estate planning

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Question 1

1. Answering the following case study requires reading the information in these links:

Case Study: The Beckers

Case Study: The Beckers (Property Table)

Which statement concerning Martin and Regina's estate plans is NOT correct?

	a.	Regina can name the ultimate beneficiaries of the Power of Appointment trust in her Will.
	b.	If Martin decides to sell Regina's rare coin collection after her death, his basis will be Regina s inherited basis of $180,000.
	c.	Regina has been given an ascertainable standard in the By-pass trust.
	d.	Assets passing to the By-pass trust for Regina will take advantage of Martin's unified credit.

2 points

Question 2

1. Answering the following case study requires reading the information in these links:

Case Study: The Beckers

Case Study: The Beckers (Property Table)

Which of the following statements concerning the irrevocable life insurance trust is correct?

	a.	If the trust has Crummey provisions, Martin and Regina can use gift-splitting to reduce the gift tax on annual premium payments transferred into the trust.
	b.	Martin can borrow from the cash values of the policies without adverse tax consequences.
	c.	If Regina dies after Martin, a gift tax will incur when trust corpus is transferred equally to the children.
	d.	If the beneficiaries are given Crummey powers and they let their annual right of withdrawal lapse, they are making gifts to the other trust beneficiaries.

2 points

Question 3

1. Answering the following case study requires reading the information in these links:

Case Study: The Beckers

Case Study: The Beckers (Property Table)

If Martin dies today, what will the value of his gross estate be for federal estate tax purposes?

	a.	$2,420,000
	b.	$2,667,500
	c.	$2,967,500
	d.	$3,967,500

2 points

Question 4

1. Answering the following case study requires reading the information in these links:

Case Study: The Beckers

Case Study: The Beckers (Property Table)

Assume for this question that Martin's daughter Debbie died unexpectedly in an accident and Martin died a year later leaving the same Will described in the case facts. What portion of the corpus of the By-pass trust would each of Debbie's children receive at Regina's death?

	a.	1/6
	b.	1/5
	c.	1/4
	d.	1/2

2 points

Question 5

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

Case Study: Anita Morrison

If Anita decides to make gifts to each of her 5 grandchildren, which one of the following statements is not correct?

	a.	Gifts up to $75,000 per child may be made to a Section 529 plan without incurring gift tax.
	b.	Gifts made to each grandchild that exceed $15,000 this year would be subject to both gift tax and generation skipping transfer tax before exclusions are applied.
	c.	Gifts made under the UTMA with Anita as custodian would not be included in Anita's gross estate at her death.
	d.	An irrevocable trust established by Anita for the benefit of her grandchildren who are the only beneficiaries in the trust, is a GST direct skip trust.

2 points

Question 6

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

Case Study: Anita Morrison

Which statement regarding incapacity documents is not correct?

	a.	A durable power of attorney continues until it is revoked by the principal or upon the principal's death.
	b.	The scope of a power of attorney can be limited or nondurable and can restrict an agent to act in a specific capacity.
	c.	A non-durable power of attorney ceases when a principal becomes incapacitated.
	d.	A springing durable power of attorney is activated once a health care agent certifies that the principal has become incapacitated.

2 points

Question 7

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

Case Study: Anita Morrison

Anita, in her grief, wants to move closer to her daughter Lynn.If Anita were to sell her home today for $810,000 what would be her basis in the property?

	a.	$400,000
	b.	$410,000
	c.	$421,000
	d.	$431,000

2 points

Question 8

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

Case Study: Anita Morrison

Anita wants to make a substantial donation to her library this year that will give the library guaranteed fixed income over the next six years.Anita also wants the assets to revert back to her after the charity s income term ends, to distribute them to her children through her Will.What type of charitable technique will accomplish her objectives?

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

2 points

Question 9

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 10

1. In which of the following situations is a marital deduction disallowed?

	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 11

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 12

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 13

1. Which of the following intra-family transfers would be recommended if a business or property owner wants to transfer his assets to family members and receive fixed income payments for life?

