3.11.4 Basic Quiz -- IRA to Testamentary Unitrust

The regular IRA has two tax benefits - pre-tax dollars contributed to the IRA and tax-free growth.

True False

Children do not pay income tax when they receive IRAs from their parents.

True False

The most effective way to leave an IRA to charity or a charitable remainder unitrust is to make sure that a provision in the will directs that the IRA pass to the appropriate charity.

True False

It is not permissible to leave a portion or percentage of an IRA to a charitable remainder unitrust. It must be done either in whole or not at all because of the complex IRA distribution rules.

True False

Naming charity as a beneficiary of an IRA causes the minimum required distributions to be increased during the donor's lifetime because a charity is not a person and does not have a life expectancy.

True False

An IRA to a spousal charitable remainder unitrust will be a tax-free transfer.

True False

An IRA that passes to a charitable remainder unitrust to benefit children is not subject to estate taxes because a charity is the ultimate beneficiary of the IRA.

True False

After an IRA is transferred into a testamentary unitrust, the trustee will have to report and pay income tax on the IRA because it is an IRD asset (income with respect to the decedent).

True False

Through proper planning and investment, it is possible for a trustee to pay out tax-free income from the testamentary unitrust that was funded with an IRA.

True False

In short, the four-tier accounting system requires income beneficiaries to pay tax at the highest rate on distributions received from their testamentary charitable remainder unitrust.