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

Per stirpes means 'by the roots'; a predeceased beneficiary's share passes down to their descendants rather than being redistributed among the remaining beneficiaries.

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

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.

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

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.

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

A spendthrift clause restricts a beneficiary from assigning their interest and shields undistributed trust assets from the beneficiary's creditors.

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

Joint tenancy with right of survivorship transfers automatically to the surviving joint tenant upon death, bypassing the probate process entirely.

CFP - Certified Financial Planner Practice Test

CFP - Certified Financial Planner Practice Test

CFP Estate Planning & Wealth Transfer 3