Estate planning

Gifting an amount exceeding the annual exclusion limit requires filing IRS Form 709 to report the transfer, which typically reduces the donor's lifetime exemption. Immediate tax payment is not required unless the donor has already exhausted their entire lifetime estate and gift tax exclusion.

A revocable living trust avoids the costly probate process because the trust owns the assets, but because the grantor retains control, these assets remain in their taxable estate. It does not avoid estate taxes entirely (Option B) nor does it completely replace the need for a pour-over will.

The basic exclusion amount for federal estate and gift taxes is historically high, reaching $13.61 million per individual in 2024. A diagram for this topic isn't available yet — the worked example below walks the same reasoning step by step.

• !Option A is incorrect as it represents historical limits from decades ago, and Option B is far too low under current TCJA provisions before sunsetting.
• !It does not avoid estate taxes entirely (Option B) nor does it completely replace the need for a pour-over will.
• !This makes Option A incorrect because heirs actually receive a tax benefit rather than paying an extra penalty or tax upon inheritance.

Answer each from memory — you'll see instantly whether you're right and why.

Run a focused 10-question mini-mock on Estate planning and see it stick.