CEA Asset Management & Wealth Transfer 5

Question 1

Under the SECURE Act 2.0, most non-spouse beneficiaries who inherit an IRA must deplete the account within how many years?

Accepted Answer

10 years

Answer

The SECURE Act eliminated the stretch IRA for most non-spouse beneficiaries, requiring full distribution within 10 years of the account owner's death.

Question 2

A client in a high tax bracket wants to make a large charitable gift of appreciated stock. What is the primary tax advantage of donating the stock directly rather than selling it first?

Accepted Answer

The client avoids capital gains tax on the appreciation and receives a deduction for the full fair market value

Answer

Donating appreciated stock directly to a charity allows the donor to avoid capital gains tax entirely while deducting the full fair market value, subject to AGI limitations.

Question 3

Which document authorizes an agent to make financial and legal decisions on behalf of a principal if the principal becomes incapacitated?

Accepted Answer

Durable power of attorney for finances

Answer

A durable power of attorney for finances remains effective (or springs into effect) upon incapacity, allowing the named agent to manage assets and legal matters without court intervention.

Question 4

In the context of wealth transfer, what is the 'reciprocal trust doctrine'?

Accepted Answer

An IRS doctrine that collapses interrelated trusts when grantors essentially create trusts for each other, resulting in estate inclusion

Answer

The reciprocal trust doctrine treats two crossed trusts (e.g., spouses each creating trusts for the other) as if each grantor had created the trust for themselves, causing estate inclusion.

Question 5

A Charitable Remainder Unitrust (CRUT) differs from a Charitable Remainder Annuity Trust (CRAT) in that the CRUT pays:

Accepted Answer

A fixed percentage of the trust's annually revalued assets

Answer

A CRUT pays a fixed percentage of trust assets as revalued each year, so distributions fluctuate with asset values, while a CRAT pays a fixed dollar amount regardless of performance.

(CEA) Certified Estate Advisor Practice Test

(CEA) Certified Estate Advisor Practice Test

CEA Asset Management & Wealth Transfer 5