	A.	Self Canceling Installment Note
	B.	Private Annuity
	C.	Gift Leaseback
	D.	Intentionally Defective Grantor Trust

2 points

Question 14

1. All of the following statements regarding property held as joint tenants with rights of survivorship are correct except:

	a.	Each party has an undivided right to the enjoyment of property.
	b.	Upon their death, the tenants' property passes per their will.
	c.	The joint tenants own the property equally.
	d.	At death, the property is excluded from the tenants' probate estate.

2 points

Question 15

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 16

1. What is one of the disadvantages the general partner should consider when setting up a Family Limited Partnership?

	a.	Lose management control
	b.	Lack of partnership interest passed to the next generation
	c.	Maximum of 1% general partnership units
	d.	The general partner is liable for all debt

2 points

Question 17

1. Which of the following is correct in regards to GSTT?

	a.	Distributions to a skip person from a trust with an inclusion ratio of zero are subject to a GST tax at the time of distribution.
	b.	A GST tax is due for a taxable distribution and taxable termination if a trust has an inclusion ratio of one.
	c.	Unused GST exemption is portable to a surviving spouse.
	d.	An annual exclusion gift is subject to a GST tax if made to a skip person.

2 points

Question 18

1. When disclaiming property, which of the following is not correct?

	a.	The refusal or rejection of the benefits may be a verbal disclaimer.
	b.	The writing must be received by the transferor, his legal representative or the holder of the legal title to the property no later than nine months after the later of: the date on which the transfer creating the interest is made, or the date the person disclaiming reaches age 21.
	c.	The person disclaiming must not have accepted the property interest or any benefits of the property.
	d.	Someone other than the disclaimant receives the disclaimed property interest. The person making the disclaimer cannot in any way influence the potential recipient of the property.

2 points

Question 19

1. MaryAnn has a gross estate of $20 million. Her husband Duke has an estate of $3 million. MaryAnn would like Duke to receive the right to some income from a trust, and take distributions from the corpus for his maintenance and support. MaryAnn would like to exclude a portion of the trust assets from Duke’s estate and maximize the use of her unified credit. She also wants Duke to have total control over the assets in a trust and choose the trust beneficiary at his death. MaryAnn and Duke further 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 20

1. Which of the following statements concerning a fiduciary is incorrect?

	a.	A CFP® practitioner who charges commissions for products sold to clients is not a fiduciary
	b.	Fiduciaries must perform their duties with utmost care and loyalty toward the beneficiaries they serve
	c.	A fiduciary can be sued for breach of his/her fiduciary duty in civil court
	d.	A CFP ® practitioner who provides Financial Advice to clients is considered a fiduciary.

2 points

Question 21

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 22

1. Which of the following is not a public charity?

	a.	Non-profit Schools
	b.	Churches
	c.	The American Red Cross
	d.	General Electric

2 points

Question 23

1. Which of the following is not an estate planning document?

	a.	Trust
	b.	Will
	c.	Bank Statement
	d.	Durable Power of Attorney

2 points

Question 24

1. Which of the following is not a fiduciary?

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

2 points

Question 25

1. Ramona transferred appreciated securities into a CRUT. Which of the following is true with respect to the gain on the security?

	a.	Ramona will pay capital gains tax on the sale of the security.
	b.	Ramona will pay tax based on the nature of distributions from the trust subject to the trust tax tier rules.
	c.	The trust will pay the tax only after the securities have been sold.
	d.	Ramona and the trust will share the tax after the securities have been sold.

