Practice Test Geeks(CES) Certified Estate and Trust Specialist Practice Test
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Risk Assessment & Mitigation Flashcards

7 cards from real CES practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Risk Assessment & Mitigation flashcards as text

  1. A trustee holds concentrated stock representing 80% of a trust portfolio. Which fiduciary duty is most at risk if no action is taken?

    Answer: Duty of prudent diversification

    The Uniform Prudent Investor Act imposes a duty to diversify unless special circumstances justify retention of concentrated positions.

  2. Which type of trust provision most directly mitigates the risk of a beneficiary losing assets in a divorce settlement?

    Answer: Spendthrift clause

    A spendthrift clause prevents beneficiaries from assigning their interests and blocks creditors, including divorcing spouses, from reaching trust assets.

  3. An estate plan relies heavily on a single life insurance policy to fund an estate tax obligation. What is the primary concentration risk here?

    Answer: Premium lapse risk

    Premium lapse risk is primary because if premiums go unpaid the policy terminates, eliminating the liquidity intended to cover estate taxes.

  4. A 90-year-old client has a revocable living trust but no durable power of attorney. Which risk does this create?

    Answer: A guardian may need court appointment to manage non-trust assets

    Assets outside the trust require a durable power of attorney or court-appointed guardian for management during incapacity.

  5. Which risk mitigation strategy is most appropriate when a closely held business represents 70% of an estate's value?

    Answer: IRC Section 6166 installment payment election

    IRC §6166 allows estate taxes attributable to a closely held business to be paid in installments over up to 14 years, preventing forced liquidation.

  6. A grantor retained annuity trust (GRAT) fails to achieve its transfer tax savings goal primarily when:

    Answer: The trust assets underperform the IRC §7520 hurdle rate

    A GRAT produces no gift tax savings if asset growth does not exceed the §7520 rate, leaving nothing in the remainder for beneficiaries.

  7. When assessing longevity risk for a surviving spouse, which planning tool most directly addresses the risk of outliving assets?

    Answer: Qualified longevity annuity contract (QLAC)

    A QLAC allows deferral of RMDs and provides guaranteed income beginning at a late age, directly insuring against outliving retirement assets.