Gary and Georgeann have the following objectives:If Gary predeceases Georgeann, to provide her exclusively with a mandatory stream of income from the assets included in his gross estateTo ensure that Gary's children from his prior marriage will ultimately receive the income-producing assets upon Georgeann's deathTo prevent assets used to provide income to Georgeann from being included in her gross estateWhich of the following estate planning techniques would accomplish the Gary and Georgeann's first objective of providing a mandatory stream of income?A power of appointment (A) trustA qualified terminable interest property (QTIP) (C) trust, with an electionA QTIP (C) trust, without an election A)II and III B)I only C)II only D)I, II, and III

A power of appointment trust provides a legal right or authority to the spouse of the deceased or another beneficiary to change the name of the heirs in the terms of the appointment, trust, beneficiaries, or any other information. A QTIP trust is used as a planning tool to maximize the qualifying marital deduction that applies to an estate of a married couple. The motive of the first objective is that Gary wants to provide Georgeann with the mandatory stream of income from the assets included in his gross estate after his death. All of the trusts mentioned provide the spouse of the deceased a mandatory stream of income to qualify for the marital deduction. A QTIP trust whether with an election or without an election provides a mandatory income stream to the spouse of the deceased, the election affects only tax goals and not distribution goals. Hence, option d (I, II, & III) is correct.All the other options (A, B,& C) are incorrect because none of them has all the techniques given in their option. Option A has II & III but as we know I is also the correct technique so it does not qualify as the correct option. Option B only has I as an option, so it is incorrect. Option C only has II as an option, so it is incorrect. Hence, option D having all the techniques as an option is the correct one.

Answered: Gary and Georgeann have the following…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Gary and Georgeann have the following objectives:

If Gary predeceases Georgeann, to provide her exclusively with a mandatory stream of income from the assets included in his gross estate
To ensure that Gary's children from his prior marriage will ultimately receive the income-producing assets upon Georgeann's death
To prevent assets used to provide income to Georgeann from being included in her gross estate

Which of the following estate planning techniques would accomplish the Gary and Georgeann's first objective of providing a mandatory stream of income?

A power of appointment (A) trust
A qualified terminable interest property (QTIP) (C) trust, with an election
A QTIP (C) trust, without an election

II and III

I only

II only

I, II, and III

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