Estate planning

Estate planning

Question 1

1. Answering the following case study requires reading the information in this link:

Case Study: The Dumonts

What type of testamentary trust has Walter created for Judy in his will?

a. A charitable remainder unitrust
b. A charitable remainder annuity trust
c. A grantor retained annuity trust
d. A charitable lead unitrust

2 points    

Question 2

1. Answering the following case study requires reading the information in this link:

Case Study: The Dumonts

The Dumonts would like to help the Nature Conservancy this year by contributing some of Walter’s company stock. Walter would also like to maintain Judy’s life style by providing her with income for life. In addition, Walter would like to minimize taxes and transfer costs to accomplish these objectives. Given these objectives and constraints, which of the following lifetime gifts would be most appropriate?

a. A bargain sale of stock to the Nature Conservancy.
b. A gift of stock to a charitable pooled income fund for the Nature Conservancy.
c. A gift of stock to a charitable remainder unitrust trust for the Nature Conservancy.
d. A gift of stock to a charitable lead trust for the Nature Conservancy.

2 points    

Question 3

1. Answering the following case study requires reading the information in this link:

Case Study: The Dumonts

Judy’s will establishes a trust that distributes all income from the motel to Lee annually. Judy was concerned that this income could be subject to Lee’s creditors, so she included a spendthrift clause in the trust. All of the following statements about trusts with spendthrift provisions are correct, except:

a. A beneficiary may not assign, pledge or promise to give distributions from the trust to others.
b. A beneficiary should not be given a general power of appointment over trust corpus.
c. Spendthrift provisions apply only to self-settled trusts.
d. Trustees can make distributions to beneficiaries solely on a discretionary basis.

2 points    

Question 4

1. Answering the following case study requires reading the information in this link:

Case Study: The Dumonts

Assume that Walter dies today. What statement concerning the universal life insurance policy he owns on Judy’s life is correct?

a. The cash value will be included in his gross estate.
b. If Walter had transferred ownership of the policy to Lee four months ago, the policy would not be included in Walter’s gross estate.
c. The policy will not be included in Walter’s probate estate.
d. The full death benefit amount will be included in Walter’s estate.

2 points    

Question 5

1. Answering the following case study requires reading the information in this link:

Case Study: The Lindsays

Which of the following statements regarding property held as tenancy in common, the form under which Jim and Todd own their fishing boat, are correct?

a. There is no right of survivorship between Jim and Todd.
b. All of the property is included in the probate estate of the first co-owner to die.
c. The entire value of the fishing boat will be includible in Jim’s gross estate because Todd did not contribute anything to the purchase price.
d. Jim can change his will and leave his interest in the fishing boat to Jonathan.

2 points    

Question 6

1. Answering the following case study requires reading the information in this link:

Case Study: The Lindsays

How will per stirpes affect Jim and Nancy’s wills?

a. “After Jim and Nancy have both died, the estate of the second to die will go to Todd only, since he is their only living child. “
b. “After Jim and Nancy have both died, the estate of the second to die will go in equal shares to Todd and Allison. “
c. “After Jim and Nancy have both died, the estate of the second to die will go 50% to Todd and 50% to Jonathan, who takes Carol’s place in family lineage. “
d. “After Jim’s death, Nancy will be prevented from changing her will and leaving the estate entirely to her second husband. “

2 points    

Question 7

1. Answering the following case study requires reading the information in this link:

Case Study: The Lindsays

When Jim changed the title of his fishing boat to a tenancy in common with Todd last year, the boat was valued at $200,000. What amount is included on Jim’s IRS Form 706 as an adjusted taxable gift?

a. $0
b. $200,000
c. $86,000
d. $100,000

2 points    

Question 8

1. Answering the following case study requires reading the information in this link:

Case Study: The Lindsays

Which of the following statements concerning the marital deduction in Jim’s estate is correct?

a. It is not available for the $200,000 whole life insurance policy owned by Jim
b. It does not apply to the term life policy proceeds, since Jim’s estate, not Nancy, is the beneficiary
c. It does apply to the fishing boat, since it passes through Jim’s will.
d. It does apply to the replacement cost of the whole life insurance policy, since Jim is the insured

2 points    

Question 9

1. Which of the following should be considered when determining which property interest to transfer?

a. Whether it is difficult to value the property
b. Whether the property is appreciating in value
c. Whether the property is depreciating in value
d. Whether the property is easily divisible
e. All of the above

2 points    

Question 10

1. Which statement is correct?

a. With a non-grantor CLUT, the grantor can take an income tax deduction for the PV of the income distributed to charity.
b. With a pooled income fund, the donor cannot increase his contributions to the fund to produce a greater stream of income.
c. With a CRAT, invasion of the trust principal is allowed but not required.
d. With a CRUT, the grantor’s income is a fixed percentage of the trust’s assets, revalued annually.

