Asset Management & Wealth Transfer Flashcards
7 cards from real CEA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Asset Management & Wealth Transfer flashcards as text
A client wants to transfer a family vacation home to their children while retaining the right to use it for life. Which strategy is most appropriate?
Answer: Qualified Personal Residence Trust (QPRT)
A QPRT allows the grantor to transfer a personal residence at a reduced gift tax value while retaining the right to live there for a specified term.
Which valuation discount is commonly applied when transferring a minority interest in a closely held family business?
Answer: Lack of marketability and minority interest discount
Minority interest and lack of marketability discounts together can reduce the taxable value of closely held business interests by 20–40% or more.
Under IRC Section 1014, what is the income tax basis of an asset received through inheritance?
Answer: Fair market value at the date of death
IRC §1014 provides a stepped-up (or stepped-down) basis equal to the asset's fair market value on the date of the decedent's death.
A Grantor Retained Annuity Trust (GRAT) is most effective for wealth transfer when:
Answer: Interest rates are low and assets are expected to appreciate rapidly
A GRAT transfers appreciation above the IRS §7520 hurdle rate to beneficiaries gift-tax free, so low rates and high asset growth maximize the benefit.
Which asset class is generally considered most suitable for a dynasty trust designed to last multiple generations?
Answer: Long-term growth-oriented equities and alternative investments
Dynasty trusts benefit from long time horizons, so growth-oriented assets that compound over decades are preferred over low-yield cash equivalents.
What is the primary benefit of a Spousal Lifetime Access Trust (SLAT) in estate planning?
Answer: It removes assets from the taxable estate while allowing the donor's spouse to access trust benefits
A SLAT lets the grantor use the gift tax exemption to shift assets out of their estate while the beneficiary spouse can still receive distributions.
For federal estate tax purposes, the alternate valuation date allows an estate to value assets as of:
Answer: Six months after the date of death, if it reduces both the gross estate and the estate tax
IRC §2032 permits use of the alternate valuation date (six months post-death) only when doing so reduces both the gross estate value and the resulting estate tax.