CFG Retirement Income & Estate Planning 5 — Questions and Answers
Question 1: A client in her late 70s wants to make annual gifts to reduce her taxable estate. What is the 2024 annual gift tax exclusion per recipient?
- $15,000
- $16,000
- $17,000
- $18,000 (Correct answer)
Correct answer: $18,000
The annual gift tax exclusion for 2024 is $18,000 per recipient, allowing donors to transfer this amount to as many individuals as they wish each year without gift tax or using the lifetime exemption.
Question 2: Which trust type is commonly used by a surviving spouse to qualify assets for the unlimited marital deduction while controlling who ultimately inherits them, preventing remarriage from diverting assets?
- Special needs trust
- QTIP (Qualified Terminable Interest Property) trust (Correct answer)
- Spendthrift trust
- Grantor retained annuity trust (GRAT)
Correct answer: QTIP (Qualified Terminable Interest Property) trust
A QTIP trust qualifies for the marital deduction, provides income to the surviving spouse, but allows the first spouse's estate to direct the remainder beneficiaries, typically children.
Question 3: Social Security widow/widower benefits are available as early as what age, provided the survivor does not have a disability?
- 55
- 60 (Correct answer)
- 62
- 65
Correct answer: 60
Surviving spouses can claim reduced widow/widower benefits as early as age 60, or age 50 if disabled.
Question 4: A 68-year-old client is still working and covered by her employer's group health plan. How does Medicare coordinate with her employer insurance?
- Medicare is always primary regardless of employer coverage
- The employer plan is primary and Medicare is secondary (Correct answer)
- She must drop employer coverage immediately upon Medicare eligibility
- Medicare covers only long-term care in this scenario
Correct answer: The employer plan is primary and Medicare is secondary
For active employees working for employers with 20 or more employees, the employer group health plan is primary payer and Medicare is secondary.
Question 5: A CFG advisor is creating a retirement income plan using a 'bucketing' strategy. What is the primary purpose of the short-term bucket?
- To maximize long-term equity growth
- To hold 1-3 years of living expenses in liquid, low-risk assets to avoid selling equities in a downturn (Correct answer)
- To fund charitable giving pledges
- To house tax-deferred growth assets
Correct answer: To hold 1-3 years of living expenses in liquid, low-risk assets to avoid selling equities in a downturn
The short-term (liquidity) bucket holds cash or near-cash assets covering 1-3 years of expenses, providing spending money without forcing the sale of volatile long-term investments during market declines.
Question 6: Under federal law, which document directs healthcare providers about a patient's wishes regarding life-sustaining treatment when the patient cannot speak for themselves?
- Durable power of attorney for finances
- Advance healthcare directive (living will) (Correct answer)
- POLST form only
- Trustee certification
Correct answer: Advance healthcare directive (living will)
An advance healthcare directive (living will) specifies a person's wishes regarding life-sustaining treatment and other medical decisions if they become incapacitated.
Question 7: A client with a $3 million IRA names a trust as beneficiary instead of an individual. What is a key risk if the trust does not qualify as a 'see-through' trust?
- The IRA is immediately subject to estate taxes at death
- Distributions must be completed within 5 years of the owner's death rather than 10 (Correct answer)
- The trust loses its tax-exempt status permanently
- The trustee must liquidate all assets within 30 days
Correct answer: Distributions must be completed within 5 years of the owner's death rather than 10
If a trust named as IRA beneficiary does not meet IRS see-through trust requirements, it has no 'life expectancy' to use, and the 5-year rule (rather than the 10-year rule) may apply for distribution.
CFG Retirement Income & Estate Planning 5
A client in her late 70s wants to make annual gifts to reduce her taxable estate.
What is the 2024 annual gift tax exclusion per recipient?