Estate Planning Final Exam 1-110 (in order) CUSTOM
Ben is interested in using a Qualified Personal Residence Trust (QPRT) as part of his estate plan. Which of the following are false regarding QPRTs? a. At the end of the trust term, the house will revert back to the grantor. b. With a QPRT, the grantor must survive the trust term to realize any estate tax savings. c. A QPRT can be used with either primary residences or vacation homes. The grantor will have made a taxable gift upon the creation of the QPRT
A
Bernard made a gift of $500,000 to his brother in 1997. At the time of the gift, the applicable gift tax credit was $192,800, but due to Bernard's prior taxable gifts he paid $200,000 of gift tax. When Bernard died in 2019, the applicable gift tax credit had increased to $4,505,800. At Bernard's death, what amount related to the $500,000 gift to his brother is included in his gross estate? a. $0. b. $153,000. c. $200,000. d. $500,000.
A
Curtis, who was married, recently died owning several assets. Given the assets below, determine whether each asset should be included in Curtis' probate estate. A. Yes, this item is included in the probate estate. B. No, this item is not included in the probate estate. His personal residence worth $250,000 titled as sole ownership (fee simple).
A
Dawson recently prepared a last will and testament in which he left all of his assets to his girlfriend, Jen. Dawson and Jen broke up last night and now Dawson wants to leave all of his worldly possessions to his best friend, Joey. What can Dawson do to prevent Jen from receiving any of his assets? a. Dawson can shred the will under which Jen receives all of his assets. b. Dawson can send Jen an email telling her that he is cutting her out of his will. c. Dawson can tell Joey that he plans to write a new will. d. Dawson can give the will to Joey.
A
Diana's will leaves all of her property to her husband, George. If he does not survive her by more than eight months, the property will transfer to Diana's only daughter. Diana dies on May 1 and George dies on the following December 1. Of the following statements, which is correct? a. Diana's property will transfer to her daughter and the property will be eligible for the unlimited marital deduction in Diana's estate. b. Diana's property will transfer to her daughter and the property will not be eligible for the unlimited marital deduction in Diana's estate. c. Diana's property will transfer to George and the property will be eligible for the unlimited marital deduction in Diana's estate. d. Diana's property will transfer to George and the property will not be eligible for the unlimited marital deduction in Diana's estate.
A
Elizabeth has drafted her own will using the "EZ Wills" software that she purchased on the internet. She sends it to you for a review. In your first review of the will, you look for which of the following common provisions? a. A statement of the domicile of the testator. b. A secondary clause. c. A specific bequest of property owned tenancy by the entirety. d. A disclosure clause.
A
Elizabeth, who is not a licensed attorney, recently started her own financial planning practice. Which of the following activities would be considered the unauthorized practice of law? a. Preparing a last will and testament for her first client. b. Helping clients to identify their financial planning goals. c. Preparing financial statements for prospective clients. d. Referring clients to her brother, Jack, who happens to be a licensed attorney.
A
Eugene is considering having his attorney prepare a springing power of attorney in which his gives his friend, Eleanor, the power to handle his finances. Why should Eugene include such a document in his overall estate plan? a. In the event that Eugene becomes disabled, Eleanor will be able to pay Eugene's bills. b. Eleanor is not legally competent. c. Eleanor is only 16 years old. d. Eugene wants Eleanor to be able to handle all of his finances immediately.
A
Fred, the founder and CEO of WonderCo, recently passed away. At his death, Fred owned 80% of the stock of WonderCo; and the WonderCo stock was his only asset. WonderCo is a publicly traded company. Which of the following discounts would be applicable to Fred's WonderCo stock? a. Key Person Discount. b. Minority Discount. c. Both a and b. d. Neither a nor b.
A
Gene contributed $500,000 to an irrevocable trust and did not retain any right to the trust's assets. The income beneficiary of the irrevocable trust was Gene's sister, and the remainder beneficiary of the irrevocable trust was Gene's niece. At the time of the transfer, Gene paid gift tax of $35,000. Gene died four years later, when the value of the irrevocable trust was $1,200,000. With regard to the irrevocable trust, how much is included in Gene's gross estate? a. $0. b. $35,000. c. $500,000. d. $1,200,000.
