CEA Estate Planning Principles & Strategies 2

Question 1

A testator wants to leave property to a grandchild but fears the parents may mismanage funds. Which trust structure is most appropriate?

Accepted Answer

Spendthrift trust

Answer

A spendthrift trust restricts the beneficiary's ability to assign or alienate the trust interest, protecting assets from both the beneficiary and their creditors.

Question 2

Under IRC Section 2036, assets transferred to an irrevocable trust are included back in the gross estate if the grantor retained:

Accepted Answer

Possession or enjoyment of the transferred property

Answer

IRC § 2036 pulls assets back into the gross estate when the decedent retained the right to possession, enjoyment, or income from the transferred property.

Question 3

Which estate planning document designates who may make medical decisions for an incapacitated individual?

Accepted Answer

Healthcare proxy (medical power of attorney)

Answer

A healthcare proxy or medical power of attorney appoints an agent to make healthcare decisions when the principal is incapacitated.

Question 4

A couple owns a home as joint tenants with right of survivorship. At the first spouse's death, what happens to the deceased spouse's basis in the property?

Accepted Answer

Only the deceased spouse's half receives a step-up in basis

Answer

For joint tenancy property in non-community property states, only the deceased joint tenant's half-interest receives a step-up in basis to date-of-death FMV.

Question 5

A QTIP trust qualifies for the marital deduction because it requires:

Accepted Answer

The surviving spouse to receive all trust income annually or more frequently

Answer

A Qualified Terminable Interest Property trust qualifies for the marital deduction only if the surviving spouse receives all net income at least annually.

(CEA) Certified Estate Advisor Practice Test

(CEA) Certified Estate Advisor Practice Test

CEA Estate Planning Principles & Strategies 2