CEA Estate Planning Principles & Strategies 3

Question 1

A grantor creates a Grantor Retained Annuity Trust (GRAT). Which of the following best describes the estate planning benefit?

Accepted Answer

If trust assets outperform the IRS Section 7520 rate, the excess passes gift-tax-free to heirs

Answer

A GRAT transfers appreciation above the § 7520 hurdle rate to remainder beneficiaries gift-tax-free; if the grantor dies during the GRAT term, assets revert to the estate.

Question 2

Which type of power of appointment, if held at death, causes the property subject to it to be included in the holder's gross estate?

Accepted Answer

General power of appointment

Answer

A general power of appointment — exercisable in favor of the holder, their estate, or creditors — causes inclusion in the gross estate under IRC § 2041.

Question 3

For a Charitable Remainder Unitrust (CRUT), what percentage of the trust's fair market value must be paid to income beneficiaries each year?

Accepted Answer

At least 5% but not more than 50%

Answer

A CRUT must pay a fixed percentage between 5% and 50% of the trust's annually revalued net assets to the income beneficiaries.

Question 4

Under the unlimited marital deduction, which of the following transfers would NOT qualify?

Accepted Answer

Outright bequest to a non-citizen resident alien spouse

Answer

The unlimited marital deduction does not apply to outright transfers to non-citizen spouses; a QDOT is required to defer estate tax for non-citizen surviving spouses.

Question 5

A decedent's estate consists primarily of a closely held business worth $8 million. Which provision allows the estate to pay federal estate taxes in installments over up to 14 years?

Accepted Answer

IRC § 6166 — Installment payment of estate taxes

Answer

IRC § 6166 allows estates with qualifying closely held business interests exceeding 35% of the adjusted gross estate to elect installment payments of estate tax over up to 14 years.

(CEA) Certified Estate Advisor Practice Test

(CEA) Certified Estate Advisor Practice Test

CEA Estate Planning Principles & Strategies 3