A
Jackie and Julie are not married and have been in a long-term, non-traditional relationship. Jackie wants to make sure that if she dies first, Julie will be provided for. Which of the following would you be likely to recommend to fulfill Jackie's goal of transferring assets to Julie at Jackie's death? a. Name Julie as the beneficiary of Jackie's retirement plan. b. Transfer the ownership of Jackie's real estate investments into Tenancy by the Entirety. c. Advise Jackie against writing a will that specifically bequeaths assets to Julie. d. Recommend that Jackie and Julie move to a community property state.
A
Chris and Jenn made the following gifts this year: · Chris gave their son, Evan, a car worth $4,000 owned as community property. Chris also gave his son his stamp collection (separate property) valued at $60,000. · Chris gave his brother Stephen $20,000 of Chris' separate property so Stephen could purchase a new home. · Chris gave his sister Heather $4,000 in cash from his and Jenn's joint checking account which consists only of community property. He also gave Heather a piece of land he purchased before his marriage to Jenn, valued at $49,000. After the gift, how is Evan's ownership of the car classified? a. Sole Ownership. b. Joint Tenancy with Chris. c. Tenancy in Common with Chris and Jenn d. Community Property with Evan's wife Michelle.
-
Creditor protection is one of the disadvantages of the probate process. True or False.
-
Which of the following accurately describes a life estate? a. An interest in property for a specified number of years. b. An interest in property that ceases upon the death of the owner of the life estate. c. An undivided interest in property held by two or more related or unrelated persons. d. A complete interest in property with all the rights associated with outright ownership.
-
Karen, age 58, recently visited her attorney to discuss the appropriate estate planning documents she needed to effectuate her estate planning goals. Given the following goals, which document is appropriate to effectuate the goal? Each document may be used more than once. a. Do Not Resuscitate Order. b. Last Will and Testament. c. Living Will. d. Power of Appointment. e. Power of Attorney for Health Care. f. Power of Attorney. g. Side Instructional Letter. To avoid being placed on an artificial breathing machine if Karen is terminally ill.
E
A U.S. citizen can annually gift an unlimited amount to his non-U.S. citizen spouse without gift tax. True or False.
F
A limited power of appointment subject to an ascertainable standard results in inclusion of the assets subject to the power in the agent's gross estate. True or False.
F
At the end of the trust term, the ownership of a residence held by a QPRT automatically reverts back to the grantor. True or False.
F
Expenses related to the administration of an estate may only be deducted on the estate tax return (Form 706). True or False.
F
If a person dies without a will, a probate court will appoint an executor when the probate process is initiated. True or False.
F
Only individuals who currently have assets in excess of the applicable estate tax credit equivalency amount need estate planning. True or False
F
Simply not listing an heir in a will is sufficient to disinherit that heir. True or False.
F
The estate planning process is fairly simple and can generally be completed by a financial planner without any assistance from a licensed attorney or CPA. True or False
F
The valuation of property included in a decedent's gross estate is either the fair market value at the date of death or, if properly elected, the value at the alternate valuation date (nine months from the date of death). True or False.
F
To qualify for the annual gift tax exclusion, a gift can be of a present or future interest. True or False
F
Karen, age 58, recently visited her attorney to discuss the appropriate estate planning documents she needed to effectuate her estate planning goals. Given the following goals, which document is appropriate to effectuate the goal? Each document may be used more than once. a. Do Not Resuscitate Order. b. Last Will and Testament. c. Living Will. d. Power of Appointment. e. Power of Attorney for Health Care. f. Power of Attorney. g. Side Instructional Letter. To clarify Karen's burial wishes.
G
Karen, age 58, recently visited her attorney to discuss the appropriate estate planning documents she needed to effectuate her estate planning goals. Given the following goals, which document is appropriate to effectuate the goal? Each document may be used more than once. a. Do Not Resuscitate Order. b. Last Will and Testament. c. Living Will. d. Power of Appointment. e. Power of Attorney for Health Care. f. Power of Attorney. g. Side Instructional Letter. To direct and provide for the future care of her minor child, Josh, in the event of her death.
G
Jaime, a wealthy doctor, wrote a will many years ago after his first child was born. His will leaves his home on Drury Lane to his daughter, Taylor. Jaime sold the home on Drury Lane last year and purchased a new home on Mulberry Lane. The extinction of Taylor's legacy is called what? a. Abatement. b. Ademption. c. Surety. d. Letters testamentary.
