Practice Test Geeks(AEP) Accredited Estate Planner Practice Test
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Estate Planning Fundamentals Flashcards

7 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 7 Estate Planning Fundamentals flashcards as text

  1. Which trust structure is commonly used to hold life insurance outside of the taxable estate while providing liquidity to pay estate taxes?

    Answer: Irrevocable life insurance trust (ILIT)

    An ILIT owns life insurance policies so proceeds are excluded from the insured's estate, and the trustee can use proceeds to provide estate liquidity.

  2. When a decedent's estate exceeds the federal estate tax exemption, what is the marginal federal estate tax rate applied to the excess?

    Answer: 40%

    The federal estate tax applies a flat 40% rate on taxable estates exceeding the applicable exclusion amount.

  3. Under IRC §1014, what is the general income tax basis of property inherited from a decedent?

    Answer: The fair market value at the date of death

    IRC §1014 provides that inherited property receives a stepped-up (or stepped-down) basis equal to its fair market value at the decedent's date of death.

  4. A Qualified Domestic Trust (QDOT) is specifically designed for situations where the surviving spouse is:

    Answer: A non-U.S. citizen

    A QDOT allows a non-citizen surviving spouse to qualify for the marital deduction while ensuring the IRS can collect estate taxes before assets leave U.S. jurisdiction.

  5. Which planning strategy involves selling appreciated assets to an intentionally defective grantor trust (IDGT) in exchange for a promissory note?

    Answer: Installment sale to an IDGT

    An installment sale to an IDGT allows the grantor to freeze the value of assets for estate tax purposes while future appreciation passes to heirs gift-tax free.

  6. What is the primary benefit of titling assets as community property with right of survivorship (CPWROS) compared to joint tenancy for a married couple?

    Answer: Both spouses' shares receive a full step-up in basis at the first death

    CPWROS gives both the deceased and surviving spouse's halves a stepped-up basis at the first death, while joint tenancy provides a step-up only on the deceased's half.

  7. Which document expresses a person's wishes regarding end-of-life medical treatment but does NOT appoint an agent to act on their behalf?

    Answer: Living will (advance directive)

    A living will states the individual's own medical wishes regarding life-sustaining treatment but does not designate a decision-making agent.