Deck 2: Estate Planning

Question 1

When dealing with property titling, what law is based on custom and general principles and in embodied in case law?

A)Community Law
B)Marriage Law
C)Common Law
D)Law of Matrimony

Answer 1

Common Law

Question 2

When dealing with property titling, what deals with property that has been acquired by the efforts of either spouse during their marriage while living in a community property state?

A)Community Property
B)Marriage Law
C)Common Law
D)Law of Matrimony

Answer 2

Community Property

Question 3

Betsy's husband just died. After 45 years of marriage she isn't very upset. But she is concerned that her stepchildren from his prior marriage will force her to sell the house they bought their first year of marriage to get a portion of the sale price. What is true of Betsy's situation?

A)The selling of her home is decided by what is said in her dead husband's will.
B)The selling of her home is decided by what is said within her dead husbands trust.
C)At the death of a co-owner, the decedent's interest automatically passes to the surviving owners.
D)All of the above.

Answer 3

At the death of a co-owner, the decedent's interest automatically passes to the surviving owners.

Question 4

Betsy and Mark is a married couple that just signed a document that can only be signed by them with respect to property. What did Betsy and Mark sign?

A)Joint tenancy with right of survivorship.
B)Tenancy in common.
C)Tenancy by the entireties.
D)Will

Question 5

Nancy is afraid that she will be hit by a car and be disable or incapable to act on her own behalf. She wants to plan for her children's guardianship. What parties is not involved with the process?

A)The ward.
B)The judge.
C)The guardian.
D)The state.

Question 6

Ted has millions of dollars and wants to spread his fortune to many different people when he dies. What is the preferred method for titling nonrelatives?

A)Joint tenancy with right of survivorship.
B)Tenancy in common.
C)Tenancy by the entireties.
D)Will

Question 7

Ted has determined that he wants to give millions of dollars away after he dies. He doesn't trust anyone so he decides to develop a trust. He already knows who he is giving his money too, what else must he determine?

A)The trustee
B)A lawyer will to take his money.
C)Who will sign the uniform Transfer to Minors Act.
D)He has determined all that he needs to.

Question 8

Lindy wishes to leave a trust for her niece under the Uniform Transfer to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). What should she know about these options?

A)UTMA was designed to replace UGMA.
B)A custodial gift may be created for only one person while a trust can provide for multiple beneficiaries.
C)UTMA allows any property interest to be transferred, including real property.
D)All of the above.

Question 9

Smith received documents that discuss the issues of Testate succession and Interstate succession that has him confused. What is this document about?

A)Law Operations
B)Tenancy in common
C)Probate
D)Ownership property

Question 10

Mr. Rich lived and died in Missouri and owns real estate in New Jersey. What should his will contain to address this issue?

A)Law Operations
B)Tenancy in common
C)Ancillary probate proceedings
D)Ownership property

Question 11

Tony wants to avoid both public proceedings and the need to determine the status of the principal when planning for incapacity planning. What is his best option for what he wants?

A)Conservatorship
B)Durable power of attorney
C)Living trust
D)None of the above

Question 12

According to the Certified Financial Planner Board of Standards, Inc. who is to explain to clients the estate planning process?

A)Accountant
B)Lawyer
C)Financial Planner
D)Investment Broker

Question 13

Joseph wants Margaret to handle everything when he dies. Margaret is a lawyer and has strong integrity. What would Margaret's title be once Joseph dies and she begins dealing with his affairs?

A)Fiduciary
B)Executor
C)Custodian
D)All of the above

Question 14

What term is defined as providing the testator with an opportunity to control the passing of his or her property and thus avoid intestacy?

A)Power of Attorney
B)Durable Feature
C)Wills
D)Transfer of Contract

Question 15

What term is defined as giving authority to another entity to act on the behalf of the individual and has a durable feature?