B
Karen, age 58, recently visited her attorney to discuss the appropriate estate planning documents she needed to effectuate her estate planning goals. Given the following goals, which document is appropriate to effectuate the goal? Each document may be used more than once. a. Do Not Resuscitate Order. b. Last Will and Testament. c. Living Will. d. Power of Appointment. e. Power of Attorney for Health Care. f. Power of Attorney. g. Side Instructional Letter. To give Karen's husband, Teddy, the ability to gift Karen's assets to himself after her death.
B
Kerri was recently diagnosed with an inoperable brain tumor. While the tumor has not caused any noticeable mental problems yet, Kerri's brain function is expected to deteriorate substantially over the next three years, resulting in significant medical expenditures. Kerri's sister Ann was diagnosed with the same illness 2 years ago. Kerri's only other surviving relatives include three brothers, two nieces, and one nephew. Although Kerri's brother invited her to live with him, Kerri sold her home in Oklahoma last month and moved to an assisted living facility in South Texas that specializes in caring for patients with brain tumors. Kerri's gross estate is currently valued at $12,000,000, including $2,000,000 in personal property, $4,000,000 in a retirement account, and $6,000,000 in a closely held family business. The only estate planning document Kerri currently has is a valid will that was executed a year ago. Kerri reviewed the will after her diagnosis and is confident that all of her wishes have been properly documented. Which of the following statements is correct? a. Since Kerri has a valid will, there is no need for her financial planner to review or update her will. b. If Kerri were to decide to make changes to her will utilizing a codicil, she would still have to be competent to execute such a document for it to be considered valid. c. Kerri should begin a gifting program of $15,000 per year per person to her surviving relatives. d. Kerri should execute a general power of attorney and a durable power of attorney for health care with Ann as her appointed agent.
B
Margie has come to you and told you that she is considering executing a power of attorney for health care or an advance medical directive (also known as a living will). Although her state utilizes both documents, she believes that she only needs one of these documents. Which of the following statements is true regarding the two documents? a. Margie is correct in believing that an individual does not need both documents, she only needs to execute one document because they both accomplish the same goals. b. Margie should execute both documents as they cover different aspects of medical care. c. Margie only needs to execute the power of attorney for health care because it covers everything the advance medical directive covers and more. d. Margie does not need to execute either document; she can solve her medical concerns by executing a DNR.
B
Paula, a single woman, transferred $2,000,000 to a GRAT naming her two sons as the remainder beneficiaries, while retaining an annuity with a present value of $860,000. If this is the only transfer that Paula made during the year, what is Paula's total taxable gift for the year? a. $1,110,000. b. $1,140,000. c. $1,970,000. d. $2,000,000.
B
Which of the following is an advantage of a revocable living trust? a. Reduction in federal estate taxes. b. Avoidance of probate. c. Removal of asset appreciation from the grantor's gross estate. d. Distribution of the trust assets according to the terms of the grantor's will.
B
Which of the following is not a feature of a testamentary trust? a. Creation under a last will and testament. b. Shifts the income tax burden to a lower-bracket taxpayer. c. Results in the inclusion of assets in the gross estate. d. Does not avoid probate.
B
Which of the following is not a method for transferring property outside of the probate process? a. State contract law. b. State intestacy law. c. State property titling law with survivorship feature. d. State trust law.
B
Which of the following statements relating to qualified transfers for gift tax purposes is not correct? a. The relationship between the donor and the donee is irrelevant with a qualified transfer. b. A payment made directly to an individual to reimburse him for medical expenses is a qualified transfer. c. The exclusion for a qualified transfer is in addition to the annual exclusion. d. A payment made to a qualified education institution for tuition costs is a qualified transfer.
B
Although he has a vast fortune, Ricky has decided not to prepare an estate plan because he believes that his surviving family members will divide up his assets appropriately. Which of the following is not a risk associated with failing to plan an estate? a. Ricky's estate could incur excessive transfer taxes. b. Ricky's favorite Corvette may not be transferred to his ex-wife, Carla. c. Ricky's insurance policy on his own life may not be paid out to the named beneficiary. d. Ricky's current wife, Lucille, may not provide for Ricky's children from a previous marriage.
