Trusts & Probate Administration 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 Trusts & Probate Administration flashcards as text
What is the primary advantage of a Revocable Living Trust over a simple will?
Answer: It avoids the probate process for trust assets
Assets properly titled in a revocable living trust pass to beneficiaries without going through probate, saving time and maintaining privacy.
In the context of probate, what does 'ademption' mean?
Answer: A specific bequest fails because the property no longer exists in the estate at death
Ademption occurs when property specifically bequeathed in a will has been sold, lost, or destroyed before the testator's death, causing that gift to fail.
A Charitable Remainder Trust (CRT) provides what benefit to the grantor during their lifetime?
Answer: An income stream during life with a charitable deduction for the present value of the remainder
A CRT pays income to the grantor (or other beneficiaries) for life or a term, then passes the remainder to charity, generating a partial charitable deduction upfront.
What is the '65-day rule' relevant to trust taxation?
Answer: Trustees can elect to treat distributions made within 65 days after year-end as made in the prior tax year
Under IRC Section 663(b), trustees of complex trusts can elect to treat distributions made within 65 days after year-end as distributions of the prior tax year.
What distinguishes a 'special needs trust' from other trusts?
Answer: It supplements government benefits for a disabled beneficiary without disqualifying them from means-tested programs
A special needs trust is structured so its assets are not counted as resources for Medicaid or SSI eligibility, preserving the beneficiary's government benefits.
When a beneficiary 'disclaims' an inheritance, what is the tax consequence?
Answer: The disclaimed property passes as if the beneficiary predeceased the decedent, with no gift tax to the disclaimant
A qualified disclaimer under IRC Section 2518 allows a beneficiary to refuse an inheritance, with the property passing to the next taker as if the disclaimant predeceased — no gift tax applies.
What is a 'no-contest' (in terrorem) clause in a will or trust?
Answer: A clause that disinherits any beneficiary who unsuccessfully challenges the document
A no-contest clause discourages frivolous will or trust contests by penalizing challengers with disinheritance if their challenge fails.