CES Risk Assessment & Mitigation 3

Question 1

A trustee receives conflicting investment instructions from co-beneficiaries with different distribution interests. Which risk management approach is most appropriate?

Accepted Answer

Apply the total return investment approach under the Uniform Principal and Income Act

Answer

The total return approach balances growth and income, satisfying both income and remainder beneficiaries while meeting the duty of impartiality.

Question 2

Which estate planning risk does a no-contest (in terrorem) clause primarily mitigate?

Accepted Answer

Will contest litigation risk

Answer

An in terrorem clause deters beneficiaries from challenging the will by forfeiting their share if the contest is unsuccessful.

Question 3

A client owns real property in three states. Which risk does a revocable living trust best mitigate compared to a will?

Accepted Answer

Multi-state ancillary probate

Answer

Holding out-of-state real property in a revocable trust avoids ancillary probate proceedings in each state where property is located.

Question 4

What is the primary risk associated with naming a minor child as a direct beneficiary of a life insurance policy?

Accepted Answer

A court-appointed guardian must manage the funds until the child reaches majority

Answer

Minors cannot legally receive large sums directly, so a court must appoint a guardian to manage the proceeds, causing delay and expense.

Question 5

A client's estate plan includes a charitable bequest via will. Which risk does a charitable remainder trust (CRT) better mitigate compared to the outright bequest?

Accepted Answer

Insufficient liquidity for heirs during the client's lifetime

Answer

A CRT provides the client with an income stream during life while mitigating the risk of heirs having no current benefit from assets earmarked for charity.

(CES) Certified Estate and Trust Specialist Practice Test

(CES) Certified Estate and Trust Specialist Practice Test

CES Risk Assessment & Mitigation 3