C
Carolyn made the following transfers during her life: · The transfer of her home to an irrevocable trust for the benefit of her four children on January 1, 2019. Carolyn retained the right to live in the home for the remainder of her life. The fair market value of the home at the date of the transfer to the trust was $1,000,000. The fair market value of the home at Carolyn's date of death was $1,200,000. · A transfer of $44,000 to an irrevocable trust for the benefit of her four children on January 2, 2014. Carolyn retained the right to a 4% annuity payment from the trust for the years 2014 and 2015. At Carolyn's date of death, the trust had a value of $62,000. If Carolyn died on July 13, 2019, with regard to the above transfers, how much is included in Carolyn's gross estate? a. $0. b. $1,044,000. c. $1,200,000. d. $1,262,000.
C
Which of the following is a principal reason for establishing a revocable living trust? a. Reducing the grantor's gross estate. b. Temporal Discounts. c. Probate Avoidance. d. Avoidance of the Rule against Perpetuities.
C
Which of the following is true regarding a Grantor Retained Annuity Trust (GRAT)? a. At the end of the GRAT term, a taxable gift occurs. b. If the grantor dies during the trust term, a pro rata portion of the trust assets are included in the grantor's estate. c. Interest and dividends earned by assets in a GRAT are taxed to the grantor. d. If the grantor survives the trust term, all of the trust assets are included in the grantor's estate.
C
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
You are a CFP® professional and although you never went to law school, you consider yourself to be very good at reviewing wills. Your client, Catherine, asks you to prepare a will for her. Should you prepare a will for Catherine? a. Yes, Catherine is your best client and you might lose her if you do not prepare the will. b. Yes, it is permissible for a CFP® professional to prepare a legal document. c. No, preparing Catherine's will would be considered the unauthorized practice of law. d. No, you should only prepare Catherine's will if you are going to prepare her husband's will as well.
C
You are a financial planner and you are preparing for a meeting with your new client, Anne. What would you be most likely to ask Anne to bring to the meeting with her? a. Pictures of her children. b. Her parents. c. Any will. d. Sales records for her ex-husband's business.
C
You recently had lunch with an estate planning attorney during which she made several statements regarding the estate planning process. Of the statements listed below, which would you consider inappropriate from an estate planning perspective? a. "I frequently request copies of any long-term care or disability policies the client has." b. "A current balance sheet and income statement are helpful when beginning the estate planning process." c. "In all my years of experience I have learned to discount the client's transfer wishes when drafting the will. They are not paying me to make sure little Suzi gets the china, they are paying me to save them money." d. "While the probate process is expensive and time consuming for many people, a financial planner should weigh the cost of the necessary planning devices needed to avoid probate against the cost of actually going through probate before determining with the client if probate should be avoided."
C
Colin would like to use his recent inheritance of $200,000 to establish a charitable remainder trust. Colin would like to have the flexibility to make additional contributions to the charitable remainder trust in the future. Which of the following would you recommend for Colin? a. A Charitable Remainder Annuity Trust. b. A Charitable Gift Annuity. c. A Charitable Lead Unitrust. d. A Charitable Remainder Unitrust.
D
During the year, Edward created a trust for the benefit of his five children. The terms of the trust declare that his children can only access the trust's assets after the trust has been in existence for 20 years and the trust does not include a Crummey provision. If Edward transfers $100,000 to the trust during the year, what is his total taxable gift for the year? a. $0. b. $30,000. c. $60,000. d. $100,000.
D
In 2018, Lori assigned a paid-up whole life insurance policy to an Irrevocable Life Insurance Trust (ILIT) for the benefit of her three children. The ILIT contained a Crummey provision for the benefit of each child. At the time of the transfer, the whole life insurance policy was valued at $200,000, and since Lori had not made any other taxable gifts during her lifetime, she did not owe any gift tax. Lori died in 2019, and the face value of the whole life insurance policy of $2,000,000 was paid to the ILIT. Regarding this transfer, how much is included in Lori's gross estate at her death? a. $0. b. $164,000. c. $964,000. d. $2,000,000.
D
This year, Dottie donated $10,000 in cash to her church and she also donated medical supplies with a fair market value and adjusted basis of $15,000 to the Red Cross. Dottie's AGI for this year is $50,000. What is Dottie's charitable income tax contribution deduction for the year? a. $10,000. b. $15,000. c. $20,000. d. $25,000.
D
Under which of the following circumstances would a decedent be considered to have died intestate? a. The decedent handwrote a will, but did not sign or date it. b. The decedent was not of "sound mind" when he signed his statutory will. c. The decedent failed to prepare a last will and testament. d. All of the above.
