Discuss QTIP trusts, GRATs, and charitable remainder trusts.

Define a testamentary trust.

The expected number of successes in a binomial experiment with n trials and probability of success p is ____.

Which of the following is considered a charitable lead trust?
a. The income of the trust fund goes to an individual until death, at which time the principal is conveyed to a charitable organization.
b. Charitable gifts are placed into the trust until a certain dollar amount is achieved and is then transferred to a specified charitable organization.
c. The income of a trust fund goes to a charitable organization for a specified time, with the principal then being conveyed to a different beneficiary.
d. A charity conveys money to a trust that generates income for the charity’s use in its various projects.

Define an inter vivos trust.

Why have trust funds become especially popular in the previous years?

The difference between a testamentary trust and an inter vivos trust is
a. A testamentary trust conveys money to a charity; an inter vivos trust conveys money to individuals.
b. A testamentary trust is created by a will; an inter vivos trust is created by a living individual.
c. A testamentary trust conveys income to one party and the principal to another; an inter vivos trust conveys all monies to the same party.
d. A testamentary trust ceases after a specified period of time; an inter vivos trust is assumed to be permanent.

Define a trust fund.

In recording the transactions of an estate, when are liabilities identified?
a. When incurred
b. At the date of death
c. When the executor takes responsibility for the estate
d. When paid

In an estate, which of the following is charged to income rather rather than to principal?
a. Funeral expenses
b. Investment costs
c. Property taxes
d. Losses on the sale of investments

Give the purpose of the charge and discharge statement that the executor of an estate issues.

A remainderman is
a. A beneficiary that receives the principal left in an estate or trust after a specified time
b. The beneficiary of the decedent’s life insurance policy
c. An executor or administrator after an estate has been completely settled
d. If a legacy is given to a group of people, the remainderman is the last of the individuals to die

When initial accounting for an estate is used, why does the executor record only the assets?

The executor of an estate is filing an income tax return for the current period. Revenues of $25,000 have been incurred. Which of the following is not a deduction allowed in computing taxable income?
a. Income distributed to a beneficiary
b. Funeral expenses
c. A personal exemption
d. Charitable donations