2 points    

Question 11

1. Gary made a loan to his daughter Jill. Jill borrowed $50,000. What is the minimum interest rate Gary can apply on the loan to Jill in order for it to qualify for an intra-family loan?

a. Inflation rate
b. Current market rate for the loan
c. Applicable federal interest rate
d. No interest rate interest free loan

2 points    

Question 12

1. Bob and Sally were recently married. They are currently working on their estate plan. As their Financial Planner, they tell you that Sally is not a citizen of the United States. She is originally from Japan. When you are looking at their estate plan, what type of trust should you include?

a. QTIP
b. Marital Trust
c. QDOT
d. None of the above

2 points    

Question 13

1. Which of the following is a legitimate reason why an individual should not gift to a charity?

a. Reduce the taxable estate
b. Reduce income tax liability
c. Donor cannot afford the donation
d. Satisfaction for the donor

2 points    

Question 14

1. There are 3 types of Powers of Attorney. If an agent has no authority to act on behalf of the principal until the principal becomes incompetent as certified by a physician, which type of power of attorney does he/she hold?

a. Non-durable POA
b. Springing Durable POA
c. Durable POA
d. None of the above

2 points    

Question 15

1. Which of the following assets do not go through probate?

a. Property held Tenant-in-common
b. Life insurance payable to the individual s estate
c. Individual’s Revocable trust
d. Assets passing through the will

2 points    

Question 16

1. Which property avoids probate?

a. Property held as Tenants in common
b. Property titled Tenancy by the Entirety
c. Life insurance policy owned by the decedent who is not the insured
d. Community property passing to the surviving spouse

2 points    

Question 17

1. Marty has an estate of $16 million and all assets are titled in Marty’s name. Marty will pass all of his estate to his wife Clarissa by will at his death. Which statement regarding planning options is not correct?

a. If Marty equalizes his estate by transferring one-half of his assets to Clarissa and funds a Bypass trust, he will avoid paying an estate tax if the remaining assets pass to Clarissa.
b. If Marty transfers an exemption equivalent amount to a Bypass trust at his death, and transfers the remainder to a Power of Appointment trust for Clarissa, his estate will be subject to an estate tax.
c. Clarissa can disclaim a portion of Marty s estate to fund a Bypass trust if a disclaimer trust is established by Marty’s will.
d. If Marty’s executor files an election to utilize the DSUEA, then Clarissa may use portability to reduce her estate tax, assuming she does not remarry.

2 points    

Question 18

1. Bobby made the following transfers this year. Which of the following is an incomplete gift?

a. A gift of the remainder interest in her beach house that she gave to her daughter Lilly
b. $75,000 that Bobby transferred to her revocable trust
c. A distribution of $20,000 made from Bobby’s revocable trust to her daughter Lilly
d. A portfolio of bonds Bobby transferred to an irrevocable trust she established for her father

2 points    

Question 19

1. Which of the following is not a form of leveraging?

a. GRAT
b. GRUT
c. QTIP
d. QPRT

2 points    

Question 20

1. Which of the following allows for an unlimited amount to be given, gift tax free?

a. A religious organization
b. A scientific organization
c. A veteran’s organization
d. A local government for public use
e. A fraternal society

2 points    

Question 21

1. Joe and Lindsay are married. Joe is a U.S. citizen. Lindsay is from Germany and does not have her citizenship. If Lindsay were to die first, which type of trust should she set up for the benefit of Joe?

a. Marital Trust
b. QDOT
c. QTIP
d. Family Trust

2 points    

Question 22

1. Which of the following is considered community property?

a. Property received as a gift and placed in a joint checking account
b. Wages earned by one of the spouses
c. Property received as an inheritance and placed in a separate account
d. 401(k) deferrals from earned income of one of the spouses

2 points    

Question 23

1. What are the factors when determining competency?

a. Legally competent
b. Mentally competent
c. Financially competent
d. All of the above
e. None of the above

