QUESTION: 93

In addition to substantial probate assets, a married man with two minor children has a $1,000,000 ordinary life insurance policy payable to his estate. He wants to make certain that if he predeceases his wife the death proceeds will be available to provide income for his wife during her lifetime and to provide for their two children after her death. He would like the policy and/or its death proceeds to be as free of federal gift and estate taxes as possible with respect to both him and his wife. Which of the following courses of action would best accomplish these objectives?

Assign the policy to his wife who will establish a revocable intervivos trust to receive the death proceeds
Assign the policy to an irrevocable intervivos trust with five and five powers and designate the trustee to receive the death proceeds
Designate his wife as beneficiary and she will establish a testamentary trust in her will to receive the proceeds at her subsequent death
Establish a revocable intervivos trust and designate the trustee to receive death proceeds

Answer(s): B

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QUESTION: 94

Ignoring the annual per-donee exclusion, which of the following transfers is a gift for federal gift tax purposes?

A father promises to buy his daughter a condominium when she finishes college.
An individual gratuitously performs valuable services for the benefit of a close friend.
A grandmother pays her grandson's $30,000 tuition at an Ivy League university.
A creditor cancels the promissory note of a recently unemployed friend as a charitable gesture.

Answer(s): D

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QUESTION: 95

Limited interests in property include all the following EXCEPT

life estates
remainder interests
fee simple estates
reversionary interests

Answer(s): C

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QUESTION: 96

John plans to transfer his life insurance policy to an irrevocable trust for the benefit of his 19- year old daughter, Jane. Which of the following conditions will enable the gift to qualify for the annual exclusion?

1. Jane is the irrevocable beneficiary of the life insurance trust but cannot withdraw from the trust until the death benefits are paid.
2. Jane is given "Crummey" demand powers permitting the withdrawal at her discretion of the annual additions to the trust.

1 only
Neither 1 nor 2
Both 1 and 2
2 only

Answer(s): D

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QUESTION: 96

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