KEIR EDUCATIONAL RESOURCES

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2 Published by: KEIR EDUCATIONAL RESOURCES 4785 Emerald Way Middletown, OH FAX ESTATE PLANNING

3 All efforts have been made to ensure the accuracy of the contents of this material. However, should any errors be detected, Keir Educational Resources would greatly appreciate being informed of them. We will post all corrections and clarifications on the updates page on our Web site at Information in this material is subject to change without notice. No part of this material may be reproduced or transmitted in any form or by any means or for any purpose without the express written permission of Keir Educational Resources. Topic List for CFP Certification Examination Copyright 2011, Certified Financial Planner Board of Standards, Inc. All rights reserved. Used with permission. Certified Financial Planner Board of Standards, Inc. owns the marks CFP, CERTIFIED FINANCIAL PLANNER, and CFP (with flame logo), which it awards to individuals who successfully complete initial and ongoing certification requirements. ISBN PRINT All rights reserved 2017 Jack C. Keir, Inc., DBA, Keir Educational Resources 2017 Keir Educational Resources

4 INTRODUCTION For over 40 years, Keir Educational Resources has helped hundreds of thousands of insurance and financial professionals to obtain their professional designations. Over the last 20 years, Keir has produced supplemental study materials to help students complete the required courses at local universities and colleges in order to qualify to sit for the CFP Certification Examination. Keir also has comprehensive review materials for the CFP Certification Examination that have helped thousands of students to pass the CFP Certification Examination. While working with numerous program directors and instructors from universities and colleges across the country, Keir Educational Resources frequently receives requests for a book that can serve as the primary textbook for each course that is required by CFP Board Registered Programs. Program directors and instructors involved with these programs are frequently looking for textbooks focused specifically on the topics and learning objectives outlined by CFP Board. Keir is pleased to offer textbooks designed specifically for each of the courses included in CFP Board Registered Programs. Keir also offers a Case Studies book that can be used in the Financial Planning Development Course. Keir designed this textbook using our well proven methodology of structuring each book to follow the topic list provided by the CERTIFIED FINANCIAL PLANNER Board of Standards. We have used this methodology for over 10 years to help thousands of students pass the CFP Certification Examination. The topic list is the current basis for the CFP Certification Examination, along with the Student-Centered Learning Objectives released by CFP Board in 2015, is the basis for student learning in Registered Programs. This textbook covers Estate Planning (Topics 63 72). Since we designed this textbook to follow the CFP Board s topic list and Learning Objectives, we are confident that students and instructors will find this unique format to be the most effective way to learn the skills required of a successful financial planner. While written with CFP Board Registered Programs in mind, this Estate Planning textbook is comprehensive and flexible enough to be used in non-cfp Board programs as well. This textbook includes over 700 multiple choice questions and case questions to help reinforce each topic. The multiple choice questions included in this textbook cover the four cognitive levels of questions used on the CFP Certification Examination which are: (1) Knowledge/Comprehension, (2) Application, (3) Analysis/Synthesis, and (4) Evaluation. Although there is more emphasis in the CFP Certification Examination on higher level cognitive questions, a student needs to master lower level knowledge and comprehensive questions in order to attempt the application, analysis, and evaluation questions. The CFP Certification Examination includes comprehensive cases and mini-cases. To provide the experience of working on cases, we have included comprehensive cases with multiple choice questions in the Appendix at the end of this textbook. Each of the topics contains a table identifying cases and questions covering material in that particular topic. Students should read the case in the Appendix and attempt to answer the case questions identified for that topic. The cases range from a few paragraphs of facts to full blown working cases of 5 to 10 pages. The short cases are similar to mini-cases and allow students to start to build on their ability to answer case questions. The full blown cases provide the student with the same level of difficulty as the comprehensive cases on the CFP Certification Examination. Although most of the multiple choice questions in this textbook were written by Keir Educational Resources, some of the questions have appeared on past CFP Certification Examinations and are reprinted here with permission Keir Educational Resources

