ACCT 4080- previous quizzes
Marissa is the trustee for a large fund. She can either liquidate assets, which would earn the beneficiaries a 35% return over what they normally get, or she can hold the assets which would earn her a 10% commission. Why must she choose to liquidate assets?
Because she has a fiduciary responsibility to act in the best interest of the beneficiaries.
Which answer is true as it relates to beneficiaries?
Beneficiaries can receive a portion or all of a benefactor's assets.
Crummey Trust
Beneficiaries have right to withdraw property transfers to a trust for a limited period of time
Power of Appointment
Beneficiary spouse gets income for life and has the power to direct where assets go during their life or at their death
What is the benefit to a living trust?
Can be changed or dissolved at any time
What is a probate court?
Specialized court that handles estate property, assets and the distribution of these items The role of the probate court is to make sure that a deceased person's debts are paid and assets are allocated to the correct beneficiariesLinks to an external site.. The term probate is used to describe the legal process that manages the assets and liabilities left behind by a recently deceased person.
A plan for the _____ of assets in a tax advantaged manner
disposition
A ____ power of attorney to manage a clients finances
durable
Naming _____ to raise minor children
guardians
Planning for _____ insurance to support a family of provide ___ for the estate
life; liquidity
A _____ trust to avoid ___
revocable, probate
A person who dies with a valid will is said to have died ____, while a person who dies without a valid will is said to have died ____.
testate, intestate
Of the several legal requirements that make a will valid, which one of the following speaks to a sound mind?
Capacity Testamentary capacity refers to the ability of a person to make a valid will:Links to an external site. the age requirement (18 years old), and a mental capacity requirement. To have mental capacity, the testator must have the ability to know: (1) the nature/extent of property; (2) the natural objects of her bounty (family members); (3) the dispositionLinks to an external site. that her will is making; (4) the ability to connect all of these elements together to form a coherent plan.
Fred has recently drafted his first will at the age of 45. When he turned 50, a lot of things changed. Most importantly, he now has grandchildren and wants to make a legally recognizable amendment to his will to reflect his new wishes. Which of the following would BEST suit his new wishes?
Codicils A codicil is an addition or supplement that explains, modifies, or revokes a will or part of one
________ regarding health care or naming an __________ agent to make health care decisions in the event the client cant make decisions for himself
Directions; agent
What is the basic function of a will?
Dispose of a person's probate property at death. The most basic function of a will is to dispose of an individual's probate property at death.
A _____ transfers property to a _____ who owns and manages it for the _____.
Donor, trustee, beneficiary A trust is an arrangement in which the ownership of assets are transferred from the donor to the trustee who manages the assets for the beneficiary
Beneficial Interest
Entitles beneficiaries to one of two types of interests, either and income interest or a remainder interest.
Paul has recently retired and he wants to have all of his affairs in order so that he can truly enjoy retirement. He has chosen his only son John as the person responsible of disposing of all of his property and assets when he dies. Which of the following BEST describes John's role?
Executor The executor is the fiduciary named in the will responsible for overseeing the probate process. This includes marshalling the decedent's assets, payment of liabilities of the estate, and distribution of the remaining estate assets according to the will.
QDOT
FBO non-US citizen spouse.
Fact-finding for estate planning is concerned only with obtaining information about property ownership
False
What is the first thing one must do in order to formally initiate the probate process?
File a petition in probate court The probate process begins with a petition to the probate court to be appointed the personal representative or executor of the estate.
Family Trust
Gives trustee discretion to distribute assets to beneficiaries in accordance to their needs.
The _____ is the individual who sets up the trust and provides the assets.
Grantor
GRAT
Grantor transfers assets to trust and retains right to fixed dollar amount from trust each year.
QPRT
Grantor transfers personal residence to trust and retains the right to use it for a period of time.
Spendthrift Trust
Has a provision limiting the beneficiary's ability to assign her interest in the trust
While single, James made out a will, naming his mother, Carol as sole beneficiary. Later, James married Lisa. If James died while married to Lisa without changing his will, where would his estate go?
His mother and Lisa Under the rules of Heirs at Law, the law presumes the client wants to benefit his spouse as well as the people he includes in his will (his mother). In addition, the client cannot disinherit his spouse. Therefore Lisa will inherit from James' estate and because he named his mother in his estate, his mother will inherit from his estate as well.
Which of the following is a requirement for a will to be legally executable?
In order for a will to be legally executable: 1) the person must be at least 18 years of age 2) the person must have the requisite mental capacity to make a will 3) the process must be free of fraud, undue influence, or the insane delusion of the testator.
Insurance Trust
Insured gives up all incidents of ownership; usually includes a Crummey provision
Which type of trust is created during life and which type is created upon death?
Inter vivos, testamentary A trust can either be created during the life of the creator (inter vivos) or at death in the will itself (testamentary).
Which of the following is true of a trust?
It may minimize taxes.
Charitable Remainder Trust
Non-charitable beneficiary gets an income interest in the trust and a charity gets a remainder interest in trust property
Which of the following is part of a probate estate?
Real estate owned solely by the deceased person at death Probate property is all property directly owned for which there is no legally recognized death beneficiary designation.
What are the possible benefits to a trust?
