Estate Planning & Wealth Transfer Flashcards
7 cards from real CFSP 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
What is an Irrevocable Life Insurance Trust (ILIT) primarily used to accomplish?
Answer: To remove life insurance proceeds from the insured's taxable estate
An ILIT holds life insurance policies outside of the insured's estate, preventing the death benefit from being included in the taxable estate at death.
What is the federal annual gift tax exclusion amount per recipient for 2024?
Answer: $18,000
The annual gift tax exclusion for 2024 is $18,000 per recipient, allowing individuals to give this amount to any number of recipients without using their lifetime exemption.
What is a Qualified Terminable Interest Property (QTIP) trust designed to accomplish?
Answer: Provide income to a surviving spouse while controlling the ultimate disposition of assets
A QTIP trust provides income to a surviving spouse while allowing the decedent to control who ultimately receives the trust assets at the spouse's death, and it qualifies for the marital deduction.
What is the primary tax benefit of a Charitable Remainder Trust (CRT)?
Answer: The grantor receives an immediate partial charitable deduction and deferred capital gains treatment on contributed assets
A CRT provides the grantor with an immediate charitable income tax deduction for the present value of the remainder interest and defers capital gains recognition on contributed appreciated assets.
What is the Generation-Skipping Transfer (GST) tax designed to prevent?
Answer: Wealthy individuals from avoiding estate tax by transferring wealth directly to grandchildren or lower generations
The GST tax imposes an additional tax on transfers made to individuals two or more generations below the transferor, preventing families from bypassing estate tax at the intermediate generation.
What is 'portability' in the context of federal estate taxes?
Answer: The ability of a surviving spouse to elect to use the deceased spouse's unused estate tax exemption
Portability allows a surviving spouse to elect to use any remaining portion of the deceased spouse's federal estate tax exemption, effectively increasing the couple's combined tax-free transfer amount.
What is the purpose of a durable power of attorney for finances in an estate plan?
Answer: To authorize a named agent to manage the principal's financial affairs if the principal becomes incapacitated
A durable power of attorney for finances designates a trusted agent to manage financial decisions—such as paying bills, managing investments, and filing taxes—if the principal becomes unable to do so.