Estate Planning

1.1 Which of the following is a consequence of the way in which the Ferris' home is titled?

A. Either spouse can dispose of his or her interest will by at death.

B. If Mary is the first to die, no portion of the home will be included in her probate estate.

C. At the first death, there is a full step-up in basis for the property.

D. If Fred contributed all of the money to purchase the home, the entire value is included in his gross estate at his death.

1.2. Which of the following statements describes the effect of the titling of the automobile parts supply business interest?

A. Mary must consent to any sale or other disposition of the interest.

B. If Fred is the first to die, no portion of the business interest will pass through probate.

C. At Fred's death, one-half of the value of the business interest will be included in his gross estate.

D. If Fred dies today, there will be a full step-up in basis for the business interest .

1.3. If Fred dies today, what is the amount of his probate estate?

A. $160,000

B. $251,000

C. $10,000,000

D. $10,216,000

1.4. If Mary dies today, how much is her probate estate?

A. $0

B. $36,000

C. $110,000

D. $250,000

1.5. Which of the following is a correct description of Fred’s will?

A. Joint will

B. Simple will

C. Pour-over wi1l

D. Mutual will

1.6. Under the current arrangements, which of the following is Fred able to change without probate court involvement if Mary becomes incapacitated?

A. Whole life policy

B. Residence

C. Value fund

D. Cash and cash equivalents

1.7. Under the current arrangements, if Mary were to lapse into an irreversible coma, which of the following is the most likely tool Fred would use to deal with medical issues for her?

A. Living will

B. Health care power of attorney

C. Durable power of attorney

D. The courts

1.8 lf Fred gives Ted $8,000 for Ned's benefit, which of the following is correct?

A. The gift will adversely affect Ned's eligibility for public benefits.

B. Ted's wife Maria will be entitled to 50%, due to state property laws.

C. Ned will need to cosign any check given to Ted.

D. The gift will qualify for the annual exclusion.

1.9. Fred and Mary are contemplating a family gifting program of some magnitude. Which of the following is the most legitimate rationale for a gifting pattern?

A. Gifts of annual exclusion amounts to the children are inappropriate because the unlimited marital deduction eliminates the federal estate tax.

B. Gifts directly to Ned are suitable, based on need.

C. Gifts to Ted are appropriate to remove the future appreciation for their estates.

D. Gifts to the daughters would serve to enhance their self-motivation.

1.10. Which of the following would constitute a generation-skipping transfer if it was made today?

A. A direct gift from Fred to Ned's Uniform Transfers to Minors Act account, using the value fund

B. Creation of a special-needs trust for Ned's benefit

C. Designating Ted as the holder of a limited power of appointment over property exclusively for

Ned's benefit

D. Nominating Maria as the holder of a general power of appointment over property for Ned's benefit

1.11. Which of the following, in addition to current arrangements, would generate a taxable gift?

A. A gift of$14,000 from the growth fund to Harmony

B. A split gift of $28,000 from Fred and Mary to Ted and Maria from the value fund

C. A gift of Fred's entire interest in the residence to Mary

D. A payment in excess of$14,000 to Felicity's high school for her tuition

1.12 Seriously contemplating early retirement, Fred wants to know the gift tax payable if he gives Ted 50% of his business interest and sells him the other 50% on a 20-year installment note. Which of the following is correct?

A. Any gift tax is payable ratably over a 20-year period.

B. No gift tax is payable.

C. The gift tax due is $1,750,000.

D. Under this arrangement, Ted would be responsible for the payment of any gift tax.

1.13. In the current situation, which of the following is the most serious weakness in terms of the Ferris family's planning for incapacity?

A. Inadequate disability insurance for Fred

B. Inadvertent disqualification for Ned's government assistance

C. Lack of a buy-sell agreement, funded with disability buyout insurance

D. Insufficient protection against long-term nursing care expenses

1.14. If Fred becomes disabled, which of the following plans currently provides protection?

A. The key person disability insurance of the business

B. Disability buyout insurance

C. Business overhead expense disability plan

D. Group long-term disability plan

1.15. If Fred dies, which of the following is not included in his gross estate?

A. The funds set aside for Felicity's education

B. The group life insurance

C. The individual term insurance

D. The SPDA

1.16. lf Fred dies today, what is the amount included in his gross estate?

A. $10,828,500

B. $10,953,000

C. $12,040,500

D. $12,150,500

1.17. Considering the current estate plan, which of the following best describes Fred's liquidity position at death?

A. Severely impaired

B. Moderately impaired

C. Modestly impaired

D. Adequate

1.18. If Fred completes business succession documents that transfer his business interest at death to Ted, which technique involves the lowest adverse impact on Fred's estate liquidity?

A. A funded one-way buyout agreement

B. Sec. 303 partial stock redemption

C. Partial transfer of Fred's individual term policy to Ted

D. Transfer of the whole life policy to Ted

1.19. Under the current documents, which of the following powers is Mary presumed to have if Fred dies first?

A. Five-and-five power

B. Limited power of appointment

C. General power of appointment

D. A power limited by an ascertainable standard

1.20. At Fred's death, Mary would, in effect, have a general power of appointment over the short-term fixed-income fund to what extent?

A. Not at all

B. 50%

C. 100%

D. Her contribution

1.21. Which of the following is least likely to be contained in Ted's marital trust for the benefit of Maria?

A. General power of appointment

B. Special power of appointment

C. Ability to name her creditors as payees

D. Full withdrawal rights

1.22. Fred's current trust can best be described as:

A. A funded revocable living trust

B. A simple trust with Crummey provisions

C. An irrevocable trust

D. A complex trust with a general power of appointment

1.23. If Ted dies, which of the following best describes his trust?

A. The trust retains its revocable character because it is a simple trust.

B. The trust becomes irrevocable.

C. The residuary must becomes irrevocable, but the marital trust is revocable.

D. The marital trust becomes irrevocable, but the residuary trust is revocable.

1.24. Considering the current situation for the extended Ferris family, which of the following is the most viable technique to accomplish one or more of the stated objectives?

A. Transferring Fred's business interest to a GRUT, with Fred receiving 6% annual income, and the remainder passing to Ted after 13 years

B. A gift of a present interest from Fred to Ted of the entirety of Fred's fractional business holdings, and Fred and Mary electing gift-splitting to avoid gift tax.

C. Placing Fred and Mary's home into a 20-year QPRT, with Ted and Maria as remainder beneficiaries.

D. A buy-sell agreement funded with life insurance (premiums paid by Fred), allowing Ted purchase Fred's shares at his death

1.25. Which of the following transfers would involve the smallest taxable gift?

A. Transfer of the growth fund to a 10-year GRA T with a 6% payout

B. Transfer of the value fund to a 15-year GRA T with a 6% payout

C. Transfer of the short-term fixed-income fund to a I5-year GRUT, using an 8% payout

D. Transfer of the home to a to-year QPRT

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