STEP Trust and Estate Planning 3

Question 1

A Charitable Remainder Annuity Trust (CRAT) pays a fixed dollar amount each year. What is the minimum required payout rate under IRC §664?

Accepted Answer

5%

Answer

IRC §664 requires a CRAT to pay at least 5% of the initial net fair market value of trust assets annually to the non-charitable beneficiary.

Question 2

Under the generation-skipping transfer (GST) tax rules, a 'skip person' is best defined as:

Accepted Answer

A natural person assigned to a generation two or more levels below the transferor

Answer

A skip person is someone who is two or more generations below the transferor, or a trust where all current interests are held by skip persons.

Question 3

Which doctrine allows a court to reform a trust to correct a drafting error that does not reflect the settlor's actual intent, even after the settlor's death?

Accepted Answer

Reformation for mistake

Answer

Reformation for mistake allows a court to rewrite trust language to conform to the settlor's original intent when clear and convincing evidence shows the document does not reflect that intent.

Question 4

A surviving spouse disclaims an interest in the deceased spouse's estate. For the disclaimer to be a 'qualified disclaimer' under IRC §2518, it must be made within how many months of the transfer?

Accepted Answer

9 months

Answer

IRC §2518 requires a qualified disclaimer to be delivered in writing within 9 months of the date of transfer creating the interest.

Question 5

Which trust structure is specifically designed to hold S corporation stock without disqualifying the S election?

Accepted Answer

Qualified Subchapter S Trust (QSST) or Electing Small Business Trust (ESBT)

Answer

Only a QSST or an ESBT qualifies as a permitted S corporation shareholder; all other irrevocable trusts generally terminate the S election.

(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 3