Module 4: Methods of Estate Transfer at Death Quiz 3

Which one of the following best describes a codicil? A) A document modifying a previous will B) A will disinheriting a child or spouse C) A will leaving all of the decedent's property to the surviving spouse D) A clause in a will discouraging heirs from challenging any provisions of the will

A - A codicil is a document that modifies or amends a previous will.

"I give all the rest, residue, and remainder of my estate to..." is an example of what type of clause? A) A residuary clause B) A general bequest C) A tangible personal property clause D) A specific bequest

A - A residuary clause disposes of property in the estate that is not otherwise distributed in the will. For example, "I give all the rest, residue, and remainder of my estate to...."

Which one of the following is a characteristic of a revocable trust? A) It will act as a will substitute because it names the people to receive title to the trust assets after the grantor's death. B) It will not act as a will substitute because of the grantor's retained right to revoke. C) It will remove the trust assets from the grantor's gross estate. D) It will act as a will substitute because the grantor has given up control of the trust assets.

A - A revocable trust acts as a will substitute because it names the people to receive title to the trust assets after the grantor's death.

Barry Albee's only will, drafted in 2013, includes the following provisions: Disposes of his household and personal effects by reference to a tangible personal property memorandum Leaves $250,000 in cash to each of his five grandchildren Leaves the family mansion to his brother Sam Leaves the remainder to the Barry Albee Revocable Trust Provides that debts shall be apportioned equally among the beneficiaries The will was signed by two witnesses, one of whom is Barry's brother, Sam. Barry's gross estate is valued at $2,862,000. The Albee mansion, worth $1.2 million, has a mortgage of $1 million. Barry has not created the Barry Albee Revocable Trust and has not drafted a tangible personal property memorandum. Which of the following statements is CORRECT regarding whether specific will clauses should be drafted or amended? I. The tangible personal property clause should be amended to provide for disposition if a personal property memorandum is not in existence at the time of Barry's death. II. The debts clause should be amended to clarify whether the mortgage on the Albee mansion left to Barry's brother Sam is to be considered a debt for purposes of this clause. III. The remainder clause should be amended to provide for disposition if the Barry Albee Revocable Trust is not in existence at the time of Barry's death. A) I, II, and III B) I and II C) II and III D) I only

A - All of the statements are correct.

Which one of the following property interests of a decedent will pass through probate? A) Property owned with the decedent's brother as tenants in common B) Property held as tenants by the entirety C) Life insurance proceeds with the decedent's spouse as the beneficiary D) Pension plan assets with a named beneficiary other than the decedent's estate

A - Property owned as tenants in common may be transferred by will or pass via state intestacy laws. In either case, the property will pass through probate. The other interests listed pass by contract (beneficiary designation) or by operation of law/survivorship rights (tenants by the entirety).

Which of the following statements regarding probate is CORRECT? I. Probate is necessary when a decedent dies testate. II. Assets held as tenancy by the entirety pass through probate. A) Both I and II B) I only C) Neither I nor II D) II only

B - When a decedent dies testate (with a valid will), probate is necessary to prove the validity of the will and transfer the decedent's assets according to its provisions. Property held as tenancy by the entirety passes by operation of law (there are survivorship rights) and is not subject to probate.

One advantage of all will substitutes is that A) they are not included in the gross estate. B) they pass outside of the probate process. C) they are revocable. D) they are irrevocable.

B - Will substitute assets are distributed according to their beneficiary designations and are not subject to the probate process.

Which one of the following assets is subject to probate? A) A mutual fund titled as joint tenancy with right of survivorship (JTWROS) with a nonspouse B) The death proceeds from a life insurance policy with the decedent's adult child named as beneficiary C) A homestead titled in the name of a revocable living trust at the grantor's death D) A condo held as tenancy in common with a sibling

D - Property held concurrently with another where no survivorship rights are present (e.g., held as tenancy in common) is subject to probate.

Cora Trout, age 79, has an estate that includes her personal residence valued at $120,000, and $18,000 in a bank account that is solely in her name. She would like to arrange her estate so that she maintains exclusive control of the assets during her lifetime, but at her death the assets will pass to her friend, Mabel Berger, outside of probate. Based on Cora's goals and situation, which of the following statements is CORRECT about will substitutes that she could use? I. She should put her bank account in tenancy in common with Mabel. II. She should title her personal residence in joint tenancy with her friend, Mabel. III. She should place the bank funds in a payable on death (P.O.D.) account with Mabel as beneficiary. IV. She should change the title on her personal residence to indicate a life estate reserved for her lifetime and a remainder to her friend, Mabel. A) I and III B) II and IV C) II only D) III and IV

D - Statement I is false because tenancy in common will require probate for her share. Statement II is false because she would not have exclusive control over the account in joint tenancy.

