CEA CEA Beneficiary Designations & Account Titling 2 — Questions and Answers
Question 1: Which of the following is NOT a non-probate transfer method?
- Joint tenancy with right of survivorship
- Transfer on death (TOD) designation
- Bequest in a will (Correct answer)
- Beneficiary designation on an IRA
Correct answer: Bequest in a will
A bequest in a will transfers property through probate, whereas the other options are contractual or titling mechanisms that bypass probate.
Question 2: When an IRA owner names a trust as beneficiary, the trust must meet specific IRS requirements to qualify for the stretch distribution rules. What is one such requirement?
- The trust must be irrevocable at the time of the IRA owner's death
- All trust beneficiaries must be individuals, not charities or entities (Correct answer)
- The trust must be a charitable remainder trust
- The trustee must be a licensed financial advisor
Correct answer: All trust beneficiaries must be individuals, not charities or entities
For a trust named as an IRA beneficiary to use individual-based RMD rules, all beneficiaries must be identifiable individuals, not charities or non-individual entities.
Question 3: Under the SECURE Act 2.0, most non-spouse beneficiaries of inherited IRAs must withdraw all assets within:
- 5 years
- 10 years (Correct answer)
- 15 years
- 20 years
Correct answer: 10 years
The SECURE Act eliminated the stretch IRA for most non-spouse beneficiaries, requiring full distribution within 10 years of the original account owner's death.
Question 4: A 'contingent beneficiary' on a retirement account receives benefits when:
- The account owner becomes disabled
- The primary beneficiary predeceases the account owner (Correct answer)
- The account value drops below a threshold
- The account owner reaches age 72
Correct answer: The primary beneficiary predeceases the account owner
A contingent beneficiary is a backup who receives retirement account assets only if the primary beneficiary is deceased or disclaims the inheritance.
Question 5: Which titling arrangement allows a property owner to retain full control and use during their lifetime while transferring ownership automatically at death?
- Tenancy in common
- Revocable living trust
- Transfer on death deed (Correct answer)
- Life estate deed
Correct answer: Transfer on death deed
A transfer on death (TOD) deed allows the owner to retain full ownership during life and automatically transfers real property to named beneficiaries at death without probate.
Question 6: Community property states give each spouse an equal interest in marital assets. What is the primary estate planning advantage of community property?
- Both halves receive a full step-up in basis at the first spouse's death (Correct answer)
- The surviving spouse owes no estate taxes
- Community property avoids all gift taxes
- Property passes entirely to the surviving spouse by default
Correct answer: Both halves receive a full step-up in basis at the first spouse's death
In community property states, both the deceased and surviving spouse's halves of community property receive a stepped-up basis at death, minimizing capital gains taxes when the surviving spouse later sells.
CEA CEA Beneficiary Designations & Account Titling 2
Which of the following is NOT a non-probate transfer method?