Family Governance & 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 Family Governance & Wealth Transfer flashcards as text
A family limited partnership (FLP) is commonly used in estate planning primarily to:
Answer: Facilitate valuation discounts and centralize asset management
FLPs allow valuation discounts for lack of control and marketability while centralizing management of family assets.
Which document serves as the foundational governance framework outlining a family's shared values, mission, and decision-making processes across generations?
Answer: Family constitution or charter
A family constitution or charter is a non-legal document that articulates shared values, mission, and governance protocols for multigenerational families.
A dynasty trust differs from a standard irrevocable trust primarily because it:
Answer: Can last multiple generations by avoiding the rule against perpetuities in certain states
Dynasty trusts are structured in states that have abolished the rule against perpetuities, allowing wealth to pass across many generations without triggering estate taxes.
When a family council is established, its primary role in family governance is to:
Answer: Serve as a formal forum for family communication, education, and shared decision-making
A family council provides structured communication and shared decision-making but does not replace legal business governance bodies.
The generation-skipping transfer (GST) tax applies when assets are transferred to a 'skip person,' which is generally defined as a beneficiary who is:
Answer: Two or more generations below the transferor
A skip person is a transferee who is at least two generations below the transferor, such as a grandchild.
In the context of family governance, what is the primary purpose of a family retreat or family assembly?
Answer: To strengthen family cohesion, educate rising generations, and discuss shared goals
Family retreats focus on relationship building, education, and shared vision rather than legal or financial mechanics.
A spousal lifetime access trust (SLAT) allows the grantor to:
Answer: Remove assets from the taxable estate while the spouse retains indirect access to benefits
A SLAT removes assets from the grantor's taxable estate while the beneficiary spouse can access trust income or principal, providing indirect benefit to the grantor.