Which of the following forms of ownership pass through probate when an owner dies? I. Fee simple II. Tenancy by the entirety III. Community property IV. Joint tenancy with right of survivorship (JTWROS) A) I only B) I, III, and IV C) IV only D) I and III

D - Statements I and III are correct. Statements II and IV are incorrect. JTRWOS and tenancy by the entirety do not pass through probate because they both include a right of survivorship and pass to the surviving joint owner(s) by operation of law.

Which one of the following is a characteristic of probate? A) Often a costly and complex process B) Expedites estate administration C) Not applicable if there is no will D) Ensures estate privacy

A - Probate is often a costly and complex process. Information regarding the estate becomes a matter of public record and generally there are delays in estate administration. Probate applies whether a person has a will or dies intestate. This is because one of the major points of probate is transferring ownership. The ownership of the deceased's property that is not transferred by operation of law (joint tenancy with right of survivorship) or by contract (beneficiary designations) must be transferred by probate. Now the question becomes, "Will the probate court seek to follow the instructions of the deceased as expressed by a valid will or does the probate court transfer ownership according to the state-set order of distribution because the deceased did not have a valid will?"

Which one of the following statements is CORRECT regarding probate of real property? A) Probate of the decedent's real property must be conducted in the state in which the real property was located. B) Probate of the decedent's real property must be conducted in the state in which most of decedent's probate assets are located. C) Probate of the decedent's real property, regardless of where it is located, must be conducted in the state in which the decedent was domiciled at the time of death. D) Probate of the decedent's real property, regardless of where it is located, must be conducted in the state in which the decedent was a resident at the time of death.

A - Real property must be probated in the state in which it is located.

Which one of the following is an advantage of the probate process? A) The probate process is court supervised. B) The probate process is lengthy. C) The probate process is public. D) The probate process is private.

A - The duration of a probate estate depends on the size and complexity of the estate and can continue for several years in certain situations. Typically, the personal representative will not make distributions to beneficiaries until the probate estate is finalized.

Which one of the following elections permit a surviving spouse to elect to take a percentage of the deceased spouse's estate if surviving spouse is dissatisfied by what the deceased spouse gave her in the will? A) Spousal elective share statute B) Family allowance statute C) Pretermitted heir statute D) Homestead allowance statute

A - The spousal elective share statute permits a surviving spouse to elect to take a percentage of the deceased spouse's probate estate if she is dissatisfied by what the deceased spouse gave her in the will.

Which one of the following describes a nuncupative will? A) A will that incorporates estate planning provisions B) An oral will C) A will that leaves all of the property to the testator's surviving spouse D) A will in the testator's own handwriting

B - A nuncupative will is an oral will.

Which one of following describes a person who dies intestate? A) A person who dies without heirs B) A person who dies without a valid will C) A person who dies with a valid will D) A person who dies owning real estate in more than one state

B - A person who dies intestate is a person who dies without a valid will.

Roberta Graham drafts a will that does not involve any estate tax planning and leaves all of her property to her surviving spouse. Which type of will is this? A) Complex B) Simple C) Nuncupative D) Holographic

B - A simple will is one that does not involve any transfer tax planning and leaves all of the testator's property to the surviving spouse.

A document that amends a will and must be executed with all the formalities and prerequisites of an original will is referred to as A) a self-proving clause. B) a codicil. C) a nuncupative will. D) a residuary clause.

B - A will is amended by means of a document referred to as a codicil.

In which one of the following situations is ancillary probate necessary? A) A decedent died without a valid will B) A decedent owned real estate in a state other than the decedent's state of domicile C) A decedent died after executing a complex will D) A decedent was the grantor of a testamentary trust

B - Ancillary probate is necessary when a decedent owned real estate in a state other than the decedent's state of domicile. Domicile is equivalent to a permanent residence; residence is simply where a person is residing or staying at any given time. A person's domicile and residence are most often in the same state.

