Question 1

How many months after your death is the federal estate tax due and payable in cash?

Accepted Answer

The federal estate tax is due and payable in cash within 9 months after the individual's death.

Question 2

Gary Ruhle has assets worth $2,400,000. Since he plans to travel and does not want to oversee these assets, he has created a legal arrangement so the assets can be managed by an officer of his local bank. What type of legal arrangement has he most likely made?

Accepted Answer

Gary Ruhle has most likely created a trust agreement to have his assets managed by an officer of his local bank. A trust agreement is a legal arrangement in which a trustee manages assets on behalf of a beneficiary or beneficiaries, according to the terms of the trust agreement. This allows individuals like Gary Ruhle to have their assets managed and protected while they are unable to oversee them personally.

Question 3

Which of the following would be a benefit of establishing a trust?

Accepted Answer

Establishing a trust can provide multiple benefits, including reducing estate taxes, avoiding probate, transferring assets immediately to beneficiaries, providing regular income while freeing the grantor from managing assets, and ensuring that property serves a desired purpose after death. Therefore, the best answer is E - a trust can do everything listed in the other answers.

Question 4

Sally Forth has a trust that she can end at any time she wants. What type of trust does Sally have?

Accepted Answer

A revocable trust is a trust that can be changed or terminated by the trustor at any time during their lifetime. Sally Forth has the ability to end her trust whenever she wants, making it a revocable trust.

Question 5

In what type of joint ownership may neither spouse sell the property without the consent of the other?

Accepted Answer

Tenancy by the entirety is a type of joint ownership where a married couple jointly owns the property, and neither spouse can sell it or make decisions about it without the consent of the other. This means that both spouses have equal ownership rights over the property, and it cannot be transferred or sold to third parties without the agreement of both spouses.

Question 6

A federal and state tax levied on the privilege of making gifts to others is called a(n) ____________ tax.

Accepted Answer

The tax levied on the privilege of making gifts to others is called a gift tax. Estate and inheritance taxes are levied upon the transfer of property upon an individual's death, while trust income tax is levied on income earned by a trust.

Question 7

A state tax levied on the right of an heir to receive all or part of the estate and life insurance proceeds of a deceased person is called a(n) ____________ tax.

Accepted Answer

An inheritance tax is a state tax imposed on the right of an heir to receive all or part of the estate and life insurance proceeds of a deceased person. This tax is levied at the state level and can vary depending on the state's tax laws. Other options like estate income, trust income, gift would not be the appropriate term for this type of tax. The term "estate" is used for the entire property a person leaves behind, while "inheritance" is used for the right of an heir to receive a part of that property.

Question 8

George Smith worries that his deteriorating health is going to make it difficult for him to conduct his day-to-day business. He wants to grant his nephew, Brandon Smith, the ability to act on his behalf. To do this, what document would he most likely need?

Accepted Answer

George Smith would most likely need a durable power of attorney to grant his nephew, Brandon Smith, the ability to act on his behalf. This legal document allows George to appoint someone to make decisions on his behalf if he becomes incapacitated or unable to make decisions for himself. The power of attorney can be made durable, meaning it remains in effect even if George becomes incapacitated. This document would give Brandon the ability to manage George's finances and make health care decisions for him.

Question 9

The American Taxpayer Relief Act of 2012 provides a permanent gift and estate tax exemption of how much for individuals?

Accepted Answer

The American Taxpayer Relief Act of 2012 provides a permanent gift and estate tax exemption of $5.25 million for individuals.

Question 10

Which of the following would keep you from being an executor of a will?

Accepted Answer

Having been convicted of a felony may disqualify someone from being an executor of a will in some jurisdictions.

Question 11

Advance directives are legal documents that allow you to state what kind of health care you want if you were too ill to speak for yourself. Advance directives most often include which of the following?

Accepted Answer

Advance directives can include multiple provisions, such as a living will (which outlines the types of medical interventions you do or do not want), a health care proxy (which designates someone to make medical decisions on your behalf if you are unable to), and/or a durable power of attorney (which designates someone to manage your financial affairs if you are unable to). A letter of last instruction is not typically included in advance directives as it is not a legally-binding document.

Question 12

A federal tax levied on the right of a deceased person to transmit his or her property and life insurance at death is called a(n) ____________ tax.

Accepted Answer

The term used for a federal tax levied on the right of a deceased person to transmit his or her property and life insurance at death is an estate tax.

