CAP CAP Estate Planning & Wealth Transfer 2

Question 1

Which of the following best describes 'portability' in the context of federal estate planning?

Accepted Answer

A surviving spouse's ability to use the deceased spouse's unused estate tax exemption

Answer

Portability allows a surviving spouse to elect to use any unused federal estate tax exemption from the deceased spouse, effectively doubling the shelter available.

Question 2

A donor transfers appreciated farmland to a Charitable Remainder Trust. What is a key income tax benefit at the time of transfer?

Accepted Answer

The donor receives a partial charitable deduction for the present value of the remainder interest

Answer

When funding a CRT, the donor receives an income tax deduction equal to the IRS-calculated present value of the remainder interest passing to charity.

Question 3

In estate planning, what does 'step-up in basis' mean for inherited assets?

Accepted Answer

The heir's cost basis is reset to the fair market value at the decedent's date of death

Answer

Inherited assets receive a stepped-up basis equal to the fair market value on the date of death, eliminating capital gains tax on pre-death appreciation.

Question 4

A philanthropic advisor suggests using IRD (Income in Respect of a Decedent) assets for charitable bequests. What is the primary reason for this strategy?

Accepted Answer

IRD assets such as traditional IRAs are subject to both estate and income tax, making them most tax-efficient to leave to charity

Answer

IRD assets like traditional IRAs are taxable as ordinary income when received by individual heirs but are income-tax-free when paid to a qualifying charity.

Question 5

Which of the following is NOT a characteristic of a Grantor Retained Unitrust (GRUT)?

Accepted Answer

The grantor receives a fixed dollar annuity regardless of trust performance

Answer

A GRUT pays a fixed percentage of the trust's annually revalued assets, so payouts vary with performance—unlike a GRAT, which pays a fixed dollar annuity.

(CAP) Certified Philanthropic Advisor Practice Test

(CAP) Certified Philanthropic Advisor Practice Test

CAP CAP Estate Planning & Wealth Transfer 2