CEA Taxation & Legal Considerations 2

Question 1

A decedent dies with a gross estate of $15 million. After allowable deductions the taxable estate is $12.4 million. Using the 2024 federal exemption of $13.61 million, what is the federal estate tax owed?

Accepted Answer

$0, because the taxable estate is below the exemption

Answer

Because the taxable estate of $12.4 million is below the 2024 unified exemption of $13.61 million, no federal estate tax is owed.

Question 2

Which legal document gives a designated person authority to make financial decisions on behalf of a living individual who has become incapacitated?

Accepted Answer

Durable power of attorney

Answer

A durable power of attorney remains effective upon incapacity and grants the agent authority over financial matters.

Question 3

Under the step-up in basis rule, an heir who inherits stock originally purchased for $10,000 but worth $90,000 at the decedent's death will have a cost basis of:

Accepted Answer

$90,000 (fair market value at death)

Answer

IRC § 1014 steps up the heir's basis to the asset's fair market value on the date of death, eliminating any built-in gain.

Question 4

A married couple wants to maximize estate tax savings using portability. What must the surviving spouse do to use the deceased spouse's unused exemption (DSUE)?

Accepted Answer

File a timely federal estate tax return (Form 706) for the deceased spouse's estate

Answer

Portability is only available if the executor of the first spouse's estate files a Form 706 electing to transfer the DSUE, even if no estate tax is owed.

Question 5

Which type of trust is designed specifically to hold life insurance proceeds outside of the insured's taxable estate?

Accepted Answer

Irrevocable life insurance trust (ILIT)

Answer

An ILIT owns the life insurance policy so that proceeds are not included in the insured's gross estate upon death.

(CEA) Certified Estate Advisor Practice Test

(CEA) Certified Estate Advisor Practice Test

CEA Taxation & Legal Considerations 2