PPC1 Probate & Tax cheat sheet

Probate is the court-supervised process of validating a will, appointing a personal representative, and administering the decedent's probate estate.

Probate assets are those titled solely in the decedent's name without a beneficiary designation; jointly held property, POD/TOD accounts, and life insurance pass outside probate.

Intestate administration applies when no valid will exists; the court appoints an administrator and statutory heirs take under state law.

A personal representative's core duties: marshal and inventory assets, pay valid debts and taxes, distribute to beneficiaries, and file an accounting.

Letters testamentary (will) or letters of administration (no will) are the court-issued documents evidencing fiduciary authority.

Summary or small-estate procedures allow abbreviated administration below a statutory value threshold, which varies by state.

Non-probate transfers include beneficiary designations, survivorship rights, payable-on-death clauses, and revocable trust funding.

Ancillary probate is required in a second state where the decedent owned real property that cannot be administered at the domicile.

Intestate succession distributes property by statute to heirs; a surviving spouse's share commonly depends on whether descendants or parents also survive.

Per stirpes divides a deceased heir's share among that heir's descendants; per capita divides equally among surviving takers at the same generation.

A valid will requires testamentary intent, capacity (testator), proper execution formalities, and absence of undue influence or fraud.

Most states require two attesting witnesses; a self-proving affidavit allows admission to probate without witness testimony.

Holographic wills are handwritten, unwitnessed, and valid only where the state statute permits them.

A codicil amends a will and must be executed with the same formalities as the will it modifies.

Revocation occurs by physical act, by a later will or codicil, or by operation of law such as divorce in many states.

Anti-lapse statutes preserve a gift to a predeceased beneficiary by passing it to that beneficiary's descendants.

A trust requires a settlor, trust property (res), identifiable beneficiaries, and a trustee; a charitable trust substitutes a charitable purpose for definite beneficiaries.

A revocable trust becomes irrevocable at the settlor's death or on a stated event, and its terms then govern distribution.

Trustee duties include loyalty, impartiality among beneficiaries, prudent investment, accounting, and duty to follow the trust instrument.

The Uniform Prudent Investor Act permits total-portfolio diversification and delegates investment decisions to qualified advisers.

Fiduciary accounting tracks principal and income separately; allocation rules determine what each beneficiary receives.

A trustee's power to adjust or a unitrust conversion can reconcile income and remainder beneficiaries' competing interests.

A breach of fiduciary duty exposes the trustee to surcharge, removal, or liability for losses caused by imprudence.

A trust protector is a non-trustee with power to modify, remove trustees, or direct distributions under the trust terms.

The estate tax base is the gross estate minus deductions (debts, expenses, charitable and marital), producing the taxable estate.

Gross estate under IRC 2031 includes property owned at death, certain transfers within three years, retained interests, and powers of appointment.

The unlimited marital deduction defers tax between spouses; the charitable deduction is also unlimited for qualifying transfers.

Annual gift tax exclusion applies per donee per year; gifts above it use lifetime exemption unless the donor elects to split with a spouse.

The generation-skipping transfer tax applies to transfers to skip persons, with an exemption allocated by the transferor or executor.

Special-use valuation under IRC 2032A and installment payment of estate tax under IRC 6166 reduce liquidity pressure on family businesses.

Section 2032 alternate valuation may be elected only if it reduces both the gross estate and the estate tax liability.

The unified credit (basic exclusion amount) shields cumulative taxable gifts and estate transfers from tax.

Estates and trusts are separate taxable entities using Form 1041; income is taxed to the entity or to beneficiaries under the distribution rules.

Distributable net income (DNI) caps the deduction for distributions and sets the character of income taxed to beneficiaries.

The conduit principle taxes beneficiaries on distributed income and the entity on retained income, avoiding double taxation.

The decedent's final Form 1040 reports income through the date of death; income after death belongs to the estate or trust.

A simple trust must distribute all income annually; a complex trust may accumulate income or distribute principal.

The 65-day rule allows a trustee to elect to treat distributions made within 65 days after year-end as made in the prior year.

Section 645 election allows an estate or revocable trust to be taxed as an estate for the administration period.

Fiduciary income tax rates reach the top bracket at low thresholds, creating compression relative to individual rates.

Property acquired from a decedent generally receives a stepped-up basis to fair market value at date of death under IRC 1014.

Alternate valuation date basis is the value on the six-month alternate valuation date if the election is made.

Property transferred by lifetime gift generally carries over the donor's basis, with adjustments for gift tax paid on appreciation.

Portability allows a surviving spouse to use the deceased spouse's unused exclusion amount (DSUE) if a timely estate tax return is filed.

Form 706 is the federal estate tax return, generally due nine months after death, extendable six months.