2 points

Question 26

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

	a.	UGMA
	b.	2503(c)
	c.	Spray trust
	d.	Estate trust

2 points

Question 27

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

Question 28

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 29

1. All of the following are items of IRD except for:

	a.	CDs
	b.	IRA assets
	c.	Deferred Compensation
	d.	Real Estate
	e.	Bonds

2 points

Question 30

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 31

1. Which of the following is not an intra-family transfer technique?

	a.	SCIN
	b.	Bargain Sale
	c.	CLAT
	d.	Intra-family loan
	e.	Private Annuity

2 points

Question 32

1. Which of the following titling procedures can be used only by 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 33

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 34

1. Which statement(s) correctly define the Alternate Valuation date?

	a.	The date that all estates are valued at
	b.	The date of the estate owner's death
	c.	Six months from the decedent's date of death
	d.	The date when assets are sold, exchanged, distributed or disposed of within six months of the decedent's death when the alternative valuation date has been selected.
	e.	Statements C and D

2 points

Question 35

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 36

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 37

1. Which of the following is a benefit of having a revocable trust?

	a.	The assets in the trust avoid probate and ancillary probate upon your death.
	b.	You maintain the power to alter or terminate the trust.
	c.	If you become incompetent, your assets will continue to be professionally managed by the trustee.
	d.	A funded trust reduces the potential for a will contest or an election against the will, and provides privacy in administering a grantor's affairs.
	e.	All of the above

2 points

Question 38

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

	a.	A simple trust is allowed a personal deduction limited to $300.
	b.	A simple trust is a separate taxable entity
	c.	A simple trust is one in which the trustee must or may accumulate income.
	d.	A simple trust does not pay tax on income it pays out.

2 points

Question 39

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 40

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 41

1. Which statement regarding terminable interest property is not correct?

	a.	A donor spouse can elect QTIP treatment on his gift tax return to reduce a taxable gift by marital deduction.
	b.	A spouse, as income beneficiary of a QTIP trust, will include the value of the trust in her gross estate.
	c.	A remainder interest given to a spouse in trust is a terminable interest.
	d.	A donor spouse can take a marital deduction for giving a spouse an income interest in trust and a general power of appointment over trust corpus.

2 points

Question 42

1. How much is the annual exclusion amount and the exemption equivalent amount that escapes gift taxation for an individual in 2019?

	a.	$15,000 and $4,505,800
	b.	$30,000 and $11,400,000
	c.	$15,000 and $11,400,000
	d.	$30,000 and $4,505,800

2 points

Question 43

1. John has a family business that he would like to transfer to his son James. James does not have the cash to pay John for the fair market value of the business and John needs the income to live on for the rest of his life. Which of the following would be the best recommendation?

	a.	Installment sale
	b.	Sale-leaseback
	c.	Bargain sale
	d.	Private annuity

2 points

Question 44

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 45

1. If Mr. Smith has two children, under which legal document would he name the guardian?

	a.	Mr. Smith's Revocable trust
	b.	Mr. Smith's Durable power of Attorney
	c.	Mr. Smith's Will
	d.	Letter of direction to the courts

2 points

Question 46

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 47

1. Billy established an irrevocable trust to benefit his daughter, Audrey, for her life. At her death, the trust will benefit his two grandsons. Billy transferred $3 million of income-producing property to the trust and allocated $3 million of his GST exemption to the trust. Which statement is correct?

	a.	This trust is an example of an indirect skip.
	b.	Distributions made to Billy's grandsons at Audrey's death are taxed at a flat 40% tax rate.
	c.	Billy's grandsons are responsible for paying the GST tax in a taxable termination.
	d.	The trust has an inclusion ratio of one.

2 points

Question 48

1. Which of the following situations classify the trust as a Grantor trust?

	a.	The Grantor's spouse can control the beneficial enjoyment of the trust.
	b.	The Grantor can revoke the trust.
	c.	The Grantor's spouse has a limited power of appointment.
	d.	The Grantor can borrow from the trust without adequate interest or security.

2 points

Question 49

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(s) could she set up for the benefit of Joe?

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

2 points

Question 50

1. As a CFP® practitioner, what is the first thing you should asses if a client tells you he/she wants to gift a large amount of assets to various family members?

	a.	Can the client afford the gift?
	b.	When does the client want to make the gift?
	c.	Which family members will receive the gifts?
	d.	What type of gift (cash, stock, etc)?