Chapter 14 Estate Planning

Which of the following is an undivided ownership in the property that, upon death of one owner, automatically passes to the surviving owner? 1. Tenants by the Entirety. 2. Tenants in Common. 3. Community Property. 4. Joint Tenancy with Rights of Survivorship. A) 1 and 4. B) 1 and 2. C) 2 and 4. D) 3 and 4. E) 1, 3 and 4.

A) 1 and 4.

Which of the following tasks are the primary responsibilities of the personal representative? 1. Inventory the estate. 2. File income tax returns for all beneficiaries. 3. Contest payment of all debts of the estate. 4. Probate the will. A) 1 and 4. B) 2 and 3. C) 2 and 4. D) 1, 3 and 4. E) 1, 2, 3 and 4.

A) 1 and 4.

Which of the following items will be retitled through probate? A) A house subject to a mortgage and owned fee simple by the decedent. B) 1/2 of real estate held tenancy by the entirety. C) Bank accounts with a POD designation. D) None of the above will be retitled through probate.

A) A house subject to a mortgage and owned fee simple by the decedent.

Which of the following documents appoints a surrogate decision-maker for health care? A) Durable power of attorney for health care. B) General power of appointment. C) Life insurance beneficiary designation. D) All of the above.

A) Durable power of attorney for health care.

Which of the following statements is the best definition of estate planning? A) Estate planning is the process of accumulation, management, conservation, and transfer of wealth considering legal, tax, and personal objectives. B) Estate planning is the management, conservation, and transfer of wealth considering estate tax transfer costs. C) Estate planning is the management, conservation, and transfer of wealth considering legal, tax, and personal objectives. D) Estate planning is the process of accumulation, management, conservation, and transfer of wealth considering estate and generation-skipping transfer tax costs.

A) Estate planning is the process of accumulation, management, conservation, and transfer of wealth considering legal, tax, and personal objectives.

Which type of will is handwritten and does not generally require a witness? A) Holographic. B) Oral. C) Nuncupative. D) Statutory.

A) Holographic.

Maxine is terminally ill. Her doctors gave her twenty-four months to live thirty-six months ago. Maxine has decided that she does not want to be placed on life support. Which document will direct Maxine's doctors to refrain from putting her on life support? A) Living will. B) Power of attorney. C) Durable power of attorney. D) General power of appointment.

A) Living will.

The first step in the estate planning process includes: A) Meeting with the client and discussing the client's assets, family structure, and desires. B) Prioritizing the client's goals. C) Developing a formal written estate plan. D) Identifying key areas of concern in relation to the client's plan - taxes, cash on hand, etc.

A) Meeting with the client and discussing the client's assets, family structure, and desires.

Steve has been married to Louise for six years. They are about to buy their first home and have come to you with some questions that they have regarding titling of the home. In your explanation of the different property ownership arrangements, which of the following titling structures can only be entered into by spouses? A) Tenancy by the entirety. B) Tenancy in common. C) Joint tenancy with rights of survivorship. D) Fee simple.

A) Tenancy by the entirety.

Which of the following are advantages of allowing property to pass through the probate process? 1. Assets do not need to be retitled if they pass though probate. 2. There are limitations on creditors' time to make claims against the estate. 3. There is stricter supervision of the disposition and management of assets. 4. A will cannot be contested under the probate process. A) 1 and 2. B) 2 and 3. C) 3 and 4. D) 1, 2 and 3.

B) 2 and 3.

Which of the following would meet the requirements for the annual exclusion under the gift tax rules? A) A gift to a trust, to be distributed to a beneficiary contingent upon the beneficiary's survivorship. B) A gift to a trust that has an ascertainable value at the time of the gift. C) A gift to a secular (not a 2503c trust) trust that does not require annual income distribution to be beneficiary. D) A gift to a trust where the grantor can benefit from current income.

B) A gift to a trust that has an ascertainable value at the time of the gift.

While he was in the hospital, Emile told his wife that if he died he wanted to give his fishing tackle to his son, Joseph; his golf equipment to his son, Joshua; his truck to his daughter, Abigail; and everything else to her (his wife). Emile died the next day without writing anything that he told his wife, but a nurse and another patient were in the room and heard his declarations. What type of will does Emile have, if any? A) Holographic. B) Nuncupative. C) Statutory. D) Emile does not have a will.

B) Nuncupative.

A spendthrift clause: A) Requires the fiduciary of a trust to make small distributions. B) Protects the trust assets from the claims of the beneficiary's creditors. C) Eliminates the problems associated with multiple beneficiaries. D) Prevents the lapse of a general power of appointment and its subsequent estate tax consequences.

B) Protects the trust assets from the claims of the beneficiary's creditors.

Which of the following is a disadvantage of the probate process? A) The decedent's heirs and/or legatees are given clear title to property. B) The probate process requires several court filings. C) The probate process provides for an orderly distribution of the decedent's assets. D) The decedent's creditors are protected.

B) The probate process requires several court filings.

A tenancy by the entirety may be terminated in which of the following ways? 1. Death, whereby the survivor takes the entire tenancy. 2. Mutual agreement. 3. Divorce, which converts the tenancy into a tenancy in common or a joint tenancy. 4. Severance, whereby one tenant transfers his or her interest to a third party with or without the consent of the other tenant. A) 1 and 2. B) 1 and 3. C) 1, 2 and 3. D) 1,2, 3 and 4.

C) 1, 2 and 3.

