AEP Estate Planning Fundamentals 3

Question 1

What is the primary purpose of a spendthrift clause in a trust?

Accepted Answer

To prevent beneficiaries from assigning their interest and protect it from creditors

Answer

A spendthrift clause restricts a beneficiary's ability to transfer their interest and shields trust assets from the beneficiary's creditors.

Question 2

Under the Uniform Disposition of Community Property Act, how is community property treated when a couple moves from a community property state to a common law state?

Accepted Answer

It retains its community property character

Answer

The UDCPA, adopted by some common law states, preserves the community property character of assets acquired in a community property state.

Question 3

Which federal tax provision allows a surviving spouse to use any unused estate tax exemption of the deceased spouse?

Accepted Answer

Portability

Answer

Portability, introduced in 2010, allows a surviving spouse to elect to use the deceased spouse's unused estate tax exemption (DSUE).

Question 4

A grantor creates an irrevocable life insurance trust (ILIT) and transfers a policy into it. What must occur to exclude the death proceeds from the grantor's gross estate?

Accepted Answer

The grantor must survive the transfer by 3 years

Answer

Under IRC §2035, if the grantor transfers a life insurance policy to an ILIT and dies within 3 years, the proceeds are included in the gross estate.

Question 5

What distinguishes a per stirpes distribution from a per capita distribution among beneficiaries?

Accepted Answer

Per stirpes distributes by bloodline branches; per capita distributes equally among all living descendants at the same generation level

Answer

Per stirpes divides an estate by family branches so descendants of a deceased heir step into their parent's share; per capita distributes equally among all living members of a generation.

(AEP) Accredited Estate Planner Practice Test

(AEP) Accredited Estate Planner Practice Test

AEP Estate Planning Fundamentals 3