Estate Planning and Probate Flashcards
7 cards from real CLA/CP Exam 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 and Probate flashcards as text
What is the 'stepped-up basis' rule for inherited property under current U.S. federal tax law?
Answer: The heir's cost basis is reset to the fair market value of the property at the date of death
Under IRC §1014, inherited property receives a basis equal to its fair market value on the decedent's date of death, eliminating capital gains on pre-death appreciation.
Which trust arrangement is irrevocable, removes assets from the taxable estate, and is commonly used to hold life insurance policies?
Answer: Irrevocable Life Insurance Trust (ILIT)
An ILIT owns a life insurance policy so the death benefit is excluded from the insured's taxable estate, provided the insured does not retain any incidents of ownership.
What is the role of a guardian ad litem in a probate proceeding?
Answer: To represent the interests of a minor or incapacitated person in the proceeding
A guardian ad litem is appointed by the court to protect the legal interests of a minor or incompetent beneficiary who cannot represent themselves.
When creditors' claims exceed estate assets in an insolvent estate, which class of debts is typically paid last?
Answer: Specific bequests to family
In an insolvent estate, specific bequests to beneficiaries are paid last after all creditor claims, following a statutory priority order that places administration expenses and secured claims first.
What is a 'no-contest clause' (in terrorem clause) in a will, and what is its general effect?
Answer: It disinherits a beneficiary who challenges the will in court
An in terrorem clause provides that any beneficiary who contests the will forfeits their inheritance, discouraging frivolous challenges.
Which federal tax return must be filed to elect portability of a deceased spouse's unused estate tax exemption?
Answer: Form 706
Form 706 (United States Estate Tax Return) must be timely filed by the executor to make the portability election, even if no estate tax is due.
What distinguishes a 'testamentary trust' from a 'living trust'?
Answer: A testamentary trust is created by will and takes effect at death; a living trust is created and funded during the grantor's lifetime
A testamentary trust is established within a will and only comes into existence—and must go through probate—upon the testator's death, unlike a living trust that is created and funded during life.