CFP Estate Planning & Wealth Transfer 3

Question 1

Under per stirpes distribution, if a beneficiary predeceases the testator, the deceased beneficiary's share passes to:

Accepted Answer

The deceased beneficiary's own descendants by representation

Answer

The surviving beneficiaries in equal shares

Answer

The testator's estate to be redistributed

Answer

The closest living relative of the testator

Question 2

A Crummey power in an irrevocable trust is used to:

Accepted Answer

Convert contributions to the trust into present-interest gifts qualifying for the annual exclusion

Answer

Allow the trustee to make discretionary distributions without beneficiary consent

Answer

Grant the grantor retained control over trust assets

Answer

Give the IRS the right to audit the trust annually

Question 3

A Qualified Personal Residence Trust (QPRT) allows the grantor to:

Accepted Answer

Transfer a personal residence to heirs at a discounted gift tax value while retaining the right to live there for a fixed term

Answer

Deduct mortgage interest on a home held in trust

Answer

Avoid all capital gains taxes when the home is eventually sold

Answer

Claim a charitable deduction for the remainder interest in the home

Question 4

A spendthrift trust provision protects trust assets by:

Accepted Answer

Preventing beneficiaries from voluntarily assigning their interest and protecting it from creditors

Answer

Allowing the trustee to invest in speculative assets on the beneficiary's behalf

Answer

Requiring the trustee to distribute all income annually to the beneficiary

Answer

Permitting the grantor to claw back assets if the beneficiary wastes distributions

Question 5

Which of the following assets passes outside of probate by operation of law?

Accepted Answer

A bank account held as joint tenancy with right of survivorship

Answer

Assets titled solely in the decedent's name with no beneficiary designation

Answer

Property bequeathed through a will

Answer

A sole-owner brokerage account with no TOD designation

Question 6

In estate planning, a disclaimer is best described as:

Accepted Answer

A refusal by a beneficiary to accept an inherited interest, causing it to pass as if the beneficiary predeceased the decedent

Answer

A trust provision that limits a beneficiary's access to principal

Answer

A legal document revoking a prior power of attorney

Answer

An IRS form filed when estate taxes exceed the applicable credit

Question 7

The applicable credit amount (formerly called the unified credit) in estate planning directly reduces:

Accepted Answer

The estate tax liability dollar-for-dollar on amounts up to the exemption equivalent

Answer

The gross estate before deductions are applied

Answer

Probate fees charged by the court

Answer

The income tax owed by estate beneficiaries on inherited IRAs