STEP Trust and Estate Law 3

Question 1

A trustee holds legal title to trust property 'in trust.' Under the doctrine of merger, a trust will fail if:

Accepted Answer

The same person is both the sole trustee and sole beneficiary

Answer

The doctrine of merger extinguishes a trust when the same person holds both the entire legal interest (as trustee) and the entire equitable interest (as beneficiary).

Question 2

Which of the following best describes a 'silent trust' arrangement?

Accepted Answer

A trust where the trustee is not obligated to inform beneficiaries of the trust's existence

Answer

A silent trust (permitted under some UTC jurisdictions) allows the settlor to direct the trustee to withhold information about the trust from beneficiaries for a specified period.

Question 3

Under US federal law, what is the estate tax treatment of property passing to a surviving spouse who is NOT a US citizen?

Accepted Answer

The property qualifies for the marital deduction only if held in a Qualified Domestic Trust (QDOT)

Answer

A QDOT is required to obtain the marital deduction for a non-citizen surviving spouse, ensuring the IRS can collect deferred estate tax.

Question 4

Which generation-skipping transfer (GST) tax exemption strategy involves allocating exemption to a trust so that its inclusion ratio is zero?

Accepted Answer

Zeroing-out allocation

Answer

Allocating sufficient GST exemption to make the inclusion ratio zero means all distributions and terminations from that trust are exempt from GST tax.

Question 5

A trustee who delegates investment management to an external advisor remains liable if the trustee fails to:

Accepted Answer

Prudently select, instruct, and monitor the agent under the Uniform Prudent Investor Act

Answer

Under the UPIA, trustees may delegate but must prudently select the agent, define the scope of delegation, and periodically monitor the agent's performance.

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

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

STEP Trust and Estate Law 3