Reduce taxes Direct your assets to specific individuals Avoid probate
What are the three types of bequests and the order in which they abate?
Residue, General, Specific According to traditional rules: Gifts of residue abate first, then general bequests next, and specific bequests are last to abate.
Totten Trust
A depositor of a bank account designates a person who will receive the property upon the depositer's death.
How is a living will different from a health care proxy?
A person decides their own medical care in a living will, but another person makes medical decisions for someone as a health care proxy. Health care proxies and living wills are two different types of instruments designed to deal with a single issue: ensuring the medical care provided at time when the patient is no longer capable of expressing his wishes is consistent with those wishes.
A testator can revoke or alter her will at any time before death by any of the following:
A subsequent writing validly executed A physical act with respect to the will By operation of the law
What are revocable trusts?
A trust where a grantor has the ability to make changes and retain property ownership.
Zack has a will in which he gives his bank account, his toy collection, a car he sold five years ago, and his horse to his children. What concept makes this bequest unenforceable?
Ademption. The concept of ADEMPTION says that if the property subject to a specific bequest was not in the possession of the testator at her death, the bequest fails, or adeems, and the beneficiary receives nothing. A testator cannot give away what they do not own.
Which of the following is also known as a living trust?
An inter vivos trust An inter vivos trust is created during the life of the creator.
While single, James made out a will, naming his mother, Carol as sole beneficiary. Later, James married Lisa. Assume James made out a new will when he married Lisa leaving his entire estate to Lisa. Later he and Lisa divorced and he married Maria but he didn't change his will. What are the rights of Maria to his estate after his death.
Because Maria is the heir at law at James' death, she has a right to contest the will.
Tom is a 17-year-old high school student who has recently been in a car accident. Despite the fact that the accident didn't inflict lasting damage, it made him feel more aware of how short life is. Without undergoing a psychological evaluation, he went to a lawyer and asked him to draft him a will. While he was preparing to list his relatively minor possessions, the lawyer politely said he couldn't draft him a will. Why CAN'T the lawyer draft a will?
Because Tom is underage and you have to be 18 in order to have a legally valid will An individual can make a valid will only if he has reached at least 18 years of age in addition to other conditions.
Which of the following types of tenancies gives the right of survivorship?
Tenancy by entirety and Joint Tenancy A joint tenancy is a form of property ownership in which two or more people share undivided ownership of property during their lives, and upon the death of one of the joint tenants, the ownership interest of the one who dies is extinguished, leaving outright ownership to the survivor. Tenancy by the entirely is available only to married couples. Tenancy in common is a form of co-ownership in which each co-owner has separate but undivided interest in property. The is no right of survivorship in a tenancy in common. The ownership interest passes to the co-owner's estate, not the surviving owner.
Allan and Beth hold a piece of property as joint tenants. Allan decides to sell his interest to Charles. How do Beth and Charles hold their interest?
Tenants in common Tenants in common have a separate but undivided interest in property. As such, either tenant can sell their interest at any time.
Important factors in assessing liquidity needs in estate planning include which of the following?
The amount and terms of debt of the client
Which of the following is a chosen recipient who receives the death benefit from the testator?
The beneficiary A beneficiary is a person the testator chooses to receive a benefit from his estate.
A LAPSE of a bequest occurs when:
The beneficiary predeceases the testator A gift failed, or lapsed, under common law if the beneficiary died before the testator. The failed bequest passed to the residuary.
QTIP trust
The executor of decedent's estate must make an election for the trust to qualify for the marital deduction
Trustee
The person who takes legal title to trust assets and has duties responsibilities with respect to the property
Elizabeth dies without a will, unmarried, without children and no relatives. Who gets her property?
The state If there are no family members, then the property of an intestate decedent passes to the state.
Samantha is a 92-year-old with a house and quite a lot of savings. She has three children. Based on the legal limitations involved, how will Samantha divide her assets?
There are no legal limitations and Samantha can distribute her assets however she wishes in her will. As long as Samantha has a validly executed will, she may distribute her assets however she wishes. Only if Samantha dies without a will (intestate) will the laws of intestacy determine how her assets will pass to her heirs.
The primary reason MOST people do not have an estate plan is:
They believe the law will take care of distributing their assets.
Why are probate courts important?
They keep everything in order and ensure that the testator's wishes are respected. When a person dies, the probate court determines if that person left behind a will. If the will is valid, the probate court appoints an executor to allocate the deceased person's assets to the proper beneficiaries according to her wishes.
Why are people advised to create living wills?
To ensure the patient's desires are respected Living wills are designed to ensure the medical care provided at time when the patient is no longer capable of expressing his wishes is consistent with those wishes.
A _____ is also known as as poor man's will.
Totten Trust
GRIT
Transferor retains an income interest in property transferred; reduces value of property transferred to beneficiaries
A living will states a person's wishes regarding estate planning?
True A living will, also known as an advance directive, is a legal document stating a person's preference for end-of-life medical care. It is used when a person is unable to communicate on their own. It stays in effect from the time it is created until death. Living wills are a part of estate planning.
What is the main purpose of notary or witness signatures on a durable power of attorney document?
Verify the identities of the people signing the document.
A plan for _____ giving
charitable
