Deck 9: Specialized Trusts

Question 1

Under federal estate tax laws, property passing from a decedent to a surviving spouse is not taxable.

Answer 1

True

Question 2

An advantage of a spendthrift trust is that when the trust is established, the settlor does not have to decide who specifically will receive the income and principal.

Answer 2

False

Question 3

Crummey powers give one or more trust beneficiaries the right to withdraw each year money that is contributed to the trust.

Answer 3

True

Question 4

Under a marital deduction trust, settlors may give the entire trust corpus outright to a surviving spouse when they die.

Question 5

A trust that gives the trustee the power to determine how the trust income or principal is to be allocated among a group of beneficiaries is

A) a sprinkling trust.
B) a spray trust.
C) a discretionary trust.
D) All of the answers are correct.

Question 6

Under the doctrine of cy pres, if the court finds that the settlor had a specific intent to benefit one charity exclusively and that charity ends, the trust fund will be turned over to another closely related charity.

Question 7

Under a sprinkling trust, the settlor must decide specifically who will receive the income and principal.

Question 8

If carefully prepared, a revocable life insurance trust may be used to pass money to heirs tax-free.

Question 9

A charitable trust also is known as a public trust.

Question 10

A trust containing a provision that protects the assets of the trust from creditors and from the beneficiary's reckless spending is a

A) discretionary trust.
B) spendthrift trust.
C) Totten trust.
D) sprinkling trust.

Question 11

People may open bank accounts in their own names "in trust" for someone else, without signing any other trust instrument.

Question 12

The depositor may withdraw money from a savings bank account in the name of the depositor as trustee for another person at any time during the depositor's lifetime.

Question 13

Under a QTIP trust, the decision to use the QTIP provision is made before the death of the decedent.

Question 14

If a settlor left money in trust for the settlor's children and then for the lives of the settlor's grandchildren, the rule against perpetuities would be violated.

Question 15

One feature of a qualified terminable interest property (QTIP) trust is that the rule against perpetuities does not apply.

Question 16

Under a sprinkling trust, the will of the first spouse to die leaves the amount that is exempt from the federal estate tax to an irrevocable trust called "Trust A."

Question 17

A savings bank account in the name of the depositor as trustee for another person is a

A) spendthrift trust.
B) spray trust.
C) Totten trust.
D) discretionary trust.

Question 18

A trust that gives all trust income to the surviving spouse for life, payable at least annually, and that must meet specific requirements found in the Internal Revenue Code is a

A) QTIP trust.
B) bypass trust.
C) discretionary trust.
D) Totten trust.

Question 19

Another name for a credit-shelter trust is

A) an A-B trust.
B) a bypass trust.
C) an exemption equivalent trust.
D) All of the answers are correct.

Question 20

In a charitable trust, the actual beneficiaries are indefinite and unascertainable.

Question 21

Assume a married couple's total assets are several million dollars and the husband dies, leaving everything to his wife. What will be the federal estate tax amount?

A) 0 percent.
B) 40 percent.
C) 50 percent.
D) 25 percent.

Question 22

A trust in which a fixed percentage (not less than 5 percent) of the value of the trust property is given at least annually to a beneficiary, and the entire remainder is given to charity is a(n)

A) charitable remainder annuity trust.
B) A-B trust.
C) charitable remainder unitrust.
D) QTIP trust.

Question 23

The spendthrift provision is built into

A) a sprinkling trust.
B) a QTIP trust.
C) a marital deduction trust.
D) None of the answers is correct.

Question 24

When money or property is left in trust to a charity and the charity ceases to exist, under this doctrine, if the court finds that the settlor had a general charitable intent, the trust fund will be turned over to another closely related charity:

A) Rule against perpetuities.
B) Crummy powers.
C) Cy pres doctrine.
D) Spendthrift.

Question 25

A rule providing that every interest in property is void unless it must vest, if at all, not later than 21 years after some life in being at the time of its creation is called the

A) doctrine of cy pres.
B) doctrine of public trusts.
C) rule against perpetuities.
D) rule against charitable remainders.

Question 26

Which of the following is NOT a way to distribute property to a surviving spouse under a marital deduction trust?

A) A credit-shelter trust.
B) An outright gift.
C) A general power of appointment.
D) A life estate.

Question 27

This type of trust is similar to an annuity trust but does not require the payment of a fixed amount each year to an income beneficiary:

A) A QTIP trust.
B) A unitrust.
C) A Crummey trust.
D) A charitable trust.

Question 28

Under the federal estate tax laws, property passing from a decedent to a surviving spouse is known as

A) an exemption equivalent.
B) a marital deduction.
C) a general power of appointment.
D) All of the answers are correct.

Question 29

To save federal estate taxes, a trust may distribute property to a surviving spouse by way of

A) a life estate with a general power of appointment.
B) a credit-shelter trust.
C) a QTIP trust.
D) All of the answers are correct.

Question 30

Which of the following statements about charitable trusts is true?

A) No one person can bring suit to enforce a charitable trust.
B) Gifts to charities are subject to federal estate tax.
C) A charitable trust is created for the benefit of an individual.
D) The actual beneficiaries are actual and ascertainable.