A)Power of Attorney
B)Durable Feature
C)Wills
D)Transfer of Contract

Question 16

Jeff is taking a test to become a financial planner. The test wants to know what a living will is also known as:

A)Trusts
B)Medical life-support directive
C)Grantor
D)General Powers

Question 17

Jack's daughter has creditors seeking money from her, over $70,000 is owed by his daughter. He is currently creating a will, what provision would Jack be wise to include?

A)Perpetuity Clause
B)Sprinkling Provision
C)Spendthrift Clause
D)Support Provision

Question 18

Carter needs a will written but he doesn't want to deal with all the standard formalities of witnesses - he has no friends. What type of will is best suited for Carter?

A)Nuncupative will
B)Pour-over will
C)Holographic will
D)None of the above.

Question 19

Joe doesn't want to be worried with issues concerning his estate and rather have someone else make decisions concerning the property. What does Joe need?

A)Power of Attorney
B)Crummey Provisions
C)Power of Appointment
D)Limited Power

Question 20

Janice doesn't want to pay taxes on their estate or on gifts. What power can she attempt to use?

A)Power of Attorney
B)Crummey Provisions
C)5 or 5 Power
D)Limited Power

Question 21

Judi is confused about taxes, gifts, and unified credit. She can't figure it all out. What would you tell her about unified credit?

A)The taxpayer has the right to pay taxes in lieu of using the unified credit.
B)Taxes due is not on the dollar-for-dollar basis.
C)The credit must be used the first time a gift tax or an estate tax is required to be paid.
D)All of the above.

Question 22

Paul placed a gift in an irrevocable trust so that it is converted to a present interest at time of withdrawal. What power is Paul using?

A)Power of Attorney
B)Crummey Provisions
C)5 or 5 Power
D)Limited Power

Question 23

Tracy is designing a gifting program and is concerned with the buildup of revenue in the estate and taxes. What would you recommend Tracy to do?

A)Give assets with high rates of return.
B)Give assets with low rates of return.
C)Give stagnant assets.
D)Opt for gifting installment obligations.

Question 24

Stock can be given as a gift. However, what percent of the adjusted gross estate must be kept to qualify for the Section 303 redemption?

A)40 percent.
B)35 percent.
C)50 percent.
D)10 percent.

Question 25

The term "gross-up" deals with the taxation of what?

A)Income
B)Gifts
C)Property costs
D)General taxation

Question 26

Joan and Seth decided to leave their only son a substantial gift of property and monies. They are not sure what to do to ensure compliance with filing requirements. What form must they fill out after giving a gift?

A)Form 717
B)Form 7089
C)Form 709
D)Form 734

Question 27

What is true of split gifts?

A)Available only to married couples who file a joint return.
B)Available only to married couples who file married but filing separately.
C)Available only to single individuals who file jointly.
D)Available only to legally separated couples who wish to gift.

Question 28

What are gifts made during life, which are either in excess of a donor's annual exemption or are not a present interest?

A)Net Gifts
B)Liability Gifts
C)Taxable Gifts
D)Voluntary Gifts

Question 29

What occurs when the donee agrees to pay any gift tax due?

A)Net Gifts
B)Liability Gifts
C)Taxable Gifts
D)Voluntary Gifts

Question 30

Jimmy wants to donate millions to a charity, but he is concerned about paying gift taxes. What should he know about this type of donation?

A)They must be non-qualifying organizations.
B)One can transfer to qualified charities without incurring federal gift tax.
C)The gift must be in the form of real estate.
D)All of the above.

Question 31

What is true of pooled income funds?

A)Additional contributions are allowed
B)Sprinkling is not allowed
C)The funds cannot invest in tax-exempt securities.
D)All of the above.

Question 32

Sally wants to reduce estate taxes by fixing the value of estate assets at current levels. What is this practice called?

A)Account Negotiation
B)Estate Freezing
C)Estate Negotiation
D)Account Freezing

Question 33

Sheila was is 96 years old and paid-off her mortgage 60 years ago. The price of the house was a whopping $23,000. The date of death is used for valuation purposes. At this time, if Sheila gifts her house to her grandson, what method would be used to determine federal transfer taxes?