D
Which of the following assets would pass through probate? a. A life insurance policy with a named beneficiary. b. Assets held in trust. c. A pay-on-death account with a named beneficiary. d. Household goods.
D
Which of the following does not qualify as a charitable organization? a. The State of Louisiana. b. The City of New Orleans. c. The Red Cross. d. The Democratic National Committee.
D
Which of the following is not a reason that the proceeds of a life insurance policy would be included in a decedent's gross estate? a. The proceeds of the policy are payable to the estate. b. The decedent transferred the ownership of the policy to his daughter six years before his death but retained the right to change the beneficiary of the policy. c. The decedent transferred the ownership of the policy to his son six months before his death. d. The decedent transferred the ownership of the policy to his wife four years ago.
D
Which of the following is not a transfer cost associated with estate planning? a. Document preparation. b. Attorney's fees. c. CPA's fees. d. Insurance premiums.
D
Which of the following states is not a community property state? a. Louisiana. b. Idaho. c. Wisconsin. d. Florida.
D
Which of the following transfers would result in gift tax? a. Bob gifts $11,000 to his daughter Barbie. b. Elroy gifts $50,000 to his wife, Elizabeth, who is a U.S. citizen. c. Adam gives his favorite employee, Aaron, a new car at Aaron's retirement worth $20,000. Pete transfers $20,000 to his ex-wife, Patricia. Pete and Patricia were divorced five years ago
D
The IRS generally has three years from the date a gift tax return has been timely filed to assess additional gift tax. True or False.
T
The probate process is the legal process that performs the function of retitling those assets that do not change title in some other way. True or False.
T
The taxable estate of a decedent is the adjusted gross estate less the marital and charitable deductions. True or False.
T
The value of property over which the decedent held a general power of appointment will be included in the decedent's gross estate, regardless of whether the decedent exercised the power. True or False.
T
Transfers that include a revocable beneficiary designation or a transfer to a revocable trust are incomplete transfers, which are not gifts for gift tax purposes. True or False.
T
Julie recently hit it big at the casino. Because of her good fortune, Julie would like to begin a gifting program in which she will give her family and friends yearly gifts equal to the annual exclusion. She would like to learn more about the gift tax system and how gifts are valued. All of the following statements regarding the valuation of a gift are true, except: a. Publicly traded securities are valued at the average of the opening and closing market price for the day of the gift. b. Real estate is generally valued utilizing an appraisal. c. The value of a bond is the present value of the expected future payments. d. Certain valuation discounts may be available due to lack of marketability, lack of liquidity, and lack of control.
A
Natalie and her younger sister Kate purchased a beach-front condominium together 15 years ago. They own the property as a joint tenancy with rights of survivorship. At the time of the purchase, Natalie, being the older sister, was in a better financial position. Therefore, Natalie contributed $300,000 and Kate contributed $100,000 to the purchase price. The property is now worth $800,000. Which of the following statements is correct? a. Natalie and Kate each own 50% of the condo. b. If Natalie were to die today, her share of the condo would transfer to her husband Brian. c. If Kate were to die today, Natalie's new basis in the property would be $400,000. d. If Natalie and Kate were to disagree on how the property was being managed, the only way they could partition their share of the property would be to find a willing buyer that would purchase both of their interests.
A
Of the following, which property transfers at death by contract? a. Roth IRAs. b. Property titled Joint Tenancy with Rights of Survivorship (JTWROS). c. An Irrevocable Living Trust. d. A Grantor Retained Annuity Trust (GRAT).
A
Sharon wants to make sure that she makes full use of the applicable estate tax credit upon her death, but also wants to make sure that her husband, Oswald, has access to her property. Which of the following would you recommend? a. A Bypass Trust. b. A Life Insurance Trust. c. A Revocable Living Trust. d. A Section 2503(b) Trust.
A
Tracey is a financial planner who recently received his CFP® designation. Tracey does not have any other designations or licenses. Although Tracey's expertise is investment planning, he is anxious to expand his client base and is willing to assist clients with any area of financial planning. Over the last month Tracey engaged in the following activities with Troy, a new client. 1. During the initial meeting, Tracey collected personal data about Troy including the estate planning documents Troy had previously executed. 2. During the second meeting, Tracey recommended the use of a trust to fulfill some of Troy's estate planning goals. 3. Troy called Tracey one afternoon and asked if Tracey could explain the probate process to him, which Tracey promptly did. 4. Tracey downloaded a copy of a generic will from the internet, filled in Troy's information and gave the document to Troy to be executed. Of the activities above, which would be considered the unauthorized practice of law? a. 4 only. b. 2 and 3. c. 3 and 4. d. 2, 3 and 4. e. 1, 2, 3 and 4.
