Ethics & Legal Compliance Flashcards

A charitable remainder trust (CRT) requires a trustee to make distributions according to a fixed schedule. If the trustee skips a required payment to increase trust corpus, this violates:

Answer: The trust document terms and the duty of loyalty to income beneficiaries

Skipping required distributions breaches the trust instrument and violates the trustee's duty to the income beneficiary.

Which scenario best illustrates the ethical concept of 'undue influence' in estate planning?

Answer: A caregiver pressures a vulnerable elderly client to change beneficiary designations in the caregiver's favor

Undue influence occurs when someone in a position of trust exploits that relationship to override a person's free will in making estate decisions.

A CES practitioner who learns about a client's new estate plan from another advisor at the same firm, without client consent, has potentially violated which principle?

Answer: Duty of confidentiality

Sharing client information within a firm without authorization violates the duty of confidentiality unless client consent or a legal exception applies.

Under the Uniform Fiduciary Income and Principal Act (UFIPA), a trustee may convert a trust to a unitrust structure primarily to:

Answer: Balance the interests of income and remainder beneficiaries more equitably

Unitrust conversion allows distributions based on a percentage of total value, removing the income-vs-principal tension and treating all beneficiaries more equitably.

A CES practitioner who holds both CFP and CES designations is subject to:

Answer: The ethical standards of both credentialing bodies simultaneously

Holding multiple professional designations means the practitioner must comply with all applicable codes of ethics simultaneously.

A trustee wants to purchase real estate from the trust for personal use at fair market value with independent appraisal. Without court or beneficiary approval, this transaction is:

Answer: A prohibited self-dealing transaction regardless of price paid

Self-dealing by a trustee is generally prohibited regardless of fairness of price, absent explicit trust authority, court approval, or fully informed beneficiary consent.

When a client dies and the estate is in probate, the CES professional's primary duty of confidentiality shifts to protecting information from whom?

Answer: Third parties not entitled to estate information, while sharing appropriately with the personal representative

The personal representative steps into the decedent's role, so confidential information is shared with them, but remains protected from unauthorized third parties.