of a decrease in value due solely due to the passage of
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