CLU Fundamentals of Estate Planning Questions and Answers

Question 1

An individual dies without a valid will, leaving behind a spouse and two minor children. How will the deceased's separate property typically be distributed under intestate succession laws?

Accepted Answer

The estate will be divided, with the spouse and children each receiving a specific share.

Answer

The property will be sold, and the proceeds held in trust until the children reach the age of majority.

Answer

The spouse will inherit the entire estate.

Answer

The state will seize the property since there was no valid will.

Question 2

Which of the following is a primary purpose of the probate process?

Accepted Answer

To provide a legal framework for validating the will and supervising the distribution of the decedent's assets.

Answer

To minimize the estate taxes owed by the beneficiaries.

Answer

To allow creditors to bypass the estate and collect directly from beneficiaries.

Answer

To fast-track the transfer of all assets to the surviving spouse, avoiding any legal oversight.

Question 3

A married couple owns their home as Joint Tenants with Right of Survivorship (JTWROS). If one spouse dies, what is the consequence of this form of ownership?

Accepted Answer

The surviving spouse automatically inherits the entire property without it passing through probate.

Answer

The deceased spouse's share must go through probate to be transferred to the surviving spouse.

Answer

The property is automatically divided, with half going to the surviving spouse and half to the deceased's children.

Answer

The deceased spouse's share passes to the beneficiaries named in their will.

Question 4

Which type of trust is created and becomes effective only upon the death of the grantor, as specified in their will?

Accepted Answer

Testamentary Trust

Answer

Revocable Living Trust

Answer

Irrevocable Life Insurance Trust

Answer

Charitable Remainder Trust

Question 5

Which of the following estate planning tools allows for the transfer of an unlimited amount of assets to a surviving spouse without incurring federal estate or gift tax?

Accepted Answer

The unlimited marital deduction

Answer

The annual gift tax exclusion

Answer

A bypass trust

Answer

A generation-skipping transfer

Question 6

A client wishes to set up a trust to provide for a child with special needs without jeopardizing their eligibility for government benefits like Medicaid or Supplemental Security Income (SSI). Which type of trust is most suitable for this purpose?

Accepted Answer

A Special Needs Trust

Answer

A Revocable Living Trust

Answer

A Charitable Lead Trust

Answer

A Grantor Retained Annuity Trust (GRAT)