CEA Family Governance & Wealth Transfer 2

Question 1

A family limited partnership (FLP) is commonly used in estate planning primarily to:

Accepted Answer

Facilitate valuation discounts and centralize asset management

Answer

FLPs allow valuation discounts for lack of control and marketability while centralizing management of family assets.

Question 2

Which document serves as the foundational governance framework outlining a family's shared values, mission, and decision-making processes across generations?

Accepted Answer

Family constitution or charter

Answer

A family constitution or charter is a non-legal document that articulates shared values, mission, and governance protocols for multigenerational families.

Question 3

A dynasty trust differs from a standard irrevocable trust primarily because it:

Accepted Answer

Can last multiple generations by avoiding the rule against perpetuities in certain states

Answer

Dynasty trusts are structured in states that have abolished the rule against perpetuities, allowing wealth to pass across many generations without triggering estate taxes.

Question 4

When a family council is established, its primary role in family governance is to:

Accepted Answer

Serve as a formal forum for family communication, education, and shared decision-making

Answer

A family council provides structured communication and shared decision-making but does not replace legal business governance bodies.

Question 5

The generation-skipping transfer (GST) tax applies when assets are transferred to a 'skip person,' which is generally defined as a beneficiary who is:

Accepted Answer

Two or more generations below the transferor

Answer

A skip person is a transferee who is at least two generations below the transferor, such as a grandchild.

(CEA) Certified Estate Advisor Practice Test

(CEA) Certified Estate Advisor Practice Test

CEA Family Governance & Wealth Transfer 2