A
Under what circumstances would property be subject to ancillary probate? a. If the decedent is a resident of one state and owns real property in another state. b. If the decedent is a tenant in common with an unrelated person. c. If the decedent was a resident of a community property state. d. If the decedent owns a life estate in real property located in a state other than his state of residence.
A
Which of the following is not a common estate planning goal?
A
Which of the following items will pass through probate? a. A house subject to a mortgage and owned fee simple by the decedent. b. Property held tenancy by the entirety. c. Bank accounts with named beneficiaries. d. None of the above will pass through probate.
A
You are opening a new financial planning practice and you would like to put together a team of experts to help your clients with estate planning. Which of the following groups represents the best team to help your clients? a. Financial planner, CPA, and attorney. b. CPA, psychiatrist, and insurance salesman. c. Financial planner, attorney, and real estate agent. d. Attorney, insurance salesman, and IRS agent.
A
Bobby, a single man, owned a building with a fair market value of $2,000,000. Bobby's adjusted basis in the building was $1,000,000. This year, Bobby agreed to sell the building to his adult son, Robby for $1,300,000. What is the amount of Bobby's taxable gift? a. Bobby has made a taxable gift of $300,000. b. Bobby has made a taxable gift of $685,000. c. Bobby has made a taxable gift of $700,000. d. Bobby has made a taxable gift of $2,000,000.
B
Brett died recently leaving all his assets in a trust for his wife Greer. Brett was concerned that Greer would not be able to manage her money adequately to maintain her standard of living for the rest of her life. Therefore, he placed the assets into a spendthrift trust and gave Greer the right to receive a certain amount of income each year. Brett appointed his good friend Paul to be the trustee of the trust. How is Paul's ownership classified? a. Paul holds a life estate over the property. b. Paul holds the legal title to the property. c. Paul holds the equitable title to the property. d. Paul does not hold an interest in the property.
B
Chelsea graduated from the University of Alabama. Each year, football season tickets are sold only to those who make a contribution to the university of $2,000 or more. Chelsea contributes $2,000, so that she meets the requirements to purchase season tickets, and also spends $500 on the season tickets. How much is her deductible charitable contribution for the year? a. $0. b. $1,600. c. $2,000. d. $2,500.
B
Curtis, who was married, recently died owning several assets. Given the assets below, determine whether each asset should be included in Curtis' probate estate. A. Yes, this item is included in the probate estate. B. No, this item is not included in the probate estate. A $500,000 life insurance policy on his own life. His daughter Ann was the named beneficiary and received the proceeds 40 days after Curtis' death.
B
Curtis, who was married, recently died owning several assets. Given the assets below, determine whether each asset should be included in Curtis' probate estate. A. Yes, this item is included in the probate estate. B. No, this item is not included in the probate estate. A car owned jointly with his son Kevin as JTWROS.
B
Curtis, who was married, recently died owning several assets. Given the assets below, determine whether each asset should be included in Curtis' probate estate. A. Yes, this item is included in the probate estate. B. No, this item is not included in the probate estate. Curtis' portion of acreage owned as community property with his wife.
B
Donald has created a trust for the benefit of his three nephews, Huey, Dewey, and Louie, who are all minors. Donald plans on making annual contributions to the trust. Donald would like at least some of his annual contributions to the trust to qualify for the annual exclusion. What would be the best way to accomplish this goal? a. Donald should make sure that he does not contribute more than $15,000 for each nephew, or $45,000 in total, each year. b. Donald should give his nephews an unlimited ability to remove funds from the trust. c. Donald should give his nephews the right to remove some or all of the annual contribution from the trust for a limited period of time. d. Donald's annual contributions to the trust will not qualify for the annual exclusion under any circumstances.
C
Donna has AGI of $100,000. Donna owns a rare antique in which she has an adjusted basis of $200,000. The antique is currently worth $2,000,000. Assuming that Donna's AGI will remain at $100,000 for the next six years, which of the following would you recommend to her if she donates the antique to a museum this year? a. Donna should deduct the entire fair market value of the antique this year. b. Donna should deduct $30,000 this year and every year for the next five years. c. Donna should deduct $50,000 this year. d. Donna should deduct $200,000 this year.