5 EDITORIAL BOARD John Keir, J.D., Chairman of the Board and Editor-in-Chief, received a B.A from Williams College and a J.D. from Villanova University School of Law. Mr. Keir practiced law in Philadelphia, including a federal court clerkship and public service in the District Attorney s office, before joining Keir Educational Resources in Mr. Keir has been writing and editing materials for the company primarily in insurance, risk management, claims, securities law, retirement planning, and estate planning. Mr. Keir is the primary author of Keir s Series 6 Study Program. Sherri Donaldson, CFP, ChFC, MSFS, CASL, CAP, Editor and Lead Instructor, received her B.S. in Business from The Pennsylvania State University and a Master of Science in Financial Services from The American College. Ms. Donaldson started her career in financial services with Nationwide Retirement Solutions working in the retirement plans field, after which she moved into a position as a Financial Specialist with Nationwide Insurance. In 2001, Ms. Donaldson began working with M&T Securities as a Financial Consultant, then in 2003 moved into a training position with M&T Investment Group. As a Senior Training Specialist, Ms. Donaldson was responsible the company s internal CFP training program, where she administered and instructed the undergraduate courses required for candidates to be eligible to sit for the CFP Certification Examination, as well as instructing elective courses for the ChFC designation, and other advanced designations. She was also responsible for developing and instructing training courses on advanced planning topics such as business succession planning and insurance, estate, and retirement planning for small business owners. In 2007 Ms. Donaldson began working as an independent contractor for Keir as an instructor for CFP exam review courses. Over the next five years, she also worked for Keir on various writing and editing projects related to CFP coursework and FINRA licensing. Ms. Donaldson joined Keir full time in She has over 25 exam cycles of experience helping students to pass the CFP Certification Exam. Mr. Keir and Ms. Donaldson serve as the Editorial Board of the following nine college textbooks related to the CFP Certification Examination and education: General Financial Planning Principles Risk Management and Insurance Planning Investment Planning Tax Planning Introduction to Financial Planning Retirement Savings and Income Planning Estate Planning Financial Plan Development Practical Applications for your Calculator They are also the authors of Keir s Comprehensive Review materials for the CFP Certification Examination Keir Educational Resources

6 BIBLICAL APPLICATION We are honored that you have selected Keir Educational Resource s CFP textbook with faithbased supplements from the Ron Blue Institute. We hope that you are equipped with a biblical overview and perspective as you study the competencies needed to sit for the national Certified Financial Planning Board of Standards, Inc. comprehensive exam. This set of materials includes sections that provide biblical principles and concepts within specific topics. These sections are noted by the following symbol: The biblical principles and concepts are short and practical for you as a Christian financial planner; however, they are not comprehensive in nature. We want to encourage you to seek more information about biblical integration into your financial planning practice by becoming aware of the work of the Ron Blue Institute and Kingdom Advisors. The Ron Blue Institute was founded in 2012 by Ron Blue in partnership with Indiana Wesleyan University. The Ron Blue Institute was created to build upon the writings and teachings of Ron Blue over the course of his 40 year career in financial services. Ron has written over 20 books and has been one of the most influential speakers on the topic of biblical wisdom and discernment in financial decision making. In addition to his writings, Ron has founded many organizations, including National Christian Foundation, Ronald Blue & Co., and Kingdom Advisors. The main focus of the Ron Blue Institute is to change the way Christians think, act, and communicate about money and money management. Kingdom Advisors, headquartered in Atlanta Georgia, is a professional organization that seeks to equip financial professionals with in-depth training within a tight-knit community of Christian financial professionals who integrate their faith with their practice. Just recently, Kingdom Advisors re-launched and re-branded their designation and training for their national Certified Kingdom Advisor, or CKA which can be obtained through Indiana Wesleyan University or Liberty University. More information can be found at This textbook offers you a one-year student membership in Kingdom Advisors, a community of financial professionals integrating faith and practice. See the insert for details on how to activate your free student membership, a $35 value. Again, we are honored that you decided to seek materials with faith-based supplements and hope that through these supplements you are able to draw a closer to God and make practical application of these biblical principles in your financial planning practice. Thank you and God Bless! 2017 Keir Educational Resources

7 Biblical Application pages are contributed by Dr. Justin M. Henegar. Dr. Justin M. Henegar, CFP, ChFC, CRPC, Executive Director of Research and Scholarship at the Ron Blue Institute for Financial Planning received his undergraduate degree from the University of Oklahoma, a Master of Business Administration degree from Oklahoma Christian University, and his doctorate degree from Kansas State University. Prior to his role with RBI, Dr. Henegar worked both as a financial advisor and Client Relationship Manager for multiple different Merrill Lynch offices in Oklahoma and Texas. Currently, Dr. Henegar s responsibilities include developing and cultivating the Institute s research agenda and curriculum development needs, focused mainly on those within academia. Dr. Henegar teaches both residential students and online classes in topics such as personal finance, financial planning, and corporate finance. Dr. Henegar and Ron Blue have recently published a college textbook titled, Biblical Financial Planning: A Biblical Worldview of Personal Finance Keir Educational Resources

