Question 1

Which of the following items is not of note for tax purposes?

Accepted Answer

The answer of Which of the following items is not...

Question 2

In 2016,an individual could give away up to what amount without paying a gift tax?

Accepted Answer

In 2016, an individual could give away up to $14,000 to another person without paying a gift tax. Any amount given above $14,000 would be subject to gift tax.

Question 3

A(n)________ is a document that expresses your wishes regarding medical treatment in the event of incapacitation.

Accepted Answer

An advance directive is a legal document that specifies the medical treatment you would like to receive or not receive if you become unable to make decisions for yourself. It can include instructions for end-of-life care, such as whether you would like to be kept alive through artificial means if you are in a vegetative state or have a terminal illness. It may also appoint a healthcare proxy or durable power of attorney for healthcare to make medical decisions on your behalf. An estate plan typically refers to a set of legal documents that outline how your assets will be distributed after your death, and a power of attorney grants someone legal authority to act on your behalf in financial or legal matters.

Question 4

You give $1,000,000 to your college in an irrevocable trust with the stipulation that you receive the earnings from the gift.You are guaranteed an annual 5% return on your investment.What will your income be from your gift?

Accepted Answer

The annual income from the gift will be 5% of $1,000,000, which is $50,000. This income is guaranteed and not affected by any taxes or marginal tax rates.

Question 5

What must you do to deduct donations to a political campaign from your taxes?

Accepted Answer

You are not able to deduct donations to a political campaign. According to the IRS, political campaign contributions are not tax-deductible.

Question 6

Steve died in a car accident.He never had a will made,so he died ________.

Accepted Answer

When someone dies without a will, they are said to have died intestate.

Question 7

A person who has made a legally valid will is ________.

Accepted Answer

A person who has made a legally valid will is referred to as testate. Intestate refers to a person who has not created a valid will before their death. Relaxed and impoverished are not relevant terms in this context.

Question 8

Which of the following is an executor allowed to do?

Accepted Answer

An executor is responsible for distributing the assets of the estate according to the will, but cannot contradict the will or make final decisions on burial details unless specified in the will.

Question 9

What documents should not be kept in your safety deposit box?

Accepted Answer

Life insurance policies and your will should not be kept in a safety deposit box because after death, the box may be sealed temporarily, making it difficult for your heirs or executor to access these important documents when they are most needed.

Question 10

Which of the following can you not deduct from your income taxes?

Accepted Answer

The cost of a dinner at a benefit is not deductible as a charitable contribution to the extent of the fair market value of the benefits received. In other words, if you receive a meal or other goods and services in return for your contribution, you can only deduct the amount that exceeds the value of the benefit received.

Question 11

A(n)________ trust is a trust for the benefit of the spouse and/or children that allows you to avoid paying estate taxes on life insurance proceeds owned within the trust.

Accepted Answer

An irrevocable trust, once established, cannot be altered or terminated by the grantor. When life insurance proceeds are owned by an irrevocable trust, they are not considered part of the estate and thus are not subject to estate taxes, benefiting the spouse and/or children financially.

Question 12

What happens if you die without a will?

Accepted Answer

If you die without a will, the court will determine who gets your assets according to state intestacy laws. This can result in your assets being distributed in a way that may not align with your wishes. It is best to have a will to ensure your assets are distributed as you desire.

Question 13

A(n)________ is a document that outlines your preferences or your directions for the administration and the withdrawal or withholding of life-sustaining medical treatment in the event of terminal illness or permanent unconsciousness.

Accepted Answer

The answer of A(n)________ is a document that outlines your...

Question 14

To qualify for a deduction,which of the following is not true when making a donation?

Accepted Answer

Works of art must be valued by a qualified appraiser if they are worth more than a certain amount, not at garage sale prices, to qualify for a tax deduction.

Question 15

What is it called when someone dies without having a valid will?

Accepted Answer

When someone dies without having a valid will, it's called dying intestate.

Question 16

A letter to your heirs and your executor outlining your wishes for your funeral arrangements,who to notify in the event of your death,and other wishes is called a

Accepted Answer

A letter to your heirs and executor outlining your wishes for funeral arrangements and who to notify is called a letter of intent. This is separate from a will, which specifically addresses the distribution of assets after death. A bypass trust is a type of estate planning tool used to minimize estate taxes, and being "testate" simply means that a person has a valid will in place. Therefore, the best choice for this question is C) letter of intent.

Question 17

A(n)________ is a legal document that designates another person to act on your behalf.

Accepted Answer

The correct answer is a power of attorney, which allows someone else to act on your behalf in legal, financial, or medical matters. Advance directives and living wills are also important legal documents related to healthcare decisions, but they specifically address end-of-life care and treatment preferences. A durable power of attorney for healthcare is a specific type of power of attorney that allows someone to make healthcare decisions on your behalf if you are unable to do so.

Question 18

A charitable contribution is tax deductible if ________.

Accepted Answer

A charitable contribution is tax deductible only when it is made to a non-profit organization that is recognized by the IRS as a tax-exempt organization. Donations made to individuals, political campaigns, or donating your time are not tax deductible.

Question 19

In a Roth 401(k)plan,________.

Accepted Answer

In a Roth 401(k) plan, the money you put in is not taxed when withdrawn, as it is taxed before being contributed. This can provide tax-free income during retirement, unlike a traditional 401(k) where taxes are paid when funds are withdrawn.

Question 20

A(n)________ becomes effective upon you becoming incompetent or unable to manage your affairs.

Accepted Answer

The answer of A(n)________ becomes effective upon you becoming incompetent...

Quiz 16: Retirement and Estate Planning