Basic Quiz - 3.6.7 Increasing Payment Lead Trust

1. The IRS has approved the concept of a lead annuity trust with increasing payouts.

True False

2. By making lower payments in earlier years and higher payments in later years, the lead trust with increasing payouts produces greater total distribution to family than a fixed payment lead trust.

True False

3. Funding a lead trust during a period of economic downturn will in some cases require the use of principal in the trust to make the annuity payment.

True False

4. Increasing payouts to charity in the latter years of the trust will not protect trust assets from an early economic downturn.

True False

5. A lead trust that earns income will always be taxed, because a lead trust is a taxable trust.

True False

6. A grantor lead trust can be created with increasing payouts.

True False

7. A grantor must report the amounts paid by the lead trust to charity as income on his or her personal tax return.

True False

8. If the grantor lead trust recognizes capital gains, the grantor must report these amounts as taxable income on his or her personal tax return.

True False

9. It is not smart for a grantor lead trust to invest in municipal bonds in a down market where there is a risk that bond interest rates will change.

True False

10. An increasing payment lead trust may be combined with an FLP to produce a double discount.

True False

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