Form 709 reports gifts; the annual exclusion and lifetime exemption are applied on the return, and gift splitting requires both spouses' consent.

The DSUE amount is reported on Form 706 and is not indexed upward after the deceased spouse's death.

A Section 754 election permits a step-up in basis for partnership assets when a partner dies, mirroring outside basis rules.

A preparer may not rely on information the preparer knows or should know is incorrect; inquiry is required before signing a return.

Circular 230 governs practice before the IRS, including competency, due diligence, and restrictions on contingent fees.

Confidentiality under Circular 230 and professional rules yields to disclosure required by law or authorized by the client.

A preparer must furnish the client a copy of the return and retain records supporting the return for the required period.

Conflicts of interest between multiple estate beneficiaries require disclosure and, where material, written consent or withdrawal.

An attorney or CPA may not act as both fiduciary and advocate in a contested matter without addressing the conflict.

Engagement letters should define scope, fees, and responsibilities of preparer and client to limit malpractice exposure.

Return preparer penalties under IRC 6694 apply to understatements due to unreasonable positions or willful misconduct.

Form 706 is due nine months after the date of death; Form 4768 extends filing and payment up to six months.

Form 709 gift tax returns are due April 15 of the year following the gift, with an automatic extension to October 15.

Form 1041 is due the 15th day of the fourth month after the entity's year-end; Form 7004 extends the filing.

The decedent's final Form 1040 is due April 15 of the year following death; Form 4868 extends the filing date.

Form SS-4 obtains an EIN for the estate or trust, which is required before filing fiduciary returns.

Form 56 notifies the IRS of fiduciary relationship and should be filed when the fiduciary is appointed.

The estate tax return statute of limitations generally runs three years from filing or the due date, whichever is later.

State estate tax returns and probate inventories have separate deadlines that may run before the federal Form 706 due date.

Probate assets pass under the will or intestacy statute; non-probate assets pass by contract or survivorship.

Letters testamentary evidence the personal representative's authority to act on behalf of the estate.

The personal representative must inventory assets, pay debts and taxes, and account to beneficiaries.

Small-estate summary procedures allow abbreviated administration below a statutory threshold.

Ancillary probate is required for out-of-state real property not held in a trust or joint tenancy.

A valid will needs testamentary intent, capacity, and proper execution formalities.

Per stirpes divides a deceased heir's share among that heir's descendants.

Anti-lapse statutes pass a predeceased beneficiary's gift to that beneficiary's descendants.

A codicil amends an existing will and must be executed with will formalities.

Divorce commonly revokes provisions for a former spouse by operation of law.

A trust requires a settlor, trust property, beneficiaries, and a trustee.

Trustee duties include loyalty, impartiality, prudent investment, and accounting.

The Uniform Prudent Investor Act permits total-portfolio diversification and delegation to advisers.

Fiduciary accounting separates principal and income for allocation to beneficiaries.

A trust protector may modify the trust or remove trustees under the trust terms.

Taxable estate equals gross estate minus deductions for debts, expenses, and charitable and marital transfers.

The unlimited marital and charitable deductions can eliminate estate tax on qualifying transfers.

The annual gift exclusion applies per donee per year; excess uses lifetime exemption.

The GST tax applies to transfers to skip persons and is offset by the GST exemption.

Section 2032 alternate valuation is available only if it reduces both gross estate and tax.

Estates and trusts file Form 1041 and are taxed on retained income.

Distributable net income caps the distribution deduction and sets beneficiary income character.

The decedent's final Form 1040 covers income through the date of death.

The 65-day rule treats certain post-year-end distributions as made in the prior year.

Fiduciary income tax brackets compress, reaching top rates at low income levels.

Property acquired from a decedent generally takes a stepped-up basis at date of death.

Gift property generally carries over the donor's basis, adjusted for gift tax on appreciation.

Portability requires a timely Form 706 to transfer the deceased spouse's unused exclusion.

Form 706 is due nine months after death and can be extended six months.

Form 709 reports gifts and applies the annual exclusion and lifetime exemption.

Circular 230 requires competency, due diligence, and restrictions on contingent fees.

A preparer may not sign a return relying on information known to be incorrect.

Conflicts among beneficiaries require disclosure and, if material, written consent or withdrawal.

Engagement letters should define scope, fees, and responsibilities to limit malpractice exposure.

Return preparer penalties under IRC 6694 apply to unreasonable positions and willful misconduct.

Form 706 is due nine months after death; Form 4768 extends filing and payment.

Form 709 is due April 15 with an automatic extension to October 15.

Form 1041 is due the 15th day of the fourth month after the entity's year-end.

Form SS-4 obtains the estate's EIN before fiduciary returns are filed.

State estate tax and probate inventory deadlines may precede the federal Form 706 due date.