A)Original market price
B)Fair market price
C)Above market price
D)Valuation tax price

Question 34

Peggy and Lenard, at their death, wish to transfer their property to their great-grandson, the only one they actually like. What will the IRS impose on the gift?

A)Settlement Tax
B)Inheritance Tax
C)Generation-skipping Transfer Tax
D)"Grandparent" Tax

Question 35

What type of trust gives a spouse a right to income, as well as access to principal for purposes of health, education, support, or maintenance, without the property being included in his or her estate at death?

A)Credit Trust
B)Minimization Trust
C)Bypass Trust
D)Foreign Tax Trust

Question 36

Property held in a trust is called the principle, regardless of type of property. A trust is to ensure beneficiaries receive property from the grantor. What is a trust to do with assets of the trust?

A)Hold the assets
B)Manage the assets
C)Distribute the assets
D)All of the above.

Question 37

Calvin wants to know the characteristics of a charitable remainder trust. What is true of these trusts?

A)There must be at least one non-charitable income beneficiary.
B)There must be at least two non-charitable income beneficiaries.
C)There must not be any no other entity beyond qualified charities.
D)None of the above.

Question 38

Craig discusses with his financial planner issues pertaining to time periods for a trust to terminate and be distributed. What is Craig discussing?

A)Rule against Perpetuities
B)Crummey Provisions
C)5 or 5 Power
D)Limited Power

Question 39

A trust is created to hold, manage, and distribute assets to beneficiaries as indicated by the grantor of the trust. There are three major parties to a trust and two principal forms of trusts. What is/are the primary reason (s) to transfer through trusts?

A)To provide for multiple beneficiaries.
B)To avoid probate.
C)Both A and B.
D)Neither A nor B.

Question 40

Matt doesn't own any property, but is worth millions that collects high levels of interest income. He wants to forward the interest income to beneficiaries. What type of trust does Matt need?

A)Simple Trust
B)Irrevocable Living Trust
C)Complex Trust
D)Revocable Trust

Question 41

What does the transfer of property to an irrevocable trust usually results in?

A)Taxable gift
B)Non-taxable gift
C)Rules against perpetuities
D)Rules for perpetuities

Question 42

What is the purpose of grantor retained income trusts (GRIT)?

A)To avoid paying all tax types
B)To avoid paying gift tax
C)To avoid paying estate tax
D)All of the above

Question 43

What is true of charitable remainder unitrusts?

A)Cannot hold tax-exempt securities.
B)Cannot hold sprinkling provisions.
C)The remainderman is not the charity.
D)None of the above.

Question 44

Samantha wants to have great flexibility of a trust she is considering creating and wants to determine the standard for incompetency. What would her best option to meet her needs?

A)Conservatorship
B)Durable power of attorney
C)Living trust
D)None of the above

Question 45

Marsha wants to a trust in which the management and distributions of terms are very detailed and would override any authority over trust property. What would be her best option?

A)Conservatorship
B)Durable power of attorney
C)Living trust
D)None of the above

Question 46

What is the distinguishing feature of charitable lead trusts?

A)They can hold tax-exempt securities.
B)Additional contributions are not allowed.
C)Must invade corpus when income is insufficient for payout.
D)The donor in the charitable lead trust gives away an income stream and receives a remainder interest.

Question 47

There are no amounts of property that may qualify for the marital deduction; however at the death of the husband the wife was given other property. The interest of the property transferred to another. What is governs this situation?

A)Terminal interest rule
B)Terminal interest dates
C)Terminal interest and payout exceptions
D)Terminal interest and exemptions

Question 48

What is true of IRC Section 2056 (d)?

A)It deals with American citizens.
B)It deals with minors.
C)It deals with noncitizen spouses.
D)None of the above.

Question 49

What type of agreement is a contract binding the owner of a business interest to sell the business interest for a specified or determined price at his or her death or disability?

