AFC - Accredited Financial Counselor Retirement and Estate Planning 2

Question 1

A client dies without a will. What legal process determines how their assets are distributed?

Accepted Answer

Probate court applies intestacy laws

Answer

When someone dies intestate, the probate court applies state intestacy laws dictating distribution based on a statutory hierarchy of heirs.

Question 2

What is the primary advantage of a revocable living trust over a will?

Accepted Answer

Trust assets avoid probate, enabling faster and more private transfer to beneficiaries

Answer

A revocable living trust allows assets to pass directly to beneficiaries without going through probate court.

Question 3

A client named their estate as beneficiary of their 401(k). Why is this problematic?

Accepted Answer

Assets passing through the estate are subject to probate, lose stretch distribution options, and are exposed to creditors

Answer

Naming the estate forces retirement assets through probate, eliminates stretch distribution options, and exposes assets to estate creditors.

Question 4

What is the current federal estate tax exemption and what percentage of estates does it typically affect?

Accepted Answer

Approximately $13.6 million per person; less than 0.1%

Answer

The exemption is approximately $13.6 million per individual, meaning fewer than 0.1% of estates owe federal estate tax.

Question 5

What is the difference between an estate tax and an inheritance tax?

Accepted Answer

An estate tax is levied on the total estate before distribution; an inheritance tax is levied on each beneficiary based on what they receive

Answer

An estate tax is on the total estate value; an inheritance tax is on individual beneficiaries based on amount received and relationship to the deceased.

AFC - Accredited Financial Counselor Practice Test

AFC - Accredited Financial Counselor Practice Test

AFC - Accredited Financial Counselor Retirement and Estate Planning 2