STEP Trust and Estate Planning 2

Question 1

A settlor creates a trust but retains the power to revoke it. For federal estate tax purposes, how is the trust treated at the settlor's death?

Accepted Answer

The trust assets are included in the gross estate under IRC §2038

Answer

Under IRC §2038, assets in a revocable trust are fully includible in the settlor's gross estate because the settlor retained the power to alter, amend, or revoke.

Question 2

Which type of trust allows the trustee to distribute income or principal among a class of beneficiaries at the trustee's absolute discretion, providing maximum creditor protection?

Accepted Answer

Discretionary trust

Answer

A discretionary trust gives the trustee unfettered discretion over distributions, meaning creditors of a beneficiary cannot compel a distribution that has not yet been made.

Question 3

Under the Uniform Trust Code, which fiduciary duty requires a trustee to treat all beneficiaries — both current and remainder — impartially?

Accepted Answer

Duty of impartiality

Answer

The duty of impartiality requires the trustee to balance the interests of income beneficiaries and remainder beneficiaries without favoring either group.

Question 4

A testator's will leaves the residuary estate 'to my children in equal shares.' One child predeceased the testator leaving two grandchildren. Under most anti-lapse statutes, what happens to that child's share?

Accepted Answer

The share passes to the two grandchildren by representation

Answer

Anti-lapse statutes typically substitute the deceased beneficiary's descendants to prevent the gift from failing when the predeceased beneficiary is a specified relative.

Question 5

For a Qualified Personal Residence Trust (QPRT), the gift tax value of the remainder interest is calculated using which primary factor?

Accepted Answer

The IRS §7520 rate and the length of the retained term

Answer

The remainder interest value in a QPRT is determined using the applicable §7520 rate and the retained term period, with a higher rate or longer term producing a lower taxable gift.

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

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

STEP Trust and Estate Planning 2