CTFA Trust and Financial Advisor Certification 5

Question 1

A trustee receives competing instructions from co-trustees who are deadlocked on an investment decision. What is the most appropriate course of action under the Uniform Trust Code?

Accepted Answer

Petition the court for instructions to resolve the deadlock

Answer

When co-trustees reach an impasse that cannot be resolved, seeking court instruction is the appropriate remedy to protect the trustees from liability and serve the beneficiaries' best interests.

Question 2

Which gift tax valuation technique uses the IRS §7520 rate to discount the present value of future interests, making transfers more gift-tax efficient when rates are low?

Accepted Answer

Grantor retained interest trust techniques (GRATs, GRUTs, QPRTs)

Answer

GRATs, GRUTs, and QPRTs use the §7520 rate to value retained interests; a lower §7520 rate increases the value of the retained interest, reducing the taxable gift of the remainder.

Question 3

A corporate fiduciary is named as trustee of a trust that also holds shares in the corporate trustee's parent company. This arrangement most directly implicates which fiduciary concern?

Accepted Answer

Conflict of interest and self-dealing under the duty of loyalty

Answer

Holding stock in the trustee's own affiliated company creates a classic conflict of interest, as the trustee has a financial stake in decisions regarding that holding.

Question 4

A generation-skipping transfer (GST) tax is triggered when assets pass to a 'skip person.' Which of the following is a skip person relative to the transferor?

Accepted Answer

The transferor's grandchild whose parent (the transferor's child) is living

Answer

A grandchild whose parent is alive is a skip person because they are two or more generations below the transferor, making transfers to them subject to the GST tax.

Question 5

A trust beneficiary requests a copy of the trust document from the corporate trustee. Under most state laws and the Uniform Trust Code, what is the trustee's obligation?

Accepted Answer

Provide a copy of the relevant portions or the full document to qualified beneficiaries upon request

Answer

The UTC imposes a duty on trustees to provide qualified beneficiaries with a copy of the trust instrument or relevant terms upon request, as part of the duty to inform.

CTFA - Certified Trust and Fiduciary Advisor Practice Test

CTFA - Certified Trust and Fiduciary Advisor Practice Test

CTFA Trust and Financial Advisor Certification 5