CFP Ultimate Certified Financial Planner 3

Question 1

A client wants to minimize estate taxes and retain income from an asset during their lifetime. Which trust structure best accomplishes both goals?

Accepted Answer

Grantor Retained Annuity Trust (GRAT)

Answer

A GRAT allows the grantor to retain an annuity stream for a fixed term while transferring any appreciation above the IRS hurdle rate to heirs gift-tax free.

Question 2

Under the Uniform Prudent Investor Act (UPIA), which of the following is the PRIMARY criterion for evaluating an investment's suitability in a trust portfolio?

Accepted Answer

The investment's contribution to the overall portfolio's risk and return

Answer

The UPIA shifted the standard from evaluating each investment in isolation to assessing each investment's role within the context of the total portfolio.

Question 3

A married couple has a net worth of $4 million. The husband wants to ensure that both federal estate tax exemptions are fully utilized. Which planning tool accomplishes this most directly?

Accepted Answer

Portability election

Answer

Portability allows a surviving spouse to use the deceased spouse's unused federal estate tax exemption by filing a timely estate tax return, effectively doubling the exemption.

Question 4

Which Social Security claiming strategy, now prohibited for new claimants, allowed a higher-earning spouse to collect spousal benefits while letting their own benefit grow?

Accepted Answer

Restricted application strategy

Answer

The restricted application strategy allowed a spouse who had reached FRA to claim only spousal benefits while deferring their own benefit to earn delayed retirement credits; it was eliminated by the Bipartisan Budget Act of 2015 for most claimants.

Question 5

A client has a $500,000 traditional IRA and names her estate as beneficiary. She dies at age 72 without taking her RMD. What distribution rule applies to the estate?

Accepted Answer

5-year rule — full distribution by December 31 of the 5th year

Answer

When a non-designated beneficiary (such as an estate) inherits an IRA from an owner who had already reached RMD age, the 5-year rule applies requiring full distribution within 5 years.

CFP - Certified Financial Planner Practice Test

CFP - Certified Financial Planner Practice Test

CFP Ultimate Certified Financial Planner 3