Estate Planning Please provide little explanation with the answers. ............

Question

Estate Planning

Please provide little explanation with the answers.

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1- John is a widower. Mary, his wife, passed away in 2006. Does “portability” apply to allow John to use Mary’s unused annual exclusion?

          (A)    Yes

          (B)    No

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2- What are the benefits associated with portability?

(A)    Preserves step up in basis on survivor’s death.

(B)    Better accommodates large qualified plans than credit shelter trusts.

(C)    Surviving spouse can use the deceased spouse’s unused exclusion amount without having to create complex trusts or use other tax-saving techniques.

(D)    All of the above.

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3- John and Mary are interested in passing the maximum amount to their grandchildren upon their deaths. Can they utilize portability for GST purposes to double the amount that can pass transfer tax free?

(A)    Yes, portability applies to all transfer taxes.

(B)    No, portability does not apply to GST tax.

Explanation / Answer

Answer-1

The Portability was introduced as the part of Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010. It is in effect for married persons dying on or after January 1, 2011. As per this law a surviving spouse is allowed to use a deceased spouse’s unused estate tax exclusion.

Here, wife of Mr. J passed away in 2006, and the law allows using annual exclusion for married person dying on or after January 1, 2011. Thus, Mr. J cannot use his wife’s unused annual exclusion.

Thus, the correct answer is option B.

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