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 a 'dynasty trust' and what is its primary estate planning benefit?
Answer: A long-term or perpetual trust designed to pass wealth across multiple generations while avoiding estate and GST taxes
A dynasty trust is structured to last many generations, using the generation-skipping transfer (GST) tax exemption to transfer wealth while minimizing estate taxes at each generational level.
In probate administration, what is the role of a 'guardian ad litem'?
Answer: A court-appointed representative who protects the interests of minor or incapacitated beneficiaries in proceedings
A guardian ad litem is appointed by the court to represent and advocate for the interests of beneficiaries who cannot represent themselves, such as minors or incapacitated adults.
What is the generation-skipping transfer (GST) tax designed to prevent?
Answer: Estates from avoiding estate tax by skipping a generation and transferring assets directly to grandchildren
The GST tax imposes an additional transfer tax when assets pass to beneficiaries two or more generations below the transferor, preventing avoidance of estate tax at each generation.
What is 'lapse' in the context of testamentary gifts, and how do anti-lapse statutes address it?
Answer: Lapse occurs when a beneficiary predeceases the testator; anti-lapse statutes redirect the gift to the deceased beneficiary's descendants
At common law, a lapsed gift fails; anti-lapse statutes in most states save the gift by passing it to the predeceased beneficiary's descendants, if they are related to the testator.
Under the Uniform Fiduciary Income and Principal Act (UFIPA), what is the trustee's power to 'adjust'?
Answer: To transfer amounts between income and principal to achieve a fair and reasonable return for all beneficiaries
The power to adjust allows trustees to reallocate between income and principal accounts when following the prudent investor rule would otherwise unfairly benefit one class of beneficiaries over another.
What is 'surcharge' in the context of trustee liability?
Answer: A monetary remedy requiring a trustee to compensate the trust for losses caused by a breach of fiduciary duty
Surcharge is the primary remedy for trustee misconduct, requiring the breaching trustee to make the trust whole for any losses resulting from the breach of fiduciary duty.
What is the purpose of a 'Crummey power' in an irrevocable trust?
Answer: To give beneficiaries a temporary right of withdrawal so that contributions qualify for the annual gift tax exclusion
A Crummey power gives trust beneficiaries a short window (typically 30-60 days) to withdraw contributions, converting future-interest gifts into present-interest gifts eligible for the annual exclusion.