STEP Documentation & Legal Requirements 5

Question 1

Under the Employee Retirement Income Security Act (ERISA), which document governs the distribution of retirement plan assets upon a participant's death and typically supersedes trust or will provisions?

Accepted Answer

The beneficiary designation form on file with the plan administrator

Answer

ERISA-governed plan assets pass according to the beneficiary designation form on file with the plan administrator, which takes precedence over wills or trust documents.

Question 2

Which section of the Internal Revenue Code governs the reporting requirements for foreign trusts with U.S. owners, requiring annual filing of Form 3520-A?

Accepted Answer

IRC §6048

Answer

IRC §6048 imposes reporting obligations on U.S. persons who are owners or beneficiaries of foreign trusts, requiring the foreign trust to file Form 3520-A annually.

Question 3

What is the primary legal document that a personal representative (executor) must obtain from the probate court to gain authority to administer a decedent's estate?

Accepted Answer

Letters testamentary or letters of administration

Answer

Letters testamentary (if there is a will) or letters of administration (if intestate) are issued by the probate court and grant the personal representative legal authority to act on behalf of the estate.

Question 4

In a dynasty trust designed to last multiple generations, which legal mechanism in states like South Dakota and Nevada eliminates the common law rule against perpetuities?

Accepted Answer

Statutory abolition or the wait-and-see approach replacing the common law RAP

Answer

Several states have statutorily abolished the rule against perpetuities or replaced it with a wait-and-see approach, allowing dynasty trusts to hold assets indefinitely across generations.

Question 5

Which documentation requirement applies when a trustee seeks to modify an irrevocable trust under the doctrine of equitable deviation due to unanticipated circumstances?

Accepted Answer

Petition to the court with supporting affidavits demonstrating the unanticipated circumstance and necessity

Answer

Equitable deviation requires the trustee to petition the court, supported by affidavits or evidence showing that the unanticipated circumstance would defeat or substantially impair the trust's purpose.

(STEP) Society of Trust and Estate Practitioners Certification Practice Test

(STEP) Society of Trust and Estate Practitioners Certification Practice Test

STEP Documentation & Legal Requirements 5