Deck 20: Estate Planning

Question 1

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.

Answer 1

related to all beneficiaries listed in it.

Question 2

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

Answer 2

False

Question 3

________ 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

Answer 3

Estate planning

Question 4

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

A)To distribute your assets as you wish
B)To avoid paying any estate taxes
C)To reduce the costs being imposed on the estate
D)To appoint a legal guardian for children

Question 5

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

Question 6

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

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

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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 from taxes.

Question 15

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

Question 16

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

Question 17

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 18

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

Question 19

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 writing the will must be sober at the time the will is written

Question 20

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 21

If the executor of a will is not able to perform the appointed tasks,then

A)the surviving spouse should take over and settle the will.
B)an attorney should be hired.
C)a trusted relative completes the duties.
D)the will becomes invalid.

Question 22

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 23

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 24

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

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

Question 25

If a person dies before they prepare a will,they are said to die ________.

Question 26

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 need of the heirs.

Question 27

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 28

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

A)It should provide current information on the estate.
B)It should provide current financial advisors.
C)It should legally determine your heirs.
D)It should explain your rationale of the bequests.

Question 29

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 30

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

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

Question 31

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

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

Question 32

The key components of a will are all of the following except

A)distribution of the estate.
B)naming of the executor.
C)appointing of a guardian.
D)spelling out funeral arrangements.

Question 33

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

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

Question 34

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 35

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

Question 36

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 37

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 38

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 39

A simple will would not be appropriate if

A)the estate is small.
B)there is only one child.
C)the person is married.
D)the entire estate is to go to the spouse.

Question 40

Which of the following is not accomplished during probate?

A)Payment of claims against the estate
B)The validation of the will
C)Determination of legal heirs
D)Heirs are allowed to trade assets that are left to them

Question 41

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

Question 42

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

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

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 45

Which of the following is true about an estate and 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 46

Under current tax laws,a person may give any other person up to $13,000 per year in cash or other assets and neither the giver nor receiver of these gifts has a tax liability for them.

Question 47

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 48

A revocable living trust is one that cannot be changed during a person's lifetime.

Question 49

A large portion of an estate is exempt from estate taxes.The portion over the next few years is

A)decreasing.
B)increasing.
C)staying the same.
D)being eliminated.

Question 50

When estate taxes are levied they start in the ________ percent tax bracket.

A)5 to 15
B)20 to 25
C)30 to 35
D)45 to 48

Question 51

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

Question 52

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

Question 53

For the purpose of avoiding estate taxes,estate planning involves all but

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

Question 54

The tax-free portion of an estate is quite high-$3.5 million.

Question 55

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

Question 56

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

A)Assets including a home are included.
B)Liabilities including home mortgage are subtracted.
C)Funeral and administrative expenses are subtracted.
D)Life insurance proceeds are not included.

Question 57

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

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

Question 58

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

Question 59

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

Question 60

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 61

What three types of planning help you protect your wealth?

Question 62

A ________ is a legal document granting a person the power to make specific decisions for you in the event that you are incapable.

A)letter of instruction
B)power of attorney
C)will
D)trust

Question 63

The recipient of gift income within the allowable amount

A)does not have to report gift income and is not subject to taxes.
B)does have to report gift income and is subject to gift taxes.
C)is taxed at the capital gains rate.
D)is taxed at the ordinary income rate.

Question 64

A legal document granting a person the power to make specific health care decisions for you is called a

A)living will.
B)power of attorney.
C)durable power of attorney for health care.
D)health care directive.

Question 65

Name three types of trusts.

Question 66

A married couple with four children may give gifts up to ________ each year to their children.

A)$44,000
B)$66,000
C)$88,000
D)$104,000

Question 67

A ________ trust is created by a will.

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

Question 68

Estate planning decisions are affected by what five areas?

Question 69

A trust that is created by the terms of the will is called a(n)________ trust.

Question 70

A power of attorney can give someone you designate the power to make all of the following decisions except

A)sell stock in your portfolio.
B)authorize that no extraordinary effort be made to prolong your life.
C)decide who gets your coin collection after you die.
D)select a nursing home for you to live in.

Question 71

A living will is a simple legal document in which individuals specify their preferences if they become mentally or physically disabled.

Question 72

In which of the following do you no longer own the assets of the trust?

A)Revocable living trust
B)Irrevocable living trust
C)Standard family trust
D)Credit shelter trust

Question 73

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

A)revocable
B)living
C)irrevocable
D)standard family

Question 74

A tax-free gift of up to ________ per year can be given to another person.

A)$1,000
B)$5,000
C)$13,000
D)$20,000

Question 75

The giving of annual individual gifts up to the allowable amount is especially important for

A)those without a will.
B)people in high income tax brackets.
C)people whose estate value exceeds the tax-free limit.
D)those with smaller estates.

Question 76

A ________ is a legal document in which individuals specify their preferences if they become mentally or physically disabled.

A)living trust
B)living will
C)testamentary trust
D)testamentary will

Question 77

Money donated from an estate to charitable organizations is

A)not subject to estate taxes.
B)added back into the value of an estate for tax purposes.
C)an itemized deduction on the federal income tax return of the deceased.
D)allowed a 50% credit against the value of the estate.

Question 78

A standard family trust is all of the following except

A)it is established for children in a family.
B)it is created by wills.
C)it is used to minimize taxes.
D)it is a living trust.