CPCU 553 Flashcards – Module 8

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[h] CPCU 553 – Module 8

[q] Estate

[a] The total of all types of property owned by a person at the time of death.

[q] Estate planning

[a] A process that results in the efficient transfer of an individual’s estate at the time of their death (or during lifetime).

[q] Estate shrinkage

[a] A decrease in the value of an estate due to estate taxes, debts, and administrative costs.

[q] Probate

[a] The transfer of property through a decedent’s Will or through intestacy laws.

[q] Goals of estate planning

[a] Goals:

Distributing assets according to wishes.

Minimizing estate and inheritance taxes.

Minimizing income taxes.

Creating needed liquidity.

Minimizing probate costs – include costs to distribute the estate and costs to defend against challenges to a Will.

[q] Professionals potentially included in an estate planning team

[a] Professionals:



Trust officer.

Investment advisor.

Insurance specialist.

[q] Steps in the estate planning process

[a] Process:

Gathering data.

Evaluating existing plan.

Creating and testing a new plan.

Implementing and monitoring the new plan.

[q] Executor

[a] A party named in a Will that is responsible for administering a decedent’s estate as prescribed in the Will.

[q] Gross estate

[a] The total value of a decedent’s assets, before considering any deductions such as debts and administrative costs.  Used in the estate tax calculation.

[q] Annual gift tax exclusion

[a] An amount that permits individuals to give away a small amount each year without incurring a gift tax liability.

[q] Unified credit

[a] A federal tax credit that can be used to reduce or eliminate the gift and estate tax.  Also referred to as the applicable credit amount or the basic credit.

[q] Gift-splitting

[a] An election by spouses to treat gifts given as being given equally by both spouses (even if the property gifted was owned exclusively by one spouse).

[q] Estate tax

[a] An excise tax imposed on transfers of property at death.

[q] Steps in calculating the estate tax

[a] Steps:

Determine gross estate.

Determine taxable estate.

Determine tentative tax before credits.

Determine tax payable.

[q] Fractional interest rule

[a] A rule used to determine the amount included in a decedent’s gross estate when property is owned jointly between spouses.  In general, 50% of the value of the property is included in the estate of the first spouse to die.

[q] Consideration furnished rule

[a] A rule used to determine the amount included in a decedent’s gross estate when property is owned jointly between non-spouses.  In general, the gross estate inclusion is based on the consideration furnished by the decedent when the property was originally purchased.

[q] Deductions from the gross estate in calculating the taxable estate

[a] Deductions:

Administrative expenses.

Burial (funeral) expenses.

Casualty losses.


Marital deduction.

Charitable deduction.

[q] Tentative tax

[a] The tax imposed on an estate before taking into account any available tax credits.

[q] Will

[a] A document that represents the legal expression of wishes about the disposition of property at death.

[q] Responsibilities of an executor

[a] Responsibilities include:

Collecting the deceased’s assets.

Determining and paying legal claims against the estate.

Distributing remaining assets to the proper individuals.

[q] Trust

[a] An arrangement by which legal title of property is held for the benefit one or more other persons or organizations.

[q] Grantor

[a] The individual or organization that establishes and transfers property to a trust.

[q] Trustee

[a] An individual or organization that has legal title to trust property and manages that property for the benefit of one or more other individuals or organizations.

[q] Inter vivos trust

[a] A trust that is created (and becomes operative) during the grantor’s lifetime.  Can be established as either a revocable or irrevocable trust.

[q] Testamentary trust

[a] A trust that is created at the time of the grantor’s death by the grantor’s Will.

[q] Charitable remainder trust

[a] An irrevocable trust created to provide the grantor with income for a period of time, with the trust assets passing to charity at the end of the trust term or at the time of the grantor’s death.

[q] Life insurance trust

[a] A trust designed to hold a life insurance policy for the purpose of removing the policy death benefits from the insured’ gross estate, and for controlling the policy’s death benefit after the insured’s death.

[q] Sprinkle trust

[a] A trust that provides the trustee with discretion to determine the amount of payments from the trust to the beneficiaries.