AEP Trust Administration & Management Flashcards
6 cards from real AEP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 AEP Trust Administration & Management flashcards as text
Which IRC section governs the income taxation of grantor trusts, causing trust income to be taxed to the grantor rather than the trust?
Answer: IRC §671–679
IRC §§671–679 (the grantor trust rules) cause a trust's income, deductions, and credits to be attributed to the grantor for federal income tax purposes when certain retained powers exist.
Upon a grantor's death, the assets of a revocable trust receive a stepped-up income tax basis under which IRC provision?
Answer: IRC §1014
IRC §1014 provides that assets included in a decedent's gross estate receive a new basis equal to fair market value at the date of death, eliminating embedded capital gains.
A trustee who fails to diversify trust investments without adequate justification may be liable for breach of:
Answer: The duty to prudently invest under the Uniform Prudent Investor Act
The Uniform Prudent Investor Act requires trustees to diversify trust investments unless special circumstances justify non-diversification, making failure to diversify a potential breach.
An inter vivos trust created during the grantor's lifetime that cannot be changed or revoked is classified as:
Answer: Irrevocable inter vivos trust
An irrevocable inter vivos trust is established during the grantor's lifetime and, once executed, generally cannot be modified or terminated by the grantor.
Which process allows a trustee to transfer trust assets from an old irrevocable trust into a new trust with more favorable terms without requiring court approval in many states?
Answer: Trust decanting
Trust decanting allows a trustee with discretionary distribution authority to 'pour' assets from an existing irrevocable trust into a new trust with updated provisions.
When a trust terminates and the trustee distributes remaining assets to beneficiaries, the trustee should first obtain which document to protect against future claims?
Answer: A signed receipt and release from each beneficiary
Obtaining a signed receipt and release from each beneficiary acknowledges distribution and releases the trustee from further liability related to trust administration.