CEA Trusts & Probate Administration 4

Question 1

What is the primary advantage of a Revocable Living Trust over a simple will?

Accepted Answer

It avoids the probate process for trust assets

Answer

Assets properly titled in a revocable living trust pass to beneficiaries without going through probate, saving time and maintaining privacy.

Question 2

In the context of probate, what does 'ademption' mean?

Accepted Answer

A specific bequest fails because the property no longer exists in the estate at death

Answer

Ademption occurs when property specifically bequeathed in a will has been sold, lost, or destroyed before the testator's death, causing that gift to fail.

Question 3

A Charitable Remainder Trust (CRT) provides what benefit to the grantor during their lifetime?

Accepted Answer

An income stream during life with a charitable deduction for the present value of the remainder

Answer

A CRT pays income to the grantor (or other beneficiaries) for life or a term, then passes the remainder to charity, generating a partial charitable deduction upfront.

Question 4

What is the '65-day rule' relevant to trust taxation?

Accepted Answer

Trustees can elect to treat distributions made within 65 days after year-end as made in the prior tax year

Answer

Under IRC Section 663(b), trustees of complex trusts can elect to treat distributions made within 65 days after year-end as distributions of the prior tax year.

Question 5

What distinguishes a 'special needs trust' from other trusts?

Accepted Answer

It supplements government benefits for a disabled beneficiary without disqualifying them from means-tested programs

Answer

A special needs trust is structured so its assets are not counted as resources for Medicaid or SSI eligibility, preserving the beneficiary's government benefits.

(CEA) Certified Estate Advisor Practice Test

(CEA) Certified Estate Advisor Practice Test

CEA Trusts & Probate Administration 4