C
In 2000, Price funded a bypass trust with $675,000, the applicable estate tax credit equivalency amount at that time. At Price's death in 2019, his will included a testamentary bypass trust and a residual bequest to his U.S. citizen wife. If Price's taxable estate before prior gifts at his death was $11,400,000, how much will be transferred to the bypass trust to maximize its benefits? a. $1,350,000. b. $4,505,800. c. $10,725,000. d. $11,400,000.
C
Jane transferred a piece of real estate to her son Christopher 6 months ago. Jane purchased the real estate for $90,000 six years ago and the property was valued at $65,000 on the date of transfer. Jane paid $20,000 in gift tax on the transfer. All of the following statements are true, except: a. If Christopher were to sell the property for $60,000 today, then the loss is a short term capital loss. b. Christopher's basis will be adjusted for a portion of the gift tax paid. c. Christopher will have a dual basis for income tax purposes. d. If Christopher sold the property for $120,000 after holding it for 5 years, his gain would be $30,000.
C
John has a general power of appointment over his father's assets. Which of the following is not true regarding such a power? a. John can appoint his father's money to pay for the needs of his father. b. John can appoint money to John's creditors. c. John must only appoint money using an ascertainable standard. d. If John predeceases his father, John's gross estate would include his father's assets even though they had not been previously appointed to John.
C
Jose created a joint bank account for himself and his friend, Amparo. At what 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 own benefit. d. When Jose dies.
C
Which of the following are parties to a power of attorney? a. The principal's mother, even though she is not named as the principal's agent. b. The guardian ad litem. c. The principal, or person granting the power. The attorney who prepares the power of attorney
C
Which of the following empowers an executor to act as the agent of a probate court? a. Surety Bond. b. Letters of Administration. c. Letters Testamentary. d. Intestacy Laws.
C
Laurie and Chance are considering purchasing a piece of land on which they plan to build a vacation home. Laurie and Chance are engaged to be married, and are unsure of how they should title the property. Which of the following statements is correct regarding their ownership and titling of the land? a. Laurie and Chance cannot own the property as joint tenants because joint tenancies may only be established between married parties. b. If Laurie and Chance were married and owned the property as a joint tenancy between spouses, one-half of the value of the property will be included in the probate estate of the first spouse to die without regard to the actual contribution of each spouse. c. If the property is held as a joint tenancy then Laurie and Chance will each own the same fractional share in the property regardless of how much they contribute. d. If the property is held as a joint tenancy and Chance dies first, the property will pass to Laurie unless Chance's will directs a different disposition.
C
Making arrangements to deal with the possibility of physical or mental incapacity is an important area of estate planning. Which of the following arrangements may be used to deal with such unexpected incapacity? 1. A springing durable power of attorney. 2. A revocable living trust. 3. Fee simple titling. 4. A living will. a. 1 only. b. 2 and 4. c. 1, 2, and 4. d. 1, 2, 3, and 4.
C
Maxwell died August 8, 2019. Of the following transfers made during his life, which is included in his gross estate? a. The transfer of a whole life insurance policy on Maxwell's life to an ILIT on September 16, 2015. b. The sale of his term insurance policy to his brother, Donald, for fair market value on August 12, 2015. c. The transfer of a whole life insurance policy on Maxwell's life (face value $150,000) valued at $20,000 to his son on September 16, 2017. d. A gift of $15,000 to Maxwell's sister on August 7, 2019. No gift tax was due on the gift.
C
Nellie recently executed a power of attorney giving Jessie the power to perform certain tasks. Which of the following powers given to Jessie would cause the power to be deemed a general power of appointment? a. Nellie gave Jessie the power to use Nellie's money to pay Nellie's creditors. b. Nellie gave Jessie the power to sell and buy property on Nellie's behalf. c. Nellie gave Jessie the power to use Nellie's money to pay Jessie's creditors. d. Nellie gave Jessie the power to make gifts to Nellie's heirs and charities.
C
Ralphie, a real estate mogul, dies owning a great deal of real property. Which of the following would be included in Ralphie's probate estate? a. A building owned in sole ownership by Ralphie's wife. Ralphie and his wife do not live in a community property state. b. A vacant lot owned joint tenancy with rights of survivorship by Ralphie and his brother. c. A beach house owned tenancy in common by Ralphie and his mother. d. An office building owned tenancy by the entirety by Ralphie and his wife.