David Hendricks, age 55, and Jessica Hendricks, age 53, have been married for 22 years. They live in a community property state and have a son, Milton, age 17. David separately owns $50,000 in assets. He also possesses community property with Jessica in the amount of $25,000. David also owns a $300,000 life insurance policy for which his estate is the beneficiary. Upon David's death, which of the assets will be subject to probate? I. The death proceeds of David's life insurance policy II. David's separately owned assets III. David's half interest in the community property IV. Both David's and Jessica's interest in the community property A) II and III B) I, II, and III C) I and II D) II and IV

B - Individually owned assets of the decedent are subject to probate at death. David's half interest in the community property will also pass through the probate process. The life insurance proceeds are part of the probate estate because David's estate is the beneficiary.

Which of the following is generally required for executing a valid last will and testament? I. The testator must be 18 or older. II. The testator must not be under the undue influence of another. III. The testator must have sufficient legal capacity to understand the consequences of creating a will. IV. The will must be attested to and witnessed by the required number of nonbeneficiary individuals. A) II and III B) I, II, III, and IV C) II, III, and IV D) I only

B - These are all requirements for executing a valid will.

One disadvantage of all will substitutes is that A) they are revocable. B) if the will substitute form is irrevocable, there is a possibility of incurring gift taxes. C) assets that transfer via will substitute are not included in the probate estate. D) they speed up the transfer process.

B - Will substitute assets are distributed according to their beneficiary designations and are not subject to the probate process and therefore transfer in less time than probate assets. They allow a great deal of flexibility when a revocable form is used.

James Killeen executed a last will and testament which created a trust. This trust becomes effective at James's death. Which one of the following describes his trust and will? A) James has created a testamentary trust and a simple will. B) James has created an irrevocable trust and a pourover will. C) James has created a testamentary trust and a complex will. D) James has created a revocable living trust and a pourover will.

C - A testamentary trust is a trust that is created in a will; a complex will includes a testamentary trust. James has created both of these.

Which one of the following properly describes partial intestacy? A) John Cooper dies without a will to dispose of his probate assets. B) John Cooper dies without a will, but all of his property will be distributed by will substitutes. C) John Cooper dies after executing a will, but the will does not effectively dispose of all of his probate assets. D) John Cooper dies with a will that leaves all of his property to Jane and none to his two children.

C - Partial intestacy in this case would occur if John dies after executing a will, but the will does not effectively dispose of all of his probate assets.

Which one of the following statements about the elective share is correct? A) The maximum percentage that may be claimed is generally 40% of the probate estate. B) The elective share may only be elected in community property states. C) The elective share can alter a decedent's estate distribution plan. D) The elective share can be taken in addition to any share granted in a will.

C - The elective share may be elected in common law property states.

All of the following statements regarding transfers of property at death are correct except A) Death benefits from retirement plans pass to named beneficiaries outside the will. B) Property can be transferred at death by will, by contract, or by operation of law. C) Intestacy laws are standard from state to state. D) Transfers at death by contract include life insurance proceeds and retirement plan death benefits with named beneficiaries.

C - There are variations among the states regarding the descent and distribution of an intestate's property.

Which one of the following describes a person who dies testate? A) A person who dies and leaves no surviving heirs B) A person who dies owning real estate in more than one state C) A person who dies with no valid will D) A person who dies with a valid will

D - A person who dies intestate does not have a valid will.

Which one of the following is a tax implication of assets transferred by a revocable will substitute? A) Assets transferred by a revocable will substitute are included in the probate estate. B) Assets transferred by a revocable will substitute cannot be included in the gross estate. C) Assets transferred by a revocable will substitute cannot receive a stepped down basis. D) Assets transferred by a revocable will substitute may receive a stepped up basis.

D - Assets transferred by a revocable will substitute may receive a stepped up basis because they are included in the decedent's gross estate.

Placing assets in joint tenancy with right of survivorship (JTWROS) with a spouse will assure the original owner that A) such assets will be distributed pursuant to the provisions of his will. B) he will retain complete control over the asset. C) such assets will be available for current living expenses, if necessary. D) the assets will avoid probate upon the original owner's death, so long as the joint tenant is still living.

D - Placing an asset in JTWROS is a form of will substitute that passes outside of the probate estate.

Which of the following are characteristics of the probate process? I. It acts as a means of documenting title to property owned by the decedent. II. It simplifies the transfer of property. III. It serves as a forum for the admission and publication of a decedent's will. IV. It serves as a forum for the submission and payment of creditors' claims. A) II, III, and IV B) I and II C) III and IV D) I, III, and IV

D - Probate is not a simple process, but it does serve as a forum for the admission and publication of a decedent's will and for the submission and payment of creditors' claims.