Test Your Financial and Estate Planning Knowledge

Though planned giving professionals don’t need to be tax experts, it is important to be conversational in some of the financial and estate planning terminology and gift planning concepts. Find out how much you know and maybe learn something new!

1. Administration expenses are costs necessarily incurred in which of the following?

1. 1. Commissions.
   2. Attorney’s fees.
   3. Funeral costs.
   4. All of the above.

2. Fair market value (FMV) is:

1. 1. The amount paid for an asset.
   2. The replacement cost of an asset.
   3. The amount an asset is worth if sold; the price a willing buyer would pay a willing seller, neither under compulsion.
   4. The book value of an asset.

3. Cost basis is:

1. 1. The amount paid for an asset, plus or minus costs for improvements, depreciation, etc.
   2. The fair market value of the asset.
   3. The replacement cost of the asset.
   4. The amount of taxes paid on the asset.

4. A bargain sale is best described as:

1. 1. Selling appreciated property to a charity at fair market value.
   2. Selling property to a charity at a price above fair market value.
   3. Selling appreciated property to a charity at a price lower than fair market value; the difference between cost basis and fair market value is treated as a charitable gift.
   4. Selling property to a private buyer for a discount.

5. Generation skipping tax (GST) is a tax on:

1. 1. Transfers to a spouse.
   2. Certain gifts made from grandparent to grandchild (skipping a generation).
   3. Income earned by a trust.
   4. Corporate reorganizations.

How did you do?

1. D — Administration expenses include items like commissions, attorney fees, funeral costs and other miscellaneous expenses.
2. C — FMV is the value of an asset if sold, defined as the price a willing buyer would pay a willing seller in an arm’s-length transaction.
3. A — Cost basis is the amount paid for an asset plus or minus adjustments like improvements or depreciation.
4. C — A bargain sale involves selling appreciated property to a charity at a price below fair market value. The difference between cost basis and fair market value is considered a charitable gift.
5. B — GST is a tax on certain gifts that skip a generation, e.g., grandparent to grandchild.