Question 1

All of the following are important documents for estate planning, except

Accepted Answer

A baptismal certificate is not typically relevant to estate planning, which focuses on documents like wills, trusts, and powers of attorney.

Question 2

Your brother is in a serious auto accident and has become incapacitated. In order for you to be able to make decisions for his medical care, he would need to have created a

Accepted Answer

A durable power of attorney for health care allows someone to make medical decisions on behalf of an incapacitated person.

Question 3

Name three types of trusts.

Accepted Answer

The answer of Name three types of trusts....

Question 4

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

Accepted Answer

The answer of A trust that is created by the...

Question 5

A tax-free gift of up to ________ per year in 2018 can be given to another person.

Accepted Answer

In 2018, the annual exclusion for gifts was $15,000 per recipient. This means an individual could give up to $15,000 to another person without having to pay gift tax or report the gift to the IRS.

Question 6

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

Accepted Answer

People whose estate value exceeds the tax-free limit benefit from giving annual individual gifts up to the allowable amount to reduce the size of their estate, potentially lowering estate taxes upon their death.

Question 7

Use the following two columns of items to answer the matching questions below:
-trust
A)a legal document in which the grantor transfers assets to the trustee who manages them for the beneficiaries
B)the person who creates a trust

Accepted Answer

The answer of Use the following two columns of items...

Question 8

A legal way to move assets from the parents to the children in order to avoid estate taxes upon the parents' death is to

Accepted Answer

The annual gift tax exclusion allows an individual to give up to $15,000 per year to another person without having to pay gift tax or report the gift to the IRS. This amount can be doubled if each parent gives separately, allowing a combined gift of up to $30,000 per child per year without incurring gift taxes.

Question 9

If your estate is $500,000 over the maximum tax-exempt limit, one way to avoid paying estate tax on the excess would be to

Accepted Answer

Making a charitable contribution of $500,000 from the estate effectively reduces the taxable portion of the estate, as charitable contributions are deductible from the estate's value before estate taxes are calculated. This is a legal way to reduce or eliminate the estate tax on the excess amount.

Question 10

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

Accepted Answer

A living will is a legal document that allows individuals to outline their preferences for end-of-life medical care in case they become unable to communicate their decisions due to illness or incapacity.

Question 11

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

Accepted Answer

A living will is indeed a legal document that allows individuals to outline their preferences regarding medical treatment and care in the event they become unable to communicate or make decisions due to mental or physical incapacity.

Question 12

A married couple with four children may give tax-free gifts up to ________ each year to their children, effective 2018.

Accepted Answer

The answer of A married couple with four children may...

Question 13

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

Accepted Answer

A durable power of attorney for health care specifically grants someone the authority to make health care decisions on your behalf if you are unable to do so.

Question 14

Use the following two columns of items to answer the matching questions below:
-grantor
A)a legal document in which the grantor transfers assets to the trustee who manages them for the beneficiaries
B)the person who creates a trust

Accepted Answer

The answer of Use the following two columns of items...

Question 15

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

Accepted Answer

A power of attorney allows someone to make decisions on your behalf while you are alive but does not extend beyond your death to dictate the distribution of your assets; that is the role of a will or estate plan.

Question 16

Money donated from an estate to charitable organizations is

Accepted Answer

Donations to charitable organizations from an estate are not subject to estate taxes, as they are typically deductible from the gross estate, potentially reducing the estate tax liability.

Question 17

The recipient of a gift within the allowable amount

Accepted Answer

Gifts within the allowable amount are not subject to taxes, and the recipient does not have to report the gift. This is because the responsibility for any gift tax falls on the giver, not the recipient, and only if the gift exceeds the annual or lifetime exclusion amounts set by tax regulations.

Question 18

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

Accepted Answer

A power of attorney is a legal document that grants someone else the authority to make decisions on your behalf if you are unable to do so.

Question 19

A standard family trust is all of the following, except

Accepted Answer

A standard family trust can indeed be established for children in a family (A), can be created by wills (B), and is often used to minimize taxes (C). However, it is not necessarily a living trust (D), as it can be established through a will after someone's death, making it a testamentary trust rather than a living (inter vivos) trust.

Question 20

In which of the following does the grantor no longer own the assets of the trust?

Accepted Answer

In an irrevocable living trust, the grantor transfers assets into the trust and relinquishes all rights and control over those assets, effectively removing them from the grantor's ownership. Unlike a revocable trust, the terms of an irrevocable trust generally cannot be changed once it is established, making the transfer of ownership permanent.

Quiz 20: Estate Planning