Financial Advisor Certified Trust and Financial Advisor 2

Question 1

A trustee is considering investing trust assets in a single stock that represents 40% of the portfolio. Which fiduciary duty is most at risk?

Accepted Answer

Duty of prudence and diversification

Answer

The Uniform Prudent Investor Act requires trustees to diversify trust investments unless special circumstances justify concentration.

Question 2

Under the Uniform Trust Code, which type of trust can be revoked or amended by the settlor at any time?

Accepted Answer

Revocable living trust

Answer

A revocable living trust allows the settlor to modify, amend, or revoke the trust during their lifetime.

Question 3

A CTFA candidate must understand that a 'spendthrift clause' in a trust primarily protects:

Accepted Answer

Beneficiaries from their own creditors

Answer

A spendthrift clause restricts a beneficiary's ability to transfer their interest and prevents creditors from reaching trust assets before distribution.

Question 4

Which generation-skipping transfer (GST) tax exemption amount applies per taxpayer in 2024?

Accepted Answer

$13.61 million

Answer

The GST tax exemption for 2024 is $13.61 million per taxpayer, indexed annually for inflation.

Question 5

When a trustee has a conflict of interest regarding a trust transaction, the most appropriate action is to:

Accepted Answer

Obtain consent from all beneficiaries after full disclosure

Answer

Full disclosure followed by informed consent from all beneficiaries is the proper way to handle a trustee conflict of interest.

Financial Advisor Practice Test

Financial Advisor Practice Test

Financial Advisor Certified Trust and Financial Advisor 2