Deck 20: Estate Planning

Question 1

The document that describes funeral preferences and indicates where key financial records are kept is called the letter of last rites.

Answer 1

False

Question 2

A legal document specifying distribution of your assets upon death is a

A) tax return.
B) letter of last instruction.
C) will.
D) trust.

Answer 2

will.

Question 3

In order to be valid, a will must be dated, signed, and witnessed.

Answer 3

True

Question 4

With samples of valid wills being available on Web sites and in book stores, it is not recommended that a person incur the additional expense of hiring a lawyer to write a will.

Question 5

The person specified in a will to receive a part of the estate is called a(n)

A) beneficiary.
B) grantor.
C) trustee.
D) administrator.

Question 6

An estate represents a deceased person's assets after all debts are paid.

Question 7

Even a parent without significant net worth needs a will to appoint a guardian for children.

Question 8

If a person dies without a valid will, the court will appoint an administrator, which results in additional costs being imposed on the estate.

Question 9

Estate planning is the act of planning how your wealth will be allocated before your death.

Question 10

________ is the act of planning how wealth will be allocated on or before your death.

A) Asset allocation
B) Estate planning
C) Liquidity planning
D) Management planning

Question 11

Probate is the legal process that ensures assets are distributed and guardians of children are appointed as the person who died wished it.

Question 12

Since the settling of wills is straightforward, almost anyone can do a good job as an executor of an estate.

Question 13

A marital share will is most appropriate for married couples with large estates.

Question 14

Which of the following is not necessary for a will to be valid?

A) All heirs must agree to the terms of the will.
B) The will must be dated.
C) The will must be signed.
D) The person creating the will must be mentally competent at the time the will is written.

Question 15

To create a will, a person must be of legal age, be mentally competent, and not be subject to undue influence or threats from others.

Question 16

Which of the following is not a reason to have a will?

A) To distribute your assets as you wish
B) To insure your debts are passed on to your heirs
C) To reduce the costs being imposed on the estate
D) To appoint a legal guardian for children

Question 17

Once you have a positive net worth to be distributed upon your death, you should consider creating a will.

Question 18

Two key goals of estate planning are to ensure that your estate passes to the proper beneficiaries and to ensure that your estate may be insulated to the extent possible from taxes.

Question 19

The only reason for having a valid will is to have your estate distributed according to your plans.

Question 20

Minor changes to a will can be made with a simple document called a codicil.

Question 21

Which of the following statements about the letter of last instruction is false?

A) It describes your preferences for your funeral.
B) It indicates whether you wish to be cremated.
C) It legally determines your heirs.
D) It indicates where your key documents are.

Question 22

A ________ will is suitable for larger estates because it distributes half of the estate to the spouse and the other half to any children or to a trust.

A) simple
B) complex
C) traditional marital share
D) modern marital share

Question 23

In choosing a guardian for your children, you should

A) always pick the family member closest to your age.
B) be sure to leave money for the guardian to care for your children.
C) ensure that the person you select is willing to serve in this capacity.
D) Both B and C are correct.

Question 24

You are recently divorced and have relocated to another state. In order to make substantial changes to your will you should

A) prepare a new letter of last instruction.
B) prepare a codicil.
C) prepare a new will.
D) have your existing will notarized in the new state.

Question 25

The person designated in a will to execute your instructions regarding the distribution of your assets is called a(n)

A) executor.
B) guardian.
C) business associate.
D) attorney.

Question 26

Which of the following is not accomplished during probate?

A) Payment of claims against the estate
B) Validation of the will
C) Determination of legal heirs
D) Trading of the estate's assets among the heirs

Question 27

A(n) ________ is a document that specifies changes in an existing will.

A) letter of instruction
B) codicil
C) amendment
D) secondary will

Question 28

If you die without a will, the court will appoint ________ to handle your estate.

A) a grantor
B) an attorney
C) an administrator
D) a good friend

Question 29

The purpose of probate is to ensure the

A) orderly distribution of assets.
B) orderly distribution of liabilities.
C) distribution of expenses.
D) equal allocation of all financial matters.

Question 30

Which of the following is not a duty of the executor of an estate?

A) Collect money owed the estate
B) Decide how the assets will be distributed
C) Pay debts of the estate
D) Sell specific assets of the estate if necessary

Question 31

A will's key components may include all of the following, except

A) distribution of the estate.
B) naming of the executor.
C) appointing of a guardian.
D) All of these are correct.

Question 32

The probate process includes all of the following steps, except

A) filing a copy of the will with the court.
B) filing a copy of the inventory of all assets and liabilities with the court.
C) opening a bank account and depositing proceeds from the sale of estate assets.
D) making extra allocations of assets based on the needs of the heirs.

