Client Advisory & Consultation Flashcards

A widowed client with a blended family asks whether a revocable living trust or a will is better for avoiding conflicts among children from two marriages. What is the primary advantage of a revocable living trust in this scenario?

Answer: It allows assets to pass outside of probate, reducing public disclosure and family disputes

A revocable living trust avoids probate, keeping asset distribution private and reducing opportunities for contested proceedings among blended family members.

During an estate planning consultation, a client discloses that a prior attorney drafted a durable power of attorney naming an estranged sibling as agent. The client wants to revoke it immediately. What is the FIRST step the advisor should recommend?

Answer: Execute a new durable power of attorney naming a different agent and notify all relevant institutions in writing

Executing a new POA and notifying financial institutions in writing is the most effective immediate step to revoke the prior agent's authority.

A CES professional is advising a client whose estate is projected to be just above the federal estate tax exemption. Which consultation strategy best addresses potential exemption sunset provisions?

Answer: Recommend irrevocable gifting now to use the current elevated exemption before it potentially decreases

Using the current elevated exemption through irrevocable gifts protects against a future reduction, as the IRS has confirmed no clawback for gifts made under the higher exemption.

A client wishes to make charitable gifts during their lifetime and at death while also retaining income. Which trust structure is most appropriate to discuss during the advisory session?

Answer: Charitable remainder trust (CRT)

A CRT allows the client to receive income for life or a term of years, with the remainder passing to charity, satisfying both income retention and charitable goals.

When counseling a client on healthcare directives, what is the key distinction between a healthcare proxy and a living will?

Answer: A healthcare proxy appoints an agent to make decisions; a living will states the client's own treatment preferences

A healthcare proxy (or healthcare power of attorney) designates a decision-maker, while a living will documents the client's specific end-of-life treatment preferences.

A client asks about the stepped-up basis rule for inherited assets. Which statement accurately describes its impact on estate planning advice?

Answer: Appreciated assets held until death receive a basis adjustment to fair market value at death, eliminating embedded capital gains

IRC §1014 adjusts the basis of inherited assets to FMV at the decedent's date of death, effectively eliminating capital gains tax on pre-death appreciation.

An advisor is meeting with a 78-year-old client who has significant IRA assets and wants to minimize required minimum distributions (RMDs) for heirs. Which strategy is most appropriate to raise in the consultation?

Answer: Convert traditional IRA assets to Roth IRA over multiple years to reduce future RMDs for heirs

Roth conversions eliminate RMDs during the owner's lifetime and allow heirs to inherit tax-free assets, reducing the income tax burden under the SECURE Act's 10-year rule.