Question 13

A simple document stating that anything you may have neglected to place in your trust during your lifetime should be placed in it at your death is called a:

Accepted Answer

A pourover will is a document that directs any assets that are not already in the trust to "pour over" into the trust upon the individual's death. This ensures that all assets are properly distributed according to the individual's wishes and are protected by the trust.

Question 14

Which of the following would keep you from being an executor of a will?

Accepted Answer

Most jurisdictions require an executor to be a legal adult, which is typically 18 years of age or older, making being 16 years of age a disqualifying factor.

Question 15

Gerald Wilkins owns a home worth $250,000, a car worth $15,000, various investments worth $600,000 and other personal assets worth $25,000. He still owes $125,000 on his mortgage and $5,000 on a car loan. The probate and administration costs of his estate are estimated at $5,000. What is his estimated net taxable estate?

Accepted Answer

The answer of Gerald Wilkins owns a home worth $250,000,...

Question 16

Maryanne Strothman wants to leave some words of encouragement and spiritual advice to her children to encourage their faith in the event that something happens to her. What type of document would be best for her to prepare?

Accepted Answer

An ethical will is a document in which a person passes on their values, beliefs, and life lessons to their loved ones, typically before or after their death. It is not a legal document, but rather a personal letter or statement that reflects the writer's spiritual and emotional legacy. An ethical will would be the best choice for Maryanne Strothman to leave her words of encouragement and spiritual advice to her children.

Question 17

As of 2013, what is the maximum yearly amount that an individual can give as a gift without incurring gift tax liability or having to report the gift to the IRS?

Accepted Answer

As of 2013, the maximum yearly amount that an individual can give as a gift without incurring gift tax liability or having to report the gift to the IRS is $14,000. Therefore, option B is the correct answer. Options A, C, D, and E are all incorrect.

Question 18

In what type of ownership is each individual considered to own a proportionate share for tax purposes with only your share being included in your estate?

Accepted Answer

In tenants in common ownership, each individual owns a proportionate share and only their share is included in their estate for tax purposes. The other options do not fit this description.

Question 19

A surgeon who will soon finish paying off college loans might want to set up a(n):

Accepted Answer

The answer of A surgeon who will soon finish paying...

Question 20

Which of the following is not a true statement about a holographic will?

Accepted Answer

A holographic will is a handwritten will that does not require an attorney. Therefore, statement C is not true.

Quiz 19: Estate Planning

How many months after your death is the federal estate tax due and payable in cash?

Gary Ruhle has assets worth $2,400,000. Since he plans to travel and does not want to oversee these assets, he has created a legal arrangement so the assets can be managed by an officer of his local bank. What type of legal arrangement has he most likely made?

Which of the following would be a benefit of establishing a trust?

Sally Forth has a trust that she can end at any time she wants. What type of trust does Sally have?

In what type of joint ownership may neither spouse sell the property without the consent of the other?

A federal and state tax levied on the privilege of making gifts to others is called a(n) ____________ tax.

A state tax levied on the right of an heir to receive all or part of the estate and life insurance proceeds of a deceased person is called a(n) ____________ tax.

George Smith worries that his deteriorating health is going to make it difficult for him to conduct his day-to-day business. He wants to grant his nephew, Brandon Smith, the ability to act on his behalf. To do this, what document would he most likely need?

The American Taxpayer Relief Act of 2012 provides a permanent gift and estate tax exemption of how much for individuals?

Which of the following would keep you from being an executor of a will?

Advance directives are legal documents that allow you to state what kind of health care you want if you were too ill to speak for yourself. Advance directives most often include which of the following?

A federal tax levied on the right of a deceased person to transmit his or her property and life insurance at death is called a(n) ____________ tax.

A simple document stating that anything you may have neglected to place in your trust during your lifetime should be placed in it at your death is called a:

Which of the following would keep you from being an executor of a will?

Maryanne Strothman wants to leave some words of encouragement and spiritual advice to her children to encourage their faith in the event that something happens to her. What type of document would be best for her to prepare?

As of 2013, what is the maximum yearly amount that an individual can give as a gift without incurring gift tax liability or having to report the gift to the IRS?

In what type of ownership is each individual considered to own a proportionate share for tax purposes with only your share being included in your estate?

A surgeon who will soon finish paying off college loans might want to set up a(n) :

Which of the following is not a true statement about a holographic will?