CEA Asset Management & Wealth Transfer 2

Question 1

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?

Accepted Answer

Qualified Personal Residence Trust (QPRT)

Answer

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.

Question 2

Which valuation discount is commonly applied when transferring a minority interest in a closely held family business?

Accepted Answer

Lack of marketability and minority interest discount

Answer

Minority interest and lack of marketability discounts together can reduce the taxable value of closely held business interests by 20–40% or more.

Question 3

Under IRC Section 1014, what is the income tax basis of an asset received through inheritance?

Accepted Answer

Fair market value at the date of death

Answer

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.

Question 4

A Grantor Retained Annuity Trust (GRAT) is most effective for wealth transfer when:

Accepted Answer

Interest rates are low and assets are expected to appreciate rapidly

Answer

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.

Question 5

Which asset class is generally considered most suitable for a dynasty trust designed to last multiple generations?

Accepted Answer

Long-term growth-oriented equities and alternative investments

Answer

Dynasty trusts benefit from long time horizons, so growth-oriented assets that compound over decades are preferred over low-yield cash equivalents.

(CEA) Certified Estate Advisor Practice Test

(CEA) Certified Estate Advisor Practice Test

CEA Asset Management & Wealth Transfer 2