1. Robert, a widower, created an ILIT four years ago and transferred his $3 million whole-life policy into the trust. Robert established the trust to remove the death benefit from his gross estate and to provide his estate with liquidity to pay his estate tax. The trust explicitly directs the trustee, his bank, and the co-trustee, his brother Larry, to purchase assets from Roberts estate at his death. The bank will professionally manage the estate assets purchased by the trust for the benefit of Roberts two children, the trust beneficiaries. Which of the following statements is correct?

A. When Robert dies, the $3 million proceeds will not be included in his gross estate because he survived the three-year term.

B. When Robert dies, the $3 million proceeds will be included in his gross estate because the trustee was obligated to use the proceeds to purchase assets from his estate.

C. he assets in the trust will be included in Larrys gross estate at death because he is the trustee.

D. The children, as beneficiaries of the trust, have incidents of ownership in the life insurance policy.

2. Carlos recently established an ILIT and transferred his life insurance policy with a death benefit of $1,250,000 into the trust. Carlos named his wife, Susanne, and his two children from a previous marriage as Crummey beneficiaries; they are entitled to withdraw the greater of $5,000 or 5% from the trust each year. Carlos wants to reduce the gift tax value of the $50,000 premiums transferred to the trust this year and avoid Crummey lapses. What gifting techniques are available to Carlos to reduce the taxable gift? Circle all that apply.

A. Annual exclusions of $15,000 for each beneficiary.

B. Gift splitting, if Susanne consents.

C. A marital deduction for a portion of the gift tax attributed to Susanne.

D. Annual exclusions of $5,000 for each beneficiary.

3. Marcy transferred $40,000 into a trust two years ago. She named her bank as trustee, her husband Marshall as the income beneficiary, and their children Russ and Audrey as the remainder beneficiaries. A trust provision also gave Marshall a right to appoint property to himself for his support in his accustomed manner of living. The bank purchased a $1 million life insurance policy on Marcys life soon after the money was transferred into the trust. When Marcy died this year, the value of the policy was $200,000. How much of the trust assets will be included in Marcys gross estate?

A. $1 million death benefit.

B. $200,000 value of the policy.

C. $40,000 that was transferred into the trust two years ago.

D. None of the trust assets will be included in her estate.

4. Using the same facts in Question 3, how much of the trust will be included in Marshalls gross estate if the trust grows to $1.2 million in the year he dies?

A. $1.2 million.

B. The $1 million death benefit amount.

C. The value of the assets that are subject to his general power of appointment.

D. The present value of his income interest in the trust based on his date of death.

E. None of the trust assets will be included in Marshalls gross estate.

5. In 2014, Daryl bought a life insurance policy on his life with a death benefit of $1,200,000. He named his wife Melanie the beneficiary of this policy. In 2017, Daryl created an ILIT with Melanie as beneficiary, and transferred all incidents of ownership in the policy to the trust. The ILIT gives Melanie a lifetime income interest and a general power of appointment over the trust corpus. The value of the policy was $360,000 at Daryls death in 2018. Which of the following statements are correct?

A. The death benefit amount is included in Daryls estate but a marital deduction is available to offset the tax.

B. The value of the policy is included in Daryls estate and a marital deduction is not available to offset the tax.

C. When Melanie dies, the value of the trust will be included in her estate.

D. When Melanie dies, the value of the trust assets will not be included in her estate.