Inheritance

### What is the primary distinction between real property and personal property in the context of inheritance? - [x] Real property refers to land and buildings, while personal property includes assets other than real estate. - [ ] Real property is always worth more than personal property. - [ ] Personal property cannot be passed through a will. - [ ] Only personal property is subject to estate tax. > **Explanation:** Real property includes land and buildings, whereas personal property includes assets such as vehicles, jewelry, and cash. ### Are heirs required to pay federal income tax on inherited property? - [ ] Yes, all inheritance is subject to federal income tax. - [x] No, federal income tax is not imposed on inherited property. - [ ] Only real property inheritance is tax-exempt. - [ ] Federal income tax applies only to financial assets and cash. > **Explanation:** Inherited property is typically not subject to federal income tax; however, the estate may be subject to federal estate tax before distribution. ### What legal mechanism allows property to be distributed according to the deceased's wishes? - [ ] Trust agreement - [ ] Probate process - [x] Will - [ ] Power of attorney > **Explanation:** A will is a legal document that specifies how a person’s estate should be managed and distributed after their death. ### What happens if a person dies without a will? - [ ] The property goes to the state. - [ ] The property cannot be inherited. - [x] The estate is distributed according to state intestacy laws. - [ ] All assets are liquidated and given to charity. > **Explanation:** If a person dies without a will, their estate is distributed according to state intestacy laws, which dictate who inherits the assets. ### Which type of property transfer involves estate tax? - [x] Inheritance of real property - [ ] Sale of personal property - [ ] Donation of tangible personal property - [ ] Lease of real property > **Explanation:** The inheritance of real property is subject to estate tax, which is imposed on the estate before the assets are distributed to the heirs. ### How can heirs know what they are entitled to inherit? - [ ] Intestate succession lists - [ ] Estate appraisals - [x] Through the will or state intestacy laws - [ ] Estate tax filings > **Explanation:** Heirs can know what they are entitled to inherit through the instructions left in the will or, in the absence of a will, through state intestacy laws that determine inheritance. ### Who typically manages the distribution of property in accordance with the will? - [ ] A bank trustee - [x] The executor of the estate - [ ] The state court - [ ] The beneficiaries > **Explanation:** The executor of the estate manages the distribution of property in accordance with the will’s directives. ### Is an heir always entitled to inherit property as mentioned in a will without disputes? - [ ] Yes, if the will exists. - [x] No, wills can be contested and subject to legal disputes. - [ ] Only spouses can contest a will. - [ ] Only real property can be contested. > **Explanation:** An heir is not always entitled to inherit property without disputes; wills can be contested, and various factors could lead to legal challenges. ### What is a common reason for an estate being subject to probate? - [ ] The estate includes real property only. - [ ] The deceased did not owe any debts. - [ ] All the heirs are minors. - [x] The deceased did not leave a valid will. > **Explanation:** When a person dies without leaving a valid will, their estate typically goes through probate to ensure proper distribution according to state laws. ### Which aspect greatly impacts whether the estate will be subject to federal estate tax? - [x] The total value of the estate - [ ] The number of heirs - [ ] The types of assets included - [ ] The state of residence of the deceased > **Explanation:** The total value of the estate determines whether it will be subject to federal estate tax, based on thresholds set by the IRS.