In 2005, Drew Creates a Trust with $1,000,000 of Securities

question 86

Multiple Choice

In 2005, Drew creates a trust with $1,000,000 of securities. Under the terms of the trust, Paula (Drew's wife) is granted a life estate with remainder to their children. Drew makes a QTIP election as to the trust. Drew dies in 2012 when the trust is worth $1,500,000, and Paula dies in 2018 when the trust is worth $2,000,000. Which, if any, of the following is a correct statement?

• A) The trust is included in Drew's gross estate when he dies in 2012.
• B) None of the trust is included in Paula's gross estate when she dies in 2018.
• C) Drew does not get a marital deduction in 2005.
• D) All of the value of the trust ($2,000,000) is included in Paula's gross estate when she dies in 2018.

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Definitions:

Utility Function

It's a mathematical representation of how a consumer's preferences over a set of goods and services translates into a level of satisfaction or utility.

Price of X

The cost at which a specific item or commodity, denoted as "X," is sold in the market.

Marginal Rate of Substitution

The exchange rate between goods that allows a consumer to trade off one product for another without altering their overall happiness.

Convex Preferences

A characteristic of consumer preference whereby a consumer prefers combinations or mixtures of goods over extreme amounts of single goods, displaying a preference for diversification.