8 TABLE OF CONTENTS Title Page Estate Planning (Topics 63-72) Topic 63: Biblical Principles and Application 63-BPA.1 Topic 63: Characteristics and Consequences of Property Titling Topic 63: Biblical Principles Journal 63-BPA.2 Topic 64: Biblical Principles and Application 64-BPA.1 Topic 64: Strategies to Transfer Property Topic 64: Biblical Principles Journal 64-BPA.2 Topic 65: Biblical Principles and Application 65-BPA.1 Topic 65: Estate Planning Documents Topic 65: Biblical Principles Journal 65-BPA.2 Topic 66: Gift and Estate Tax Compliance and Tax Calculation Topic 67: Sources for Estate Liquidity Topic 68: Biblical Principles and Application 68-BPA.1 Topic 68: Types, Features, and Taxation of Trusts Topic 68: Biblical Principles Journal 68-BPA.2 Topic 69: Marital Deduction Topic 70: Biblical Principles and Application 70-BPA.1 Topic 70: Intra-Family and Other Business Transfer Techniques Topic 70: Biblical Principles Journal 70-BPA.2 Topic 71: Biblical Principles and Application 71-BPA.1 Topic 71: Postmortem Estate Planning Techniques Topic 71: Biblical Principles Journal 71-BPA.2 Topic 72: Estate Planning for Non-traditional Relationships Keir Educational Resources

9 TABLE OF CONTENTS, CONTINUED Title Page Appendix Bartlett Case Appendix 1 Marshall Case Appendix 9 Webster Case Appendix 20 Unser Case Appendix 31 Tingey Case Appendix 42 Lytle Case Appendix 45 Beals Case Appendix 51 Mocsin Case Appendix 64 Young Case Appendix 71 Borelli Case Appendix 82 Cunningham Case Appendix 94 Ferris Case Appendix 109 Wyatt Estate Plan Appendix 145 Williams Hypothetical Estate Tax Return Appendix 160 Gantry Hypothetical Gift Tax Return Appendix 165 Worthington Hypothetical Gift Tax Return with GST Tax Appendix 171 Johns Hypothetical Estate Tax Return with GST Tax Appendix 177 Selected Facts and Figures Appendix Topic List Appendix 211 Glossary Glossary 1 Index Index Keir Educational Resources

10 ESTATE PLANNING Biblical Principles and Application Topic Title: Characteristics and Consequences of Property Titling Scripture Verse: An inheritance gained hastily in the beginning will not be blessed in the end. (Proverbs 20:21) Wealth Transfer versus Estate Planning: As we think about estate planning, we need to understand that God actually owns everything, and we have been stewards of His possessions. For Christian financial planners, this paradigm directs how we can help clients with their estate planning. Throughout this chapter, you will learn the characteristics of titling various assets and the implications of each title as it relates to owning, caring for, and passing ownership upon death. Before starting the estate planning process, however, it is important to understand the difference between Estate planning and Wealth Transfer. Estate planning is the use of tools and techniques effectively to achieve the client s goals for accumulation, conservation, and disposition of assets. For Christian financial planners, wealth transfer, on the other hand, is a process that seeks to honor God as the highest priority and widens the focus from one steward to include the impact the transfer will make on the next steward. Understanding this concept will be the foundation on which every titling decision will be made. As you go through the text and see the various types of titling options, from Joint Tenancy with Rights of Survivorship to Tenants in Common, you need to consider how you would ensure that each participant is prepared to discharge their responsibility as a steward. Hence, wealth transfer is a continuing process. As we progress through the topic of estate planning, we will continually review the sixstep process of wealth transfer: Step 1: Transfer Decision Step 2: Treatment Decision Step 3: Timing Decision Step 4: Title Decision Step 5: Tools and Techniques Step 6: Talk Decision As you prepare to dive into the topic content, seek the Holy Spirit and reflect on how you can articulate these biblical principles in your understanding of the titling conversations. You will have the opportunity to reflect on this more at the end of this topic. Explore this topic further at Keir Educational Resources

