LOS 11.b: Explain the two principal forms of wealth transfer taxes and discuss effects of important non-tax issues, such as legal system, forced heirship, and marital property regime.
The two primary means of transferring assets are through gifts and bequests. Gifts are referred to as lifetime gratuitous (without the intent of receiving value in return) transfers or inter vivos (between living individuals) transfers and may be subject to gift taxes. Whether the gift is taxed and who pays the tax is determined by the taxing authorities involved. Assets transferred through bequests are referred to as testamentary (after death) gratuitous transfers and can be subject to estate taxes, paid by the grantor (i.e., transferor), or inheritance taxes, paid by the recipient. - from Kaplan
Q: Do we need to memorize how to _ spell _ all these vocabulary? It becomes a Language Exam to me…
I’m trying to think if there is an easy way to explain this LOS.
Not exactly as long you write down the answer needed for the question they are not going to grade you for vocabulary…
but for this particular LOS you need to understand first
Are assets taxed when they are transferred from my estate? Ultimately, it depends on the jurisdiction, but you should definitely consider the impact of taxes as part of your estate planning process. Wealth transfer taxes are commonly applied on both gifts (when you transfer assets while you’re still alive) and bequests (when you transfer assets after you die). Whether you transfer you assets as a gift or a bequest, taxes may be applied either you as the donor or the recipient.
What are some non-tax issues to consider as part of the estate planning process? Some jurisdictions apply forced heirship rules, which can ensure that children receive an equal share of their parents’ estate. Another consideration is community property regimes, under which a surviving spouse is entitled to half of the portion of the estate that was built up during the marriage.
Note that under a community property regime that also has forced heirship rules, the surviving spouse is entitled to receive the greater of what he or she is entitled to under community property or forced heirship rules.By contrast, separate property regimes each spouse has separate ownership over their own property.
Hope that helps
Thanks Rogue. It’s helpful.