RFC Estate Planning & Wealth Transfer 3

Question 1

A decedent owned a farm worth $10 million but cash-poor heirs cannot pay the estate tax without selling it. Which IRC provision allows installment payment of estate taxes attributable to a closely held business?

Accepted Answer

IRC §6166

Answer

IRC §6166 permits estates where a closely held business exceeds 35% of the adjusted gross estate to pay the portion of estate tax attributable to that business in installments over up to 14 years.

Question 2

Which of the following best describes the 'three-year rule' under IRC §2035?

Accepted Answer

Life insurance gifted within three years of death is pulled back into the gross estate

Answer

Under IRC §2035, if the decedent transferred an incident of ownership in a life insurance policy within three years of death, the policy proceeds are included in the gross estate.

Question 3

A client establishes a Spousal Lifetime Access Trust (SLAT) for the benefit of their spouse. A key risk of this strategy is:

Accepted Answer

If the marriage ends in divorce, the grantor loses indirect access to the trust assets

Answer

Because the grantor's indirect access to SLAT assets depends on the spouse remaining alive and married, divorce or the spouse's premature death eliminates that access to the gifted assets.

Question 4

Special use valuation under IRC §2032A allows qualifying real property used in farming or a closely held business to be valued at:

Accepted Answer

Its actual use value rather than highest and best use value

Answer

IRC §2032A permits the estate to value qualifying real property at its current-use value (e.g., as a farm) rather than its potentially much higher highest and best use value, reducing the taxable estate.

Question 5

When a testator's will fails to dispose of all property (partial intestacy), the undisposed portion passes under:

Accepted Answer

The residuary clause of the will, if one exists; otherwise state intestacy law

Answer

A well-drafted residuary clause captures assets not otherwise distributed; absent such a clause, the undisposed assets pass under the decedent's state intestacy statutes.

(RFC) Registered Financial Consultant Practice Test

(RFC) Registered Financial Consultant Practice Test

RFC Estate Planning & Wealth Transfer 3