CTFA Estate Planning and Administration 3

Question 1

What is the primary purpose of a special needs trust (supplemental needs trust) in estate planning?

Accepted Answer

To provide for a disabled beneficiary without disqualifying them from government benefits

Answer

To reduce estate taxes for high-net-worth individuals

Answer

To distribute assets equally among multiple heirs

Answer

To hold life insurance proceeds for minor children

Question 2

Under the Uniform Fiduciary Income and Principal Act (UFIPA), what is the trustee's power to adjust primarily designed to address?

Accepted Answer

Imbalances between income and remainder beneficiaries caused by the portfolio's total return

Answer

Discretionary distributions for health and education expenses

Answer

Conversion of trust situs to another jurisdiction

Answer

Division of a trust into multiple subtrusts

Question 3

What is a generation-skipping transfer (GST) tax designed to prevent?

Accepted Answer

Wealthy families from avoiding estate tax by passing assets directly to grandchildren or later generations

Answer

Beneficiaries from receiving assets before reaching a specified age

Answer

Trustees from investing trust assets in risky securities

Answer

Executors from delaying estate administration indefinitely

Question 4

Which trust structure is most commonly used to remove life insurance proceeds from the insured's taxable estate?

Accepted Answer

Irrevocable life insurance trust (ILIT)

Answer

Revocable living trust

Answer

Charitable remainder trust

Answer

Grantor retained annuity trust

Question 5

What is the stepped-up basis rule for inherited assets?

Accepted Answer

Inherited assets receive a new cost basis equal to fair market value at the date of the decedent's death

Answer

Inherited assets retain the decedent's original purchase price as basis

Answer

Inherited assets receive a basis midway between purchase price and date-of-death value

Answer

Inherited assets have a zero basis for capital gains purposes

Question 6

A dynasty trust is best described as which of the following?

Accepted Answer

A long-term trust designed to hold assets for multiple generations by leveraging the GST exemption

Answer

A trust that distributes all assets to beneficiaries within 21 years of creation

Answer

A charitable trust that benefits a family foundation indefinitely

Answer

A trust limited to the rule against perpetuities period of all states