Estate Planning and Trusts Flashcards
6 cards from real AAFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Estate Planning and Trusts flashcards as text
Which document directs how a deceased person's assets are to be distributed and names an executor to administer the estate?
Answer: Last will and testament
A last will and testament is a legal document specifying how a decedent's probate assets will be distributed and naming an executor responsible for administering the estate through probate.
Which type of trust allows the grantor to retain control and revoke the trust during their lifetime while avoiding probate at death?
Answer: Revocable living trust
A revocable living trust holds assets during the grantor's lifetime and distributes them at death without going through probate, providing privacy and continuity of management.
An irrevocable life insurance trust (ILIT) is primarily used to exclude life insurance proceeds from which tax?
Answer: Federal estate tax
An ILIT owns the life insurance policy outside the insured's estate, so death benefit proceeds are excluded from the gross estate and avoid federal estate tax.
The federal estate tax exemption in 2024 allows an individual to transfer up to approximately how much without incurring federal estate tax?
Answer: $13.61 million
The federal estate and gift tax exemption for 2024 is $13.61 million per individual (indexed for inflation), scheduled to sunset to approximately $7 million at end of 2025 without legislative action.
Which trust strategy transfers appreciating assets out of an estate by requiring the trust to pay the grantor a fixed annuity for a set term?
Answer: GRAT
A grantor retained annuity trust (GRAT) transfers the appreciation of assets in excess of the IRS hurdle rate (Section 7520 rate) to beneficiaries gift-tax free at the end of the trust term.
Probate is a legal process that validates a will and distributes estate assets under court supervision, which is typically known for being what?
Answer: Costly, time-consuming, and public
Probate proceedings are often lengthy, can be expensive due to court and attorney fees, and create a public record of estate assets and beneficiaries.