11 ESTATE PLANNING Characteristics and Consequences of Property Titling (Topic 63) CFP Board Student-Centered Learning Objectives (a) Compare and contrast the most common types of titling property (sole ownership, joint tenancy with rights of survivorship, tenants in common, tenants by the entirety, and community property). (b) Recommend the appropriate property titling mechanism given the client s lifetime and estate distribution objectives, and relevant state laws. Characteristics and Consequences of Property Titling A. Community property vs. non-community property B. Sole ownership C. Joint tenancy with right of survivorship (JTWROS) D. Tenancy by the entirety E. Tenancy in common F. Trust ownership Community Property vs. Non-Community Property Community property laws apply in ten states: Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In these states, community property is the ownership interest of the husband and wife in any property acquired by the couple during their marriage. When married couples take title to property concurrently in states that follow the common law, they usually become tenants by the entirety or joint tenants with right of survivorship. We will discuss community property in more detail at the end of this Topic, after we review the common-law forms of ownership. Sole Ownership Sole ownership means one person holds the title to the property and has full ownership rights. For real estate, this full ownership title is referred to as a fee simple. The sole owner has complete control over the property and can sell, mortgage, or give it away during his or her lifetime without the consent of any other person. At death, the sole owner can dispose of the property by will; in the absence of a will, the property is distributed according to intestacy laws. One of the main advantages of sole ownership is the owner s complete control over the handling and disposition of the property Keir Educational Resources

12 During the owner s lifetime, the property can be the subject of gifts to any person, organization, or charity. At death, the owner similarly has complete testamentary control over the property. In estate planning, sole ownership affords the most flexibility in meeting a client s objectives. The sole owner is entitled to all income from the property, so the sole owner is also subject to the income tax on all of this income. At the owner s death, the full value of the property is included in the probate estate, as well as in the gross estate, for federal estate tax calculation. Property of the sole owner is fully subject to the claims of creditors, both during lifetime and during probate administration. Joint Tenancy WROS When title to property is held by two or more persons in joint tenancy with right of survivorship, each joint tenant has an equal ownership interest in the property. The ownership reflects the four unities: interest, title, time, and possession. The joint tenants acquire the same interest, in the same property, at the same time, and they take possession simultaneously. The unique feature of joint tenancy WROS is that ownership of the property passes by operation of law to the surviving tenant(s). When a joint tenant dies, the ownership interest passes outside probate and is not subject to testamentary disposition. Nevertheless, during a joint tenant s lifetime, the interest can be sold or disposed of by converting the joint tenancy to a tenancy in common. Property held in joint tenancy WROS will avoid the expense, delay, and publicity of probate proceedings. Property passing to the surviving joint tenant can also avoid the spouse s elective share, will contests, and claims of creditors in probate. Joint tenancy property also has the potential income tax advantage of splitting the income from the property among the joint tenants. This income-splitting can result in income tax reduction when some of the joint tenants are in lower marginal income tax brackets. A joint tenant WROS does not have the same control over the property that a sole owner has. At death, the joint tenant has no ability to dispose of the property, and it passes by operation of law to the other joint tenant(s). During the joint tenant s lifetime, income must be split with the other joint tenants. When persons who are not spouses sell property owned in joint tenancy WROS, each joint tenant must report a proportionate share of the gain for income tax purposes. If there are three joint tenants, for example, each must report one-third of the gain. Even when one 2017 Keir Educational Resources

13 joint tenant receives more than his or her proportionate share of the proceeds, each tenant must report the proportionate amount. Unless the interest a joint tenant acquires is proportionate to his or her contribution to the purchase price, the creation of a joint tenancy can give rise to a taxable gift. The creation of joint tenancies between spouses, however, will not result in gift tax liability, due to the unlimited gift tax marital deduction. For estate tax purposes, the full value of jointly held property will be included in the gross estate of the first joint tenant to die, except to the extent that the survivor can show consideration furnished for the purchase of the property. In other words, if the decedent contributed 1/3 of the purchase price, and the other joint tenants contributed 2/3, then 1/3 of the value of the jointly owned property will be included in the decedent s gross estate. When joint tenancy property is received as a gift or inheritance, only the decedent s fractional interest is included in the gross estate. When the joint tenancy is between spouses, one-half of the value of the property is included in the decedent s gross estate, regardless of the consideration furnished by the parties for the purchase. Showing that the surviving spouse furnished the entire purchase price will not reduce the included amount below 50%. REMEMBER: IF JOINT TENANTS ARE SPOUSES, ONE- HALF OF THE PROPERTY S FAIR MARKET VALUE AT DEATH IS INCLUDED IN THE DECEDENT S GROSS ESTATE. IF JOINT TENANTS ARE NOT SPOUSES, THE PERCENTAGE-OF-CONTRIBUTION RULE APPLIES. Since one-half of spousal joint tenancy property will be included in the gross estate of the first spouse to die, there is a step-up in basis to the date-of-death value on one-half of the property. For nonspousal joint tenancy property, there is a step-up in basis equal to the amount of property included in the decedent s gross estate Keir Educational Resources