Question 33

For a will to be valid, the maker must be all of the following, except

A) the legal required age.
B) mentally competent.
C) free from undue influence from others.
D) related to all beneficiaries listed in it.

Question 34

If you die without a will, you are said to have died

A) intestate.
B) unlucky.
C) tragically.
D) irresponsibly.

Question 35

A simple will may not be appropriate if

A) the estate is small.
B) the estate is large.
C) the person is married.
D) the entire estate is to go to the spouse.

Question 36

Which of the following is not required to be an executor of an estate?

A) U.S. citizenship
B) Blood relationship to the deceased
C) Legal age
D) Not a convicted felon

Question 37

An executor, also called your ________, is named in your will to carry out your instructions regarding how your assets will be distributed.

A) personal representative
B) attorney
C) friend
D) brother-in-law

Question 38

If you wish to be cremated when you die, this request should be included in a

A) simple will.
B) letter of last instruction.
C) codicil.
D) probate.

Question 39

A will could be written to distribute assets in terms of the following, except

A) percentages.
B) a specific dollar amounts.
C) percentages and a remainder portion.
D) the discretion of the probate judge.

Question 40

The primary purpose of a marital share will is to

A) give each former spouse a share of the assets in the case of multiple marriages.
B) minimize taxes on the estate.
C) give all assets to the surviving spouse.
D) keep peace in the family.

Question 41

Use the following two columns of items to answer the matching questions below:
executor

A)persons specified in a will to receive part of an estate
B)dying without a will
C)a document that specifies changes in an existing will
D)the legal process that declares a will valid and ensures orderly distribution of assets
E)a legal request for how your estate should be distributed upon your death
F)a will suitable for a smaller estate distributed to the spouse
G)the person designated in a will to execute instructions regarding the distribution of your assets

Question 42

In determining estate taxes, the estate is valued by subtracting all liabilities including funeral expenses from the value of all assets including a home.

Question 43

The value of the estate is calculated using

A) cost.
B) market value.
C) cost plus inflation.
D) the consumer price index.

Question 44

Which of the following is commonly chosen as an executor?

A) An attorney
B) A family member
C) A bank trust company employee
D) All of the above

Question 45

List the following steps of the probate process in order:
(a) Estate taxes are paid
(b) Value of the estate is determined
(c) A copy of the will is provided to the probate court
(d) Executor files forms in the local probate court
(e) A list of assets and liabilities is prepared

Question 46

If it is your desire to have Giddy Funeral Home handle the details of your viewing and burial, your will should prepare a

A) power of executor.
B) codicil.
C) letter of last instruction.
D) living will.

Question 47

Minor changes to an existing will can be accomplished by the use of a(n) ________.

Question 48

Use the following two columns of items to answer the matching questions below:
simple will

A)persons specified in a will to receive part of an estate
B)dying without a will
C)a document that specifies changes in an existing will
D)the legal process that declares a will valid and ensures orderly distribution of assets
E)a legal request for how your estate should be distributed upon your death
F)a will suitable for a smaller estate distributed to the spouse
G)the person designated in a will to execute instructions regarding the distribution of your assets

Question 49

The tax-free portion of an estate is quite high-$11.2 million in 2018.

Question 50

If you are married, have a small estate, and have no children, a(n) ________ will probably serve your needs.

Question 51

Use the following two columns of items to answer the matching questions below:
will

A)persons specified in a will to receive part of an estate
B)dying without a will
C)a document that specifies changes in an existing will
D)the legal process that declares a will valid and ensures orderly distribution of assets
E)a legal request for how your estate should be distributed upon your death
F)a will suitable for a smaller estate distributed to the spouse
G)the person designated in a will to execute instructions regarding the distribution of your assets

Question 52

A person who dies without preparing a will is said to have died ________.

Question 53

All of the following are required for a will to be valid, except

A) the will must be typed.
B) the will must be witnessed by at least two people who are not beneficiaries of the will.
C) the will must be dated.
D) the will must be signed.

