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

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.

Question 2

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

Accepted Answer

$18,000

Answer

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.

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

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.

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

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.

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

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.

CFSP - Certified Financial Services Professional Practice Test

CFSP - Certified Financial Services Professional Practice Test

CFSP Estate Planning & Wealth Transfer 2