Reference no: EM133058045

Maurice is a wealthy widower with two sons, Claude and Bixby. The value of his estate is well over the exemption, so he is worried about paying estate taxes.

1. Which of the following statements regarding the alternate valuation date is not correct?

a. When the alternate valuation date is elected, all property in the estate is valued six months after the decedent's death.

b. An estate passing to a surviving spouse is able to use both their marital deduction to eliminate estate taxes and the alternate valuation date election.

c. The executor elects to use the alternative valuation date.

d. There must be a decrease in the total value of the gross estate and estate tax liability six months after death.

2. Maurice was one of several beneficiaries of an irrevocable trust created by his mother. Maurice was given the right to withdraw the greater of $5,000 or 5% of the trust corpus each year. Maurice withdrew $100,000 from the trust the day before he died. The value of the trust was $2 million. What amount subject to the withdrawal was included in Maurice's gross estate?

a. The $100,000 that Maurice had withdrawn from the trust but had not yet spent is included in his gross estate.

b. $5,000 is included in Maurice's gross estate

c. A special power of appointment is not included in a holder's gross estate

d. The $2 million value of the trust is included in his gross estate

3. Claude funded an irrevocable trust with $3 million of dividend paying stock. He gave his wife, Jenny, a life estate in the trust. The trust directs that upon Jenny's death the remainder will be paid to Claude, if he is living or to his daughter Esther if he is not. Claude retained a reversionary interest in the trust greater than 5% at his death. Which of the following statements IS NOT correct?

a. If Claude had retained a reversionary interest of 4%, then the value of the trust would not be included in his gross estate.

b. The FMV of the trust is not included in Claude's gross estate.

c. The total FMV of the trust is included in Claude's gross estate.

d. Esther has a contingent interest because she cannot receive the remainder interest unless she survives Claude.

4. Maurice owns the following assets which are includible in his gross estate. Which asset is not included in his probate estate?

a. An irrevocable trust that Maurice created five years ago and funded with $500,000. Lawrence named himself trustee and retained the right to change the trust beneficiaries.

b. A vacation home Maurice owned in a state other than his state of residence.

c. A 50% business interest Maurice held for $400,000.

d. A life insurance policy Maurice owned on his life that is payable to his estate.

5. Maurice made the following transfers during his lifetime. Which assets are included in his gross estate? Mark all that apply.

a. Maurice established a trust for her son six years ago, and named herself trustee with general powers of attorney. He funded the trust with $180,000. The value of the trust at his death was $250,000.

b. Four years ago Maurice made his revocable trust irrevocable when the corpus was worth $300,000. When he died last month, the trust was valued at $380,000.

c. Four years prior to dying, Maurice transferred $1.5 million of rare coins to his children.

d. Maurice was given a power to direct in his will who would receive the assets from his mother's trust, without restriction. At the time Maurice received the testamentary power of appointment the trust was valued at $450,000. When Maurice died, the trust was valued at $600,000.