Question 54

Use the following two columns of items to answer the matching questions below:
codicil

A)persons specified in a will to receive part of an estate
B)dying without a will
C)a document that specifies changes in an existing will
D)the legal process that declares a will valid and ensures orderly distribution of assets
E)a legal request for how your estate should be distributed upon your death
F)a will suitable for a smaller estate distributed to the spouse
G)the person designated in a will to execute instructions regarding the distribution of your assets

Question 55

Use the following two columns of items to answer the matching questions below:
intestate

A)persons specified in a will to receive part of an estate
B)dying without a will
C)a document that specifies changes in an existing will
D)the legal process that declares a will valid and ensures orderly distribution of assets
E)a legal request for how your estate should be distributed upon your death
F)a will suitable for a smaller estate distributed to the spouse
G)the person designated in a will to execute instructions regarding the distribution of your assets

Question 56

Use the following two columns of items to answer the matching questions below:
probate

A)persons specified in a will to receive part of an estate
B)dying without a will
C)a document that specifies changes in an existing will
D)the legal process that declares a will valid and ensures orderly distribution of assets
E)a legal request for how your estate should be distributed upon your death
F)a will suitable for a smaller estate distributed to the spouse
G)the person designated in a will to execute instructions regarding the distribution of your assets

Question 57

Once your net worth exceeds the tax-free limit of estate taxes, you should carefully plan your estate to minimize any potential tax liability.

Question 58

All of the following are true about the executor of a will, except

A) the executor is selected by the creator of the will.
B) the executor may be paid for his or her services by the estate.
C) the executor is generally paid 5% of the value of the estate for his or her services.
D) the executor may elect not to be paid for his or her services.

Question 59

Use the following two columns of items to answer the matching questions below:
beneficiaries

A)persons specified in a will to receive part of an estate
B)dying without a will
C)a document that specifies changes in an existing will
D)the legal process that declares a will valid and ensures orderly distribution of assets
E)a legal request for how your estate should be distributed upon your death
F)a will suitable for a smaller estate distributed to the spouse
G)the person designated in a will to execute instructions regarding the distribution of your assets

Question 60

The assets less liabilities of a deceased individual are called a(n) ________.

Question 61

As of 2018, a person may give any other person up to $15,000 per year in cash or other assets, and neither the giver nor the recipient of the gift has any tax liability for it.

Question 62

A legal document in which one person transfers assets to another who manages them for designated beneficiaries is called a

A) testamentary device.
B) trust.
C) will.
D) codicil.

Question 63

Which of the following is not a type of trust?

A) Revocable living trust
B) Living trust
C) Standard family trust
D) Income trust

Question 64

The person who establishes and funds a trust is known as the

A) executor.
B) administrator.
C) grantor.
D) testator.

Question 65

A ________ trust is created by a will.

A) testamentary
B) living
C) bequeathed
D) credit shelter

Question 66

The amount of an estate that is exempt from federal estate taxes in 2018 is

A) $11.2 million.
B) $3.25 million.
C) $850,000.
D) $10.5 million.

Question 67

Which of the following is true about estate taxes?

A) All of an estate is tax-free.
B) A portion of an estate is excluded from taxes.
C) All of an estate is taxed.
D) Fifty percent of an estate is taxable.

Question 68

All of the following are correct regarding assets included for estate tax purposes, except

A) stocks are included in the estate value.
B) bonds are included in the estate value.
C) municipal bonds are not included in the estate value since they are federal tax free.
D) All of the above are correct.

Question 69

For the purpose of avoiding estate taxes, estate planning involves all of the following, except

A) a living will.
B) trusts.
C) gifts.
D) charitable contributions.

Question 70

A trust involves the transfer of assets to a third party who manages these assets for a beneficiary.

Question 71

Estate planning commonly involves trusts, gifts, and charitable contributions for the purpose of avoiding estate taxes.

Question 72

Which of the following is not true regarding the valuation of an estate for tax purposes?

A) Assets including a home are included.
B) Liabilities including a home mortgage are subtracted.
C) Funeral and administrative expenses are subtracted.
D) Life insurance proceeds from policies owned by the decedent are not included.

Question 73

A revocable living trust cannot be changed during the grantor's lifetime.

Question 74

Any money donated from an estate to charitable organizations is given after estate taxes are paid.

Question 75

A(n) ________ trust is one that cannot be changed.

A) revocable living
B) spendthrift
C) irrevocable living
D) retirement

Question 76

Estate taxes may be levied by

A) the federal government only.
B) state governments only.
C) both federal and state governments.
D) foreign governments only.

Question 77

It is very important to engage in estate planning once the value of your estate nears

A) $1,000,000.
B) the legal limit for the maximum estate that can be passed down to your children.
C) $11,200,000.
D) $3,500,000.

Question 78

The top federal estate tax rate in 2018 is

A) 15%.
B) 30%.
C) 40%.
D) 55%.

Question 79

A person who manages assets for designated beneficiaries is called a

A) witness.
B) trustee.
C) grantor.
D) executor.

Question 80

By using a revocable living trust, you can avoid the probate process.