Which of the following is/are considered a disadvantage(s) of probate? 1. The process can result in delays. 2. The process may be expensive. 3. The process provides clear title to heirs and legatees. 4. The process is open to public scrutiny. A) 1 only. B) 1 and 2. C) 1, 2 and 4. D) 1, 2, 3, and 4.

C) 1, 2 and 4.

Of the following types of ownership, which is available for married couples? 1. Tenancy by the entirety. 2. Tenancy in common. 3. JTWROS. 4. Tenants by marriage. A) 1 only. B) 1 and 3. C) 1, 2, and 3. D) 1, 2, 3, and 4.

C) 1, 2, and 3.

If Priscilla died with each of the following property interests, which will be excluded from her probate estate? A) Property owned as community property. B) Property held tenancy in common. C) Death proceeds of life insurance payable to a living stranger. D) Property owned fee simple.

C) Death proceeds of life insurance payable to a living stranger.

Which of the following is considered an advantage of the probate process? A) The probate process creates delays. B) The probate process is costly. C) Heirs receive property with clear title. D) Information that is filed with the court becomes public information.

C) Heirs receive property with clear title.

Twenty-two years ago, Kyle and John began dating, and 19 years ago, they began living together. Last year, Kyle inherited over $9,000,000 from his grandfather. He wants to ensure that if he dies first, John will be taken care of for the rest of his life. Despite your insistence, Kyle does not have a will, and you have advised him previously that state intestacy laws do not protect same-sex partners. Which of the following asset ownership options would fulfill Kyle's goal of transferring assets to John at his death? A) Community property. B) Tenancy in common with each other. C) Joint tenancy with rights of survivorship. D) Tenancy by the entirety.

C) Joint tenancy with rights of survivorship.

Donald agreed to sell his house to his brother, but could not attend the closing date of the sale (act of sale). Of the following options, which would allow Donald's mother to attend the closing and sign the necessary documents on Donald's behalf? A) Living will. B) Advanced real estate directive. C) Power of attorney. D) Side instruction letter.

C) Power of attorney.

Jose created a joint bank account for himself and his friend, Amparo. At what earliest point has a gift been made to Amparo? A) When the account is created. B) When Jose notifies Amparo that the account has been created. C) When Amparo withdraws money from the account for her benefit. D) When Jose dies.

C) When Amparo withdraws money from the account for her benefit.

A tenancy by the entirety may be terminated in which of the following ways? 1. Death, whereby the survivor takes the entire estate. 2. Mutual agreement. 3. Divorce, which converts the estate into a tenancy in common or a joint tenancy. 4. Severance, whereby one spouse transfers his or her interest to a third party but requires the consent of the other spouse. A) 4 only. B) 1 and 3. C) 2 and 4. D) 1, 2, 3 and 4.

D) 1, 2, 3 and 4.

Which the following is a risk of failing to plan for the estate? 1. Property transfers contrary to the client's wishes. 2. The client's family may not be provided for financially. 3. The estate suffers liquidity problems at the client's death. 4. The estate may bear higher transfer costs. A) 2 only. B) 2 and 3. C) 1, 3, and 4. D) 1, 2, 3, and 4.

D) 1, 2, 3, and 4.

Which of the following is included in the definition of estate planning? 1. Asset management. 2. Accumulation of wealth. 3. Asset preservation. A) 1 only. B) 1 and 2. C) 2 and 3. D) 1, 2, and 3.

D) 1, 2, and 3.

This estate planning tool will cause assets to be included in non-grantor holder's gross estate: A) An intervivos trust. B) A special power of attorney. C) The exercise of a nuncupative will. D) A general power of appointment that is unexercised.

D) A general power of appointment that is unexercised.

The unrestricted ability to ultimately name beneficiaries of income and corpus of a trust is known as: A) A HEMS power. B) A special power of attorney. C) A crummey power. D) A general power of appointment.

D) A general power of appointment.

Which of the following does not need estate planning? A) Tom, age 30, married with two minor children, and a net worth of 375,000. B) Carly, age 35, never been married, one severely disabled son. C) Michelle, age 45, single, has a net worth of $450,000 and two dogs. D) All of the above need estate planning.

D) All of the above need estate planning.

A person or entity entitled to act on behalf of another is known as: A) A principal. B) A curator. C) An attorney at law. D) An attorney in fact.

D) An attorney in fact.

Claude decides to prepare his will, but does not want to seek the help of an attorney. Claude handwrites, signs and dates all of the provisions of the will but does not have it witnessed by anyone. What type of will does Claude have, if any? A) None. B) Nuncupative. C) Self Prepared. D) Holographic.

D) Holographic.

Which of the following is not a party to a trust? A) Trustee. B) Income beneficiary. C) Grantor. D) Principal.

D) Principal.

Which type of will complies with the statutes of the domiciliary state and is drawn by an attorney? A) Holographic. B) Oral. C) Nuncupative. D) Statutory.

D) Statutory.

Tyrone does not want to write a will. It upsets him to contemplate his own death and he simply desires to avoid the estate planning process. All of the following are risks Tyrone's estate may face due to Tyrone's inaction, except: A) Tyrone's property transfers contrary to his wishes. B) Tyrone's estate may face liquidity problems. C) Tyrone's estate faces increased estate administration fees. D) Tyrone's estate faces increased debt payments for outstanding debts at death.

D) Tyrone's estate faces increased debt payments for outstanding debts at death.