CRPC - Chartered Retirement Planning Counselor Estate Planning Objectives Questions and Answers

Question 1

Which of the following represents the MOST fundamental objective of creating an estate plan?

Accepted Answer

To ensure the client's assets are transferred to the desired people or entities in the intended manner.

Answer

While tax minimization, probate avoidance, and asset growth are all important goals, the most fundamental purpose of an estate plan is to provide for the orderly transfer of assets according to the client's specific wishes. This ensures their legacy is handled as they intended.

Question 2

A client, Sarah, is a 70-year-old widow in good health. She wants to ensure her daughter can manage her finances and make healthcare decisions if she becomes unable to do so herself. Which combination of estate planning documents is MOST essential to meet these specific objectives during her lifetime?

Accepted Answer

A durable power of attorney for finances and a healthcare proxy/power of attorney.

Answer

A durable power of attorney for finances grants the authority to manage financial affairs, and a healthcare proxy (or medical power of attorney) grants the authority to make medical decisions. These documents are specifically designed for managing affairs during a period of incapacity, which is the client's stated goal. A will and testamentary trust are only effective after death, and an ILIT serves a different purpose related to life insurance and estate taxes.

Question 3

A client has a large estate composed primarily of an illiquid family business and real estate. A primary objective of their estate plan is to ensure funds are available to pay significant estate taxes and settlement costs without forcing the sale of these core assets. Which of the following strategies BEST addresses this specific objective?

Accepted Answer

Purchasing a life insurance policy, potentially held in an Irrevocable Life Insurance Trust (ILIT).

Answer

Life insurance provides an immediate, income-tax-free death benefit that creates liquidity to pay estate taxes, debts, and administrative expenses. This prevents the forced, and often unfavorable, sale of illiquid assets like a business or real estate. Placing the policy in an ILIT can also remove the proceeds from the taxable estate.

Question 4

John and Mary, a married couple, own their home as Joint Tenants with Rights of Survivorship (JTWROS). John also has a brokerage account titled solely in his name, with his son from a previous marriage named as the beneficiary in his will. If John dies, what is the most likely disposition of these two assets?

Accepted Answer

The home will pass directly to Mary outside of probate, while the brokerage account will be distributed through probate according to the will.

Answer

Property titled as JTWROS passes directly to the surviving joint owner(s) by operation of law, overriding the will and avoiding probate. The brokerage account, being titled only in John's name without a transfer-on-death (TOD) designation, is a probate asset and will be controlled by the terms of his valid will.

Question 5

One of the key objectives in estate planning is to minimize transfer costs. Besides federal and state estate taxes, which of the following represents a significant cost that a well-structured estate plan using a revocable living trust aims to reduce?

Accepted Answer

Probate court fees and legal expenses.

Answer

Probate can be a lengthy and expensive public court process involving filing fees, executor commissions, and attorney's fees. A primary reason for using a revocable living trust is to hold title to assets so they can pass to beneficiaries outside of the probate process, thereby reducing these specific administrative costs.

CRPC - Chartered Retirement Planning Counselor Practice Test

CRPC - Chartered Retirement Planning Counselor Practice Test

CRPC - Chartered Retirement Planning Counselor Estate Planning Objectives Questions and Answers