C
Rosie and her brother Michael decided recently to purchase an RV together. They both want to use the RV to take their families camping. The price for the RV was $10,000. Since Michael expects to use the RV 60% of the time and Rosie 40% of the time, Michael contributed $6,000 and Rosie contributed $4,000. Their ownership percentage equals their contribution percentage. Which type of property titling must the RV be to reflect their ownership interest? a. Sole Ownership. b. JTWROS. c. Tenancy in Common. d. Tenancy by the Entirety. e. Community Property.
C
Jose recently died with a probate estate of $900,000. He was predeceased by his wife, Guadalupe, and his daughter, Lucy. He has two surviving children, Pete and Fred. Jose was also survived by eight grandchildren, Pete's three children, Naomi, Daniel, Nick; Fred's three children, Heather, Chris and Steve; and Lucy's two children, David and Rachel. Jose's will states the following "I leave everything to my three children. If any of my children shall predecease me then I leave their share to their heirs, per stirpes." Which of the following statements is correct? a. Under Jose's will David will receive $225,000. b. Under Jose's will Chris will receive $150,000. c. Under Jose's will Nick will receive $100,000. d. Under Jose's will Fred will receive $300,000.
D
Kent, age 38, recently came to you for estate planning advice. He has never executed any estate planning documents. During the client interview, you learned that Kent has never been married and has a six-year-old daughter, Kerstin, with his previous girlfriend, Karen. Karen is Kerstin's custodial parent and Kent sees Kerstin every other weekend. While Kent and Karen are cordial, the relationship was recently strained when Karen began dating Kent's business partner, Bobby. Kent is in good health and participates regularly in automobile racing competitions. While Kent often wins in competitions, he has wrecked his car several times and has been seriously injured. Because Kent has had so many wrecks, he invested a majority of his $500,000 net worth in a closely held company to develop a revolutionary steel product that will not bend, crumble or catch fire. Kent and his business partner, Bobby, are sure that all race car companies will buy the steel product because their initial tests established that nine out of ten times a car made with the product that was in a wreck did not even get a dent. Although they plan to take their product to market in a few months, Kent and his partner have had several disagreements. Which of the following statements is true? a. If Kent died today, there would not be any liquidity issues because Kent's share of the closely held company could easily be sold for fair market value. b. Since the value of Kent's net worth is below $11,400,000, there is no need for estate planning. c. Amounts given to Karen for Kerstin's support are deductible on Kent's income or gift tax return. d. If Kent were to die today, his assets would transfer via state intestacy laws with Kerstin being the most likely heir.
D
Kevin transferred $4,000,000 to a GRAT naming his four children as the remainder beneficiaries. Kevin retained an annuity from the GRAT valued at $1,500,000. If this is his only transfer during the year, what is Kevin's total taxable gifts for the year? a. $1,444,000. b. $1,500,000. c. $2,440,000. d. $2,500,000.
D
Of the following, which is not an issue when considering whether to deduct the adjusted basis or the fair market value of property contributed to a charitable organization? a. The current market rate of interest. b. The donor's current and projected adjusted gross income for the 5 years after the contribution. c. The fair market value of the donated property. d. The capital gains rate in effect at the time of the transfer.
D
A Crummey provision is the explicit right of a trust beneficiary to withdraw some, or all, of any contribution to a trust for a limited period of time after the contribution. True or False.
T
A disclaimer clause attempts to discourage disappointed heirs from contesting the will by substantially decreasing or eliminating a bequest to them. True or False.
T
A durable power of attorney for health care allows the agent to make health care decisions for the principal in the event that the principal is incapacitated and unable to make health care decisions for himself. True or False
T
Estate planning is the process of accumulation, management, conservation, and transfer of wealth considering legal, tax, and personal objectives. True or False
T
One of the advantages of an FLP is that restrictions can be placed on the transferability of the limited partnership interests owned by junior family members. True or False.
T
Retirement plans, such as IRAs, SEPs, and SIMPLEs, with named beneficiary designations pass outside of the probate process. True or False
T
Charlotte is getting ready for her first meeting with her new financial planner, Samantha. What information does Charlotte not need to bring to this meeting? a. Previously filed income tax and gift tax returns. b. A copy of her current will. c. A detailed list of Charlotte's assets and liabilities. d. Charlotte should bring all of the above information to her first meeting with Samantha.
d