14 Practice Question Which of the following statements concerning joint tenancy WROS is correct? A. If the joint tenants are spouses, the entire value of the property may be included in the gross estate of the first to die. B. If the joint tenants are not spouses, the entire value of the property will be included in the gross estate of the first to die. C. If the joint tenants are spouses, the first to die does not have testamentary control over any of the property, regardless of any contribution to the purchase price. D. If the joint tenants are not spouses, the tenant who contributed the purchase price will report the income from the property. Answer: If the joint tenants are spouses, the first to die does not have testamentary control over any of the property, regardless of any contribution to the purchase price. One-half of entire value of the property will be included in the gross estate of the first to die. If the joint tenants are not spouses, the entire value of the property will be included in the gross estate of the first to die only where the survivor cannot show any contribution to the purchase price. The joint tenants will report equal shares of the income. The answer is C Keir Educational Resources

15 KEY SUMMARY 63 1 Property Ownership in Common-Law States Sole Tenancy in Ownership Common (Fee Simple) Who can own? Anyone, but only one Anyone and any number Joint Tenancy WROS Anyone and any number Tenancy by the Entirety Husband and wife only What is the ownership percentage? Is consent of others needed for a sale or gift? Can an owner transfer at death? Is probate required? 100% Can be equal or unequal, as stated in title No No, but can only transfer the portion owned Yes Yes, to extent of ownership interest Equal Yes, but can transfer portion after converting to tenancy in common No, passes by right of survivorship Equal for spouses Yes Yes Yes No No No, passes by right of survivorship Community Property Community property is the separate, undivided, and equal ownership interests of husband and wife in any property acquired by the couple during marriage. Property acquired with the earnings of one spouse is still deemed community property even when the title is placed in the name of only one spouse. Unlike joint tenancy WROS and tenancy by the entirety, there is no right of survivorship in community property. Each spouse has the right of disposition over one-half of the community property Keir Educational Resources

16 APPLICATION QUESTIONS 1. When David and Jill Rooney moved from Oregon, a common-law state, to California, a community-property state, they sold the home they had owned as joint tenants WROS during the 10 years of their marriage. They used the proceeds, totaling $200,000, to buy a new home in California. At the time of the move, David owns common stock, valued at $100,000, in a brokerage account in his name, which was purchased for $40,000 from his earnings over the past 6 years. He also owns $20,000 in mutual funds that he bought for $10,000 before he was married, using his earnings. David is also one of five investors in a limited partnership valued at $100,000 (his share is $20,000). David s interest in the limited partnership was purchased with money he earned during the marriage. David and Jill own two cars in joint names, with a total value of $50,000. Jill owns $20,000 in municipal bonds in her own name that she received as a gift from her parents. If David were to die soon after the Rooneys move, what would be the total value of the property considered quasi-community property in California? A. $250,000 B. $270,000 C. $290,000 D. $350,000 E. $370, If Jill Rooney (in the previous question) sells the mutual funds for $25,000 and the common stock for $120,000 after David s death, what is the amount of capital gain that she should report? A. $0 B. $5,000 C. $12,500 D. $25,000 E. $45, Roger Allen, who lives with his wife Jean in New York, inherited a vacation home in Maine from his uncle. Roger would like to arrange for the title to the vacation home to pass to his wife at his death to avoid the expense of probate. Roger also wants to avoid any title arrangement that might allow his wife to sell or transfer the property before his death. Which of the following forms of titling the vacation home would be most appropriate? A. Tenancy in common B. Joint tenancy WROS C. Tenancy by the entirety D. Sole ownership E. Quasi-community property 2017 Keir Educational Resources