A)Personal Holding Agreement
B)Stock Recapitalization
C)Partnership Capital Freeze
D)Buy-sell Agreement

Question 50

What transfer technique provides for payment of the purchase price over a period of years?

A)Private Annuities
B)Transfer of Trust
C)Buy-sell Agreements
D)Installment Notes

Question 51

Installment notes are transfer techniques that provide for payment of the purchase price over a period of years. What triggers a self-canceling installment note?

A)Death of the person holding the note.
B)The seller has changed their minds about the sell.
C)The buyer changes their mind about the purchase.
D)All of the above.

Question 52

Janis is exchanging an asset to Becky as an unsecured promise to pay an annuity of the life of the transfer. What is this transfer called?

A)Private Annuities
B)Transfer of Trust
C)Buy-sell Agreements
D)Installment Notes

Question 53

William and Bill jointly own a business. William hates Bill and had decided to sell his share of the business to Bill to avoid seeing him daily. However, he is concerned about gift taxation and their buy-sell agreement. Under what condition would there be owed taxes?

A)If William just gives his portion of the business to Bill.
B)If William sells to someone other than Bill.
C)If William pays under fair market value.
D)All of the above.

Question 54

Atticus just refused a broken down mansion due to the amount of work it needs. Now the original estate plan needs changing. What is the best option for post-mortem estate planning in this situation?

A)IRD tax deductions
B)Qualified Disclaimers
C)Both A and B
D)Neither A nor B

Question 55

Carolina has died and has opted to leave her closely held stock to a charity. The corporation wishes to buy the stock to gain increase power in decisions. The charity has agreed to take the cash. How will the proceeds be treated on the side of the corporation?

A)Dividends Income
B)Inheritance Income
C)Special Valuation Income
D)All of the above

Question 56

There are many ways to obtain deductions from and credits for estate taxes. What is/are a method (s)?

A)Inter-spousal Gifting
B)Foreign Death Taxes
C)Funeral, debts, and losses
D)All of the above

Question 57

Often there are situations that do not fit traditional situations or secession of inheritance and estate planning for these non-traditional relationships must supplied. There are four major non-traditional situations. Jason and Mike have been living together for thirty years. They know death will come sooner than later. What would be true of estate planning for this couple?

A)They are not eligible for martial deductions.
B)Liquidity is a primary consideration.
C)Wills containing specific bequests are very important.
D)All of the above.

Question 58

Which of the following might you work with to analyze estate liquidity?

A)Attorneys
B)Tax preparers
C)Insurance agents
D)All of the above

Question 59

Which of the following is NOT a source of estate liquidity?

A)Life insurance proceeds
B)Marketable securities
C)The decedent's accounts payable
D)Other trusts

Question 60

Which of the following is true regarding planning for estate liquidity?

A)You should calculate the liquidity needs over the course of one year at a time
B)The IRS allows for estate tax payment deferral elections, which you can use to improve liquidity
C)The decedent's final expenses should be paid before forming an estate
D)The best estate liquidity strategies are uncompromising

Question 61

What type of spouse does not qualify for the unlimited marital deduction?

A)A second spouse
B)A same-sex spouse
C)A non-U.S. citizen's spouse
D)A spouse of fewer than 2 years

Question 62

Which of the following is considered a traditional relationship?

A)Victor and Rebecca have been legally married for thirty years. Rebecca was previously divorced. She pays alimony to her previous spouse, with whom she had two children with.
B)Robert and Patricia have been legally married for four years. They were both previously married and divorced and have no children or any other lasting ties with their former spouses.
C)Matthew and Gail have been living together for fifty years, but have never been legally married. Neither of them has a previous spouse or any children.
D)Peter and Susan have been married for ten years. Susan was previously married and shares custody of her son with her former spouse.

Question 63

What is the percentage of first marriages that end in divorce?

A)10%
B)25%
C)50%
D)60%