CFSP Estate Planning & Wealth Transfer 2

Question 1

What is an Irrevocable Life Insurance Trust (ILIT) primarily used to accomplish?

Accepted Answer

To remove life insurance proceeds from the insured's taxable estate

Answer

To provide tax-free retirement income to the grantor

Answer

To convert term life insurance to permanent insurance more efficiently

Answer

To maximize cash value accumulation within a life insurance policy

Question 2

What is the federal annual gift tax exclusion amount per recipient for 2024?

Accepted Answer

$18,000

Answer

$10,000

Answer

$15,000

Answer

$25,000

Question 3

What is a Qualified Terminable Interest Property (QTIP) trust designed to accomplish?

Accepted Answer

Provide income to a surviving spouse while controlling the ultimate disposition of assets

Answer

Minimize income taxes on retirement account distributions to heirs

Answer

Transfer discounted business interests to family members

Answer

Fund charitable donations while providing income back to the grantor

Question 4

What is the primary tax benefit of a Charitable Remainder Trust (CRT)?

Accepted Answer

The grantor receives an immediate partial charitable deduction and deferred capital gains treatment on contributed assets

Answer

The grantor avoids all estate taxes on assets transferred to the trust

Answer

All income generated by the trust is permanently tax-exempt to the grantor

Answer

The trust qualifies for the unlimited marital deduction

Question 5

What is the Generation-Skipping Transfer (GST) tax designed to prevent?

Accepted Answer

Wealthy individuals from avoiding estate tax by transferring wealth directly to grandchildren or lower generations

Answer

Spouses from transferring assets to each other tax-free using the marital deduction

Answer

Charities from receiving large bequests without estate tax consequences

Answer

Minors from receiving large inheritances before reaching legal adulthood

Question 6

What is 'portability' in the context of federal estate taxes?

Accepted Answer

The ability of a surviving spouse to elect to use the deceased spouse's unused estate tax exemption

Answer

The ability to transfer real property between states without triggering estate taxes

Answer

The automatic rollover of retirement account balances to a surviving spouse

Answer

The carryover of unused capital loss deductions from the estate to beneficiaries

Question 7

What is the purpose of a durable power of attorney for finances in an estate plan?

Accepted Answer

To authorize a named agent to manage the principal's financial affairs if the principal becomes incapacitated

Answer

To authorize an agent to make medical decisions if the principal becomes incapacitated

Answer

To transfer assets to a trust without going through probate

Answer

To name a guardian for minor children in the event of the principal's death