CSS Estate Planning & Wealth Transfer 2 — Questions and Answers
Question 1: What is the federal estate tax exemption amount per individual for 2024?
- $5.49 million
- $9.18 million
- $13.61 million (Correct answer)
- $20 million
Correct answer: $13.61 million
The federal estate tax exemption for 2024 is $13.61 million per individual, meaning estates below this threshold owe no federal estate tax.
Question 2: Which planning strategy allows a surviving spouse to use the deceased spouse's unused estate tax exemption?
- Marital deduction
- Portability election (Correct answer)
- QTIP trust
- Bypass trust
Correct answer: Portability election
The portability election, filed on a timely estate tax return, allows the surviving spouse to add the deceased spouse's unused exemption to their own.
Question 3: A Qualified Personal Residence Trust (QPRT) is primarily used to:
- Avoid paying property taxes on a primary home
- Transfer a home to heirs at a reduced gift tax value (Correct answer)
- Provide Medicaid eligibility for nursing home costs
- Eliminate capital gains when the home is sold
Correct answer: Transfer a home to heirs at a reduced gift tax value
A QPRT transfers a residence to heirs at a discounted gift tax value by retaining the right to live in the home for a set term.
Question 4: What is the purpose of a spendthrift clause in a trust?
- It limits trustee investment risk
- It prevents beneficiaries from assigning their interest to creditors (Correct answer)
- It allows the trustee to sell assets quickly
- It restricts charitable distributions
Correct answer: It prevents beneficiaries from assigning their interest to creditors
A spendthrift clause protects trust assets from a beneficiary's creditors by preventing the beneficiary from assigning or pledging their interest.
Question 5: Which document specifies end-of-life medical care preferences and is separate from a financial power of attorney?
- Durable power of attorney
- Living will / advance directive (Correct answer)
- Letter of instruction
- Testamentary trust
Correct answer: Living will / advance directive
A living will or advance directive documents a person's medical care wishes, such as life-sustaining treatment preferences, independent of financial decisions.
Question 6: Under the rule against perpetuities, what is the main concern with dynasty trusts in most states?
- They are taxed at the highest estate tax rate
- They cannot hold real estate
- Traditional law limits how long a trust can last after creation (Correct answer)
- They must distribute income annually
Correct answer: Traditional law limits how long a trust can last after creation
The traditional rule against perpetuities limits trust duration, though many states have modified or abolished this rule to allow long-lasting dynasty trusts.
CSS Estate Planning & Wealth Transfer 2
What is the federal estate tax exemption amount per individual for 2024?