2 points    

Question 24

1. Which of the following is appropriate use of an inter vivos trust?

a. To avoid probate
b. To ensure the orderly distribution of assets at death
c. To minimize or avoid estate taxes
d. All of the above
e. Both A and B

2 points    

Question 25

1. Ann has a gross estate of $13 million. Her husband David has an estate of $3 million. Ann would like David to receive the right to some income from a trust, and take distributions from the corpus for his maintenance and support. Ann would like to exclude a portion of the trust assets from David’s estate and maximize the use of her unified credit. She also wants David to have total control over the assets in a trust and choose the trust beneficiary at his death. Ann and David wish to minimize the total estate tax liability for their combined gross estate. What marital transfer techniques will meet their objectives?

a. Power of appointment trust
b. By-pass trust with an ascertainable standard
c. Estate equalization

2 points    

Question 26

1. Which of the following titling procedures can be used by only married couples?

a. Joint tenancy with the right of survivorship
b. Tenancy in common
c. Tenancy by the entirety
d. Both A and B

2 points    

Question 27

1. Joe and Barry are in a committed relationship but not married. Joe wants to make sure that his house will pass to Barry automatically if Joe should pass away. How should the house be titled?

a. Joint Tenants with right of survivorship
b. Tenants in common
c. Tenants by the entirety
d. Held in Joe’s name solely

2 points    

Question 28

1. Gloria transfers $2 million into a trust for her grandchildren. She allocated $2 million of her GST exemption to the trust. At her death, the trust is valued at $3 million. What is the inclusion ratio and GST tax due at her death?

a. Zero
b. One
c. 0.33
d. 0.5

2 points    

Question 29

1. Which statement is not correct?

a. A decedent spouse receives a marital deduction for terminable interest property transferred into a By-Pass Trust.
b. A marital deduction delays the estate tax until the surviving spouse’s death.
c. A By-pass trust eliminates the estate tax in both spouse’s estate
d. Estate equalization combined with By-pass trusts may reduce the couple’s combined taxable estate since they may be taxed in a lower tax bracket.

2 points    

Question 30

1. How much is the annual exclusion amount and the lifetime exemption for an individual in 2017?

a. $14,000 and $2,141,800
b. $28,000 and $5,490,000
c. $14,000 and $5,490,000
d. $28,000 and $2,141,800

2 points    

Question 31

1. Which of the following statements is not correct in regards to a complex trust?

a. A complex trust is any trust that is not a simple trust.
b. A complex trust is one in which the trustee must or may accumulate income.
c. A complex trust is a separate taxable entity
d. A complex trust is allowed a personal deduction limited to $300.

2 points    

Question 32

1. What is Ancillary Probate?

a. Probate for assets held in a trust
b. Probate for personal property
c. Probate for real estate held in another state
d. Probate for deciding guardianship

2 points    

Question 33

1. Which of the following is not a main result of DNI?

a. To ensure that the trust or estate receives a deduction for amounts distributed and provides a limit for that deduction.
b. To ensure that the trust pays the associated tax on distributions that are made to the beneficiaries and/or retained in the trust for reinvestment.
c. To limit the portion of distributions that is taxable to beneficiaries.
d. To ensure that the character of the distributions to a beneficiary remains the same as in the hands of the trust or estate.

2 points    

Question 34

1. Which of the following is not a fiduciary?

a. Trustee
b. Executor
c. Guardian
d. Beneficiary

2 points    

Question 35

1. All of the following is an advantage of probate except:

a. Court supervision over the executor’s activities
b. Inventory of the estate
c. Privacy of decedent’s will
d. Validation of decedent’s will

2 points    

Question 36

1. Which of the following is an advantage of making a charitable gift of appreciated securities that have been held for more than one year?

a. The capital gains tax liability is transferred to the charity
b. The donor’s income tax deduction is based on the fair market value of the security
c. The appreciated security is removed from the donor’s gross estate only if the transfer was made more than three years before death.
d. A and C

2 points    

Question 37

1. Jane is named as Bob’s executor. Which of the following is not a step that Jane will have to take with respect to settling Bob s estate?

a. Valuation of the estate
b. Providing notice to Bob’s creditors
c. Making Bob’s funeral arrangements
d. Distributing Bob’s assets per the terms of the will

2 points    

Question 38

1. Which of the following is not an allowable deduction from the gross estate?

a. Credit card debt
b. A bequest to charity
c. Executor’s commission
d. The cost of the grave marker

