Financial Advisor Certified Trust and Financial Advisor 3

Question 1

A trustee who self-deals by purchasing trust property for personal use without authorization has breached the duty of:

Accepted Answer

Loyalty

Answer

Self-dealing violates the duty of loyalty because the trustee is placing personal interests above those of the beneficiaries.

Question 2

Which document authorizes an agent to make financial decisions on behalf of a principal if the principal becomes incapacitated?

Accepted Answer

Durable power of attorney

Answer

A durable power of attorney remains effective (or takes effect) upon the principal's incapacity, allowing the agent to manage financial affairs.

Question 3

A trustee managing a trust with both current income beneficiaries and remainder beneficiaries must observe the duty of:

Accepted Answer

Impartiality

Answer

The duty of impartiality requires a trustee to balance the competing interests of current income beneficiaries and future remainder beneficiaries.

Question 4

A Qualified Personal Residence Trust (QPRT) is primarily used to:

Accepted Answer

Transfer a residence out of the estate at a reduced gift tax value

Answer

A QPRT allows the grantor to transfer a home to heirs at a discounted gift tax value by retaining the right to live there for a set term.

Question 5

Under ERISA, which fiduciary standard applies to the management of pension plan assets?

Accepted Answer

Prudent expert standard

Answer

ERISA imposes the 'prudent expert' standard, requiring plan fiduciaries to act as a knowledgeable expert in managing plan assets.

Financial Advisor Practice Test