17 Estate Planning Application Questions Topic Which of the following transfers to an irrevocable trust conveys a present interest to the beneficiary? (1) The beneficiary will receive income from the trust for 10 years, and then the trust assets will be paid to the grantor. (2) The trust allows the grantor s spouse to live in the home for life, and at the spouse s death, it will pass to the beneficiary. (3) The trust provides for income to be accumulated in the trust, and both income and principal are payable to the beneficiary (a minor) at age 21. (4) The trust provides for the beneficiary to receive income for life, and at the beneficiary s death, any remaining trust assets will be paid to the Red Cross. A. (1) and (2) only B. (1) and (4) only C. (2) and (3) only D. (2) and (4) only E. (3) and (4) only 5. Jerry Freeman, age 65, and his wife Elizabeth, who is 55 years of age, own a shopping center property as joint tenants WROS. Jerry would like to use the property to fund a trust for his son and daughter, but Elizabeth wants the property to pass outright to their son. If no agreement can be reached, which of the following statements would be appropriate advice to give Jerry? A. Jerry can sever the joint tenancy and put one-half of the property in trust for the two children. B. Jerry can convert ownership to a tenancy in common and place onehalf in trust for the daughter and give one-half outright to the son. C. Jerry will have to wait until he outlives Elizabeth to take any action. D. Jerry cannot sever the joint tenancy, but he can buy Elizabeth s share and then leave the property in trust. E. If Jerry paid all of the purchase price for the property, he can convert it to sole ownership at any time Keir Educational Resources

18 Estate Planning Application Questions Topic 63 For practice answering case questions related to Topic 63, please answer the following questions in the cases included in the Appendix at the back of this textbook. Case Questions Bartlett 1 Marshall 1, 2, and 3 Webster Unser Tingey Lytle Beals Mocsin Young Borelli 1 Cunningham 1 Fred and Mary Ferris Keir Educational Resources

19 Estate Planning Application Questions Topic 63 ANSWERS AND EXPLANATIONS 1. E is the answer. Quasi-community property is property acquired in a common-law state that would have been treated as community property if the couple had lived in a community-property state at the time of acquisition. The couple moved from Oregon, a common-law state, to California, a community-property state that also has the concept of quasi-community property. In California, only the municipal bonds received by Jill as a gift and the mutual funds purchased by David before the marriage will be treated as separate property. The home ($200,000), the brokerage account ($100,000), the cars ($50,000), and the 1/5 interest in the limited partnership ($20,000) are all considered quasi-community property and will be treated as community property. 2. D is the answer. The quasi-community property is treated as community property, and it will receive a full step-up in basis to the date-of-death value. The common stock in the brokerage account is quasi-community property and will also receive a full step-up in basis. The mutual funds were David s separate property and, therefore, will receive a full step-up in basis, too. The dateof-death value for the stock is $100,000, so Jill s gain on this stock is $20,000. The date-of-death value for the mutual funds is $20,000, so Jill s gain on these funds is $5, C is the answer. Tenancy by the entirety will enable Roger to include his wife in the title to the vacation home and still require her to obtain his consent before making any transfer or disposition of the property. Tenancy in common will not prevent Roger s wife from selling her interest. Joint tenancy WROS will also not prevent Roger s wife from selling her interest in the property because the joint tenancy could be severed and turned into a tenancy in common, allowing the wife s separate interest to be sold or transferred. Sole ownership in Roger s name will not avoid probate. Quasi-community property is not available in Maine. 4. B is the answer. The beneficiary who receives income from the trust for 10 years begins to enjoy the income immediately and is given a present interest to the income. There is no delay in the start of this income interest. By contrast, the beneficiary who must wait until the death of the grantor s spouse cannot make immediate use of the home and has a future interest. The beneficiary who must wait until age 21 to receive income and principal also has only a future interest. Note that Code Section 2503(c) provides that gifts to such a trust shall not be treated as gifts of a future interest for purposes of the annual exclusion. The beneficiary who has an income interest for life has an immediate life estate and a present interest. 5. A is the answer. Jerry can sever the joint tenancy, and then as a tenant in common, he can dispose of his one-half interest as he wishes. He can leave the one-half interest in trust for both children or set the trust up entirely for the daughter. He will not be able to exercise control over the entire property by converting to a tenancy in common. He cannot convert it to sole ownership even if he paid the entire purchase price. Waiting to outlive Elizabeth does not make sense because he is older by 10 years. If the property were owned in tenancy by the entirety, Jerry could not sever the interests Keir Educational Resources

20 Estate Planning Answers and Explanations Topic 68 ESTATE PLANNING Biblical Principles Journal Take time to reflect on your scripture reading and its implications for this topic. Write down your thoughts and reflections, prayers, or ways you can incorporate these biblical truths into your counsel Keir Educational Resources