Free CFC Estate Planning Questions and Answers

Question 1

What is the primary goal of estate planning?

Accepted Answer

To ensure the efficient transfer of assets to heirs

Answer

To minimize taxes

Answer

To manage investments

Answer

To maximize retirement income

Question 2

Which legal document specifies how a person's assets should be distributed after their death?

Accepted Answer

Last will and testament

Answer

Living will

Answer

Trust agreement

Answer

Power of attorney

Question 3

What is the main advantage of setting up a revocable living trust?

Accepted Answer

Avoidance of probate

Answer

Immediate tax savings

Answer

Higher investment returns

Answer

Enhanced retirement benefits

Question 4

Which of the following is NOT typically included in an estate plan?

Accepted Answer

Financial audit

Answer

Will

Answer

Trusts

Answer

Powers of attorney

Question 5

What is the role of an executor in estate planning?

Accepted Answer

To distribute the estate’s assets according to the will

Answer

To manage the deceased person's investments

Answer

To provide legal advice to heirs

Answer

To handle the deceased person’s medical decisions

Question 6

Which type of trust can be changed or revoked by the grantor during their lifetime?

Accepted Answer

Revocable trust

Answer

Irrevocable trust

Answer

Charitable trust

Answer

Special needs trust

Question 7

What is the purpose of a durable power of attorney in estate planning?

Accepted Answer

To manage financial affairs if the person becomes incapacitated

Answer

To manage health care decisions

Answer

To distribute assets after death

Answer

To establish a trust

Question 8

Which tax is specifically associated with the transfer of assets from a deceased person to their heirs?

Accepted Answer

Estate tax

Answer

Income tax

Answer

Sales tax

Answer

Property tax

Question 9

How can life insurance be used in estate planning?

Accepted Answer

To provide liquidity to pay estate taxes and other expenses

Answer

To reduce estate taxes

Answer

To invest in stocks

Answer

To enhance retirement benefits

Question 10

What is a common method for reducing estate taxes?

Accepted Answer

Gifting assets during the grantor’s lifetime

Answer

Investing in bonds

Answer

Establishing a retirement account

Answer

Purchasing real estate