PFS Estate Planning 2

Question 1

Which trust allows a surviving spouse to benefit from assets while keeping them out of the surviving spouse's taxable estate?

Accepted Answer

Bypass (credit shelter) trust

Answer

A bypass trust holds assets up to the estate tax exemption, benefiting the surviving spouse without including those assets in the survivor's estate.

Question 2

What is the primary benefit of a stepped-up basis for inherited assets?

Accepted Answer

It resets the cost basis to fair market value at date of death, reducing capital gains tax

Answer

A stepped-up basis resets the inherited asset's cost basis to its fair market value on the decedent's date of death, minimizing the heir's capital gains tax liability.

Question 3

A QTIP trust is designed primarily to:

Accepted Answer

Provide income to a surviving spouse while controlling ultimate distribution of principal

Answer

A Qualified Terminable Interest Property (QTIP) trust qualifies for the marital deduction while allowing the first spouse to die to control who ultimately receives the principal.

Question 4

Which planning tool is most appropriate for transferring a family business to children at a discounted value while retaining an income stream?

Accepted Answer

Grantor Retained Annuity Trust (GRAT)

Answer

A GRAT allows the grantor to transfer appreciating assets to heirs at a reduced gift tax value by retaining an annuity payment for a fixed term.

Question 5

Under the unlimited marital deduction, transfers between spouses are exempt from estate taxes EXCEPT when:

Accepted Answer

The receiving spouse is not a U.S. citizen

Answer

The unlimited marital deduction does not apply to transfers to a non-U.S. citizen spouse; instead, a Qualified Domestic Trust (QDOT) must be used.

(PFS) Personal Financial Specialist Practice Test

(PFS) Personal Financial Specialist Practice Test

PFS Estate Planning 2