Estate Planning & Wealth Transfer Flashcards
7 cards from real CFP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Estate Planning & Wealth Transfer flashcards as text
Under per stirpes distribution, if a beneficiary predeceases the testator, the deceased beneficiary's share passes to:
Answer: The deceased beneficiary's own descendants by representation
Per stirpes means 'by the roots'; a predeceased beneficiary's share passes down to their descendants rather than being redistributed among the remaining beneficiaries.
A Crummey power in an irrevocable trust is used to:
Answer: Convert contributions to the trust into present-interest gifts qualifying for the annual exclusion
A Crummey power gives beneficiaries the right to withdraw contributions for a limited period, converting the gift into a present interest that qualifies for the annual gift tax exclusion.
A Qualified Personal Residence Trust (QPRT) allows the grantor to:
Answer: Transfer a personal residence to heirs at a discounted gift tax value while retaining the right to live there for a fixed term
A QPRT freezes the home's estate value by transferring it now at a discounted gift tax value (present value of the remainder interest), with the grantor retaining occupancy for a fixed term.
A spendthrift trust provision protects trust assets by:
Answer: Preventing beneficiaries from voluntarily assigning their interest and protecting it from creditors
A spendthrift clause restricts a beneficiary from assigning their interest and shields undistributed trust assets from the beneficiary's creditors.
Which of the following assets passes outside of probate by operation of law?
Answer: A bank account held as joint tenancy with right of survivorship
Joint tenancy with right of survivorship transfers automatically to the surviving joint tenant upon death, bypassing the probate process entirely.
In estate planning, a disclaimer is best described as:
Answer: A refusal by a beneficiary to accept an inherited interest, causing it to pass as if the beneficiary predeceased the decedent
A qualified disclaimer allows a beneficiary to refuse an inheritance so it passes to the next beneficiary — useful for post-mortem estate tax planning when the original distribution plan is suboptimal.
The applicable credit amount (formerly called the unified credit) in estate planning directly reduces:
Answer: The estate tax liability dollar-for-dollar on amounts up to the exemption equivalent
The applicable credit is a dollar-for-dollar offset against the federal estate or gift tax owed, effectively sheltering up to the exemption equivalent ($13.61 million in 2024) from tax.