2 points    

Question 39

1. Mike is active with his alma mater. In 2017, Mike contributed $11,000 of highly appreciated stock and $20,000 cash to an endowment appeal. He also contributed 100 hours of his time normally billed at $200 an hour. If no further charitable contributions were made in 2017, what is the total value of Mike’s charitable contributions for 2017?

a. $20,000
b. $31,000
c. $51,000
d. Cannot determine without Mike’s AGI

2 points    

Question 40

1. Which power is a general power of appointment?

a. You create a trust for your husband and sister and retain the power to invade the corpus for your husband’s health care expenses.
b. You have the power to direct in your will who will receive assets from your mother’s trust.
c. You have the right to exercise a power only with the beneficiary’s consent.
d. You have a power to make distributions to your children from a trust created by your father.

2 points    

Question 41

1. Which of the following is not correct in regards to the GSTT?

a. At the transferor’s death, the beneficiary is responsible for paying the GST tax in the case of a direct skip.
b. An indirect skip occurs when a transferor gives a child a life estate in real property and gifts the remainder interest to a grandchild.
c. If a grantor allocates his GST exemption to a trust, there will be no GST tax due when a non-skip beneficiary dies.
d. A skip person must pay the tax in a taxable distribution.

2 points    

Question 42

1. Which of the following gifts can be split?

a. Bill transferred $60,000 to an irrevocable trust for this wife in which she is the sole beneficiary.
b. Jill and her brother made a gift of $20,000 to their sister.
c. Dan and Julie are married and jointly gave their son $40,000.
d. Frank and his wife gifted $75,000 to a revocable trust for Frank’s father who is the sole beneficiary.

2 points    

Question 43

1. Which of the following is not a type of account you can use to gift assets to a minor?

a. UGMA
b. 2503©
c. 529 accounts
d. Annual Exclusion

2 points    

Question 44

1. Jennifer is the sole beneficiary of an irrevocable trust created by her father. Income and principal may be distributed to her at the trustee’s discretion. Jennifer has a 5-and-5 power of appointment over the trust. Jennifer died last month at which time the trust was valued at $2,500,000. How much of the trust was included in her estate at death?

a. $125,000
b. $50,000
c. $5,000
d. $100,000

2 points    

Question 45

1. Which of the following accounts does not avoid probate?

a. Mrs. A’s checking account payable on death to her daughter
b. Mrs. A’s savings account transfer on death to her son
c. Joint checking account between Mrs. A and her two children
d. Checking account in Mrs. A’s name passing through her will

2 points    

Question 46

1. In which of the following situations can a marital deduction not be taken?

a. A husband established a testamentary trust by will that gave his wife the income interest for life. His executor made a QTIP election on IRS form 706
b. A wife bequeathed her husband $10 million in cash
c. A husband gave his non-citizen wife $2 million
d. A wife established a testamentary trust that gave her son the income interest for 2 years and her husband the remainder interest

2 points    

Question 47

1. What is a Codicil?

a. An amendment to a trust
b. An amendment to a will
c. An amendment to guardianship
d. An amendment to a health care proxy

2 points    

Question 48

1. Which of the following statements is correct about a trustee?

a. The trustee manages trust assets according to the trust instrument
b. An institutional trustee serving with a co-trustee who is a family member can make distributions of trust assets to a beneficiary
c. The trustee must collect a decedent’s assets at death to pay debts, taxes and expenses attributable to the decedent’s estate
d. A trustee typically specializes in estate administration
e. Both A and B

2 points    

Question 49

1. Lou set up an ILIT and transferred his life insurance policy with a death benefit of $2 million to the trust. The premiums are $20,000 each year. Lou named his wife Carol and his two children as trust beneficiaries and gave them the right to withdraw the greater of $5,000 or 5% each year. Which statement is NOT correct?

a. If Lou dies within the next 3 years, the $2 million death benefit will be included in his gross estate.
b. Lou can split the premium payments transferred to the trust with Carol to reduce the value of the taxable gifts.
c. When Lou transfers premium payments to the trust, his taxable gift will be $5,000 each year.
d. When the beneficiaries let their Crummey powers lapse, they are not making taxable gifts to each other.

2 points    

Question 50

1. Which of the following statements is/are correct in regard to the taxation of installment payments under an installment note?

a. The basis recovery portion is subject to ordinary income tax
b. The interest portion of the payment may be subject to capital gains tax
c. The gain portion of the payment may be subject to capital gains tax
d. A and C

2 points    

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