CFSP Estate Planning & Wealth Transfer

Question 1

What is the primary purpose of a last will and testament?

Accepted Answer

To designate the distribution of assets and name an executor upon death

Answer

To avoid the probate process entirely

Answer

To establish a trust for minor children automatically

Answer

To minimize federal estate taxes

Question 2

Which of the following best describes the probate process?

Accepted Answer

The court-supervised legal process of validating a will and distributing a deceased person's estate

Answer

A tax levied on inherited assets above the exemption amount

Answer

A living trust created to transfer assets during the grantor's lifetime

Answer

The tax-free transfer of assets between legally married spouses

Question 3

Which characteristic most distinguishes a revocable living trust from an irrevocable trust?

Accepted Answer

A revocable trust can be modified or terminated by the grantor during their lifetime

Answer

A revocable trust removes assets from the grantor's taxable estate

Answer

A revocable trust protects assets from the grantor's creditors

Answer

A revocable trust requires court approval before any changes can be made

Question 4

What is the primary advantage of designating beneficiaries on retirement accounts and life insurance policies?

Accepted Answer

Assets transfer directly to beneficiaries outside of probate

Answer

The assets are permanently shielded from all income taxes

Answer

Inherited assets receive a step-up in cost basis

Answer

Beneficiaries avoid paying any estate taxes on inherited amounts

Question 5

What is a 'step-up in basis' as it applies to inherited assets?

Accepted Answer

The adjustment of an inherited asset's cost basis to its fair market value at the decedent's date of death

Answer

An increase in asset value attributed to inflation adjustments

Answer

A tax credit applied against estate taxes owed by the estate

Answer

An annual increase in the lifetime gift tax exemption amount

Question 6

What is the role of an executor (personal representative) in estate administration?

Accepted Answer

To manage and distribute the estate's assets according to the will and applicable laws

Answer

To contest the validity of the will on behalf of disinherited heirs

Answer

To serve as the trustee of all trusts created by the decedent

Answer

To establish new beneficiary designations for any accounts lacking them

Question 7

Which form of property ownership allows assets to pass directly to a surviving co-owner upon death without going through probate?

Accepted Answer

Joint tenancy with right of survivorship

Answer

Tenants in common

Answer

Sole ownership with a transfer-on-death deed

Answer

Community property without right of survivorship