Module 4 Exam

Arthur owns a life insurance policy on himself with face value of $1.75 million and cash value of $250K. His wife and four children are beneficiaries of the policy. If he died today, what amount of life insurance proceeds would be included in his probate estate?

$0; because of the beneficiary designations, the proceeds will pass by contract

Clause in a will that disposes of real property is known as a A) Devise B) bequest C) Legacy D) General bequest

A) Devise; devise- clause in will that disposes of real property; bequest - clause in will that disposes of personal property; legacy - alternate term for clause in will that disposes of personal property, especially cash; general bequest - term for bequest payable out of general assets of estate

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

A) Intestacy laws are standard state to state

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

A) assets may receive stepped up basis; because they are included in decedent's gross estate

Which of the following statements regarding probate is correct? I. Probate may be costly and create delays in distribution of assets II. Probate is open to public scrutiny III. Probate protects creditors IV. Probate provides heirs and/or legatees with clear title to property

All statements are correct

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 codicil

Which one of the following types of statutes may give a replacement bequest to a beneficiary who was given a specific asset in a decedent's will when that asset is not available at testator's death? A) Abatement B) Ademption C) Spousal elective D) Advancement

B) Ademption

Which one of the following assets is subject to probate? A) Mutual fund titled as JTWROS with a nonspouse B) Condo held as tenancy in common with a sibling C) Death proceeds from life insurance policy with decedent's adult child named as beneficiary D) Homestead titled in name of a revocable living trust at grantor's death

B) Condo held as tenancy in common with a sibling; property held concurrently with another where no survivorship rights are present (tenancy in common) is subject to probate.

Jack recently died. His will leaves everything in equal shares to his wife and their three children. His wife, named executor, has discovered that Jack was indebted to virtually every person in town. So many claims have been filed against his estate that if they were all paid, She and the children would get nothing from his estate. Which of the following laws would NOT help his wife and children retain some portion of Jack's estate? A) Exempt property award statutes B) Elective or spousal share statutes C) Homestead allowance statutes D) Statutes granting the right to compensation for an executor

B) Elective or spousal share statutes; even though elective or spousal share may grant her a larger percentage of Jack's estate, the percentage is applied only after payment of all valid claims

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

B) Elective share can alter a decedent's estate distribution

Dawn's will leaves half of her real estate assets to her spouse, Marc, and the remaining half in equal shares to her two children. The will has no residuary clause and their combined estates do not exceed applicable exclusion amount. Marc recently died, and Dawn is in the process of amending her will. Which one of the following estate planning pitfalls CAN BE AVOIDED by amending Dawn's will? A) allowing estate to be distributed through probate B) Having part of the estate pass under the laws of intestacy C) Not having sufficient liquidity to pay estate tax liability D) Making an inadvertent gift by improper retitling of assets

B) Having part of the estate pass under the laws of intestacy; without residuary clause, portion going to Marc under dawn's present will will pass by intestacy as well as all her personal property

All of the following are methods to avoid probate except A) Transferring property by deed during life B) Owning real estate in states where the decedent is not domiciled C) Titling property as JTWROS or tenancy by entirety D) Passing property by contract (eg. beneficiaries for life insurance, IRAs, or retirement benefits)

B) Owning real estate in states where decedent is not domiciled; Real estate must be probated in situs, or where it resides, which will be ancillary probate if it is not in the owner's domiciled state

Which one of the following is a document that designates a trust as the recipient of all property that has not been otherwise disposed of upon the death of the decedent? A) Testamentary trust B) Pourover will C) Power of appointment D) Codicil

B) Pourover will; Pourover will - document designating trust as recipient of all property that has not been otherwise disposed of upon death; Codicil - document that amends or adds provisions to a will: Power of appointment - legal device by which one person confers authority on another person to dispose of property on behalf of the person conferring the authority; Testamentary trust - legal entity that has no obligation to keep or use property for benefit of another and becomes operative only upon death of person who created it in their will

All of the following statements regarding probate are correct EXCEPT: A) Probate can be costly and complex B) Probate is private in nature C) Probate provides for an orderly administration of decedent's assets D) Probate can delay the distribution of assets to heirs

B) Probate is private in nature; probate is public

Which 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 most of the decedent's probate assets are located B) Probate of the decedent's real property must be conducted in the state in which the real property was located C) Probate of the decedent's real property, regardless of where it is located, must be conducted in the domiciled state D) Probate of the decedent's real property, regardless of where it is located, must be conducted in decedent's resident state

B) Probate of the decedent's real property must be conducted in the state in which the property was located

Which one of the following property interests of decedent will pass through probate? A) Property held as tenants by the entirety B) Property owned with the decedent's brother as tenants in common C) Life insurance proceeds with decedent's spouse as beneficiary

B) Property owned with the decedent's brother as tenants in common

Nancy is a widow with four children and nine grandchildren. In preparing her will, she wants to leave her entire estate to her children equally. If any of her children are not living when she dies, she wants that child's share of her estate to be split equally among that child's living children. Which one of the following will provisions best meets Nancy's needs? A) survivorship provision B) provision calling for per stirpes distribution C) simultaneous death provision D) provision calling for per capita distribution

B) Provision calling for a per stirpes distribution; per stirpes means members of a designated class (generation) inherit property, so their children would split their deceased parent's share equally if that was the case

One disadvantage of will substitutes is that: A) They speed up the transfer process B) If the will substitute form is irrevocable, there is a possibility of incurring gift tax C) They are revocable D) assets that transfer via will substitute are not included in the probate estate

B) if the will substitute form is irrevocable, there is a possibility of incurring gift taxes

Peter remarried after divorcing his first spouse last year. He asked you for advice on updating his estate plan to reflect his new marital status. His existing will leaves all of his property to his first spouse. He does not want to leave any of his property to his new spouse and he wants all of his property to pass to his children from his first marriage when he dies. Which of the following recommendations would you make? I. Peter should redo his will to reflect his new marital status II. If Peter's new will disinherits his SECOND spouse, she may still be able to claim a share of his estate when he dies by electing against the will

Both I and II

Rick dies as a resident of New Jersey. He owns a beach home in South Carolina. Which of the following statements regarding the probate of Rick's estate is CORRECT? I. Rick's personal assets will be probated according to the laws of New Jersey II. Rick's beach home will be probated according to laws of SC

Both I and II; real estate probated according to laws of state is located in, personal property probated according to decedent's domicile state

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

C) Decedent owned real estate in state other than domicile

Which of the following wills is totally handwritten by testator? A) Durable B) Nuncupative C) Holographic D) Statutory

C) Holographic

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

C) Probate is court supervised

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 deceased spouse gave her in the will? A) Family allowance B) Homestead allowance C) Spousal elective share D) Permitted heir statute

C) Spousal elective share; statute permits surviving spouse to elect to take a percentage of deceased spouse's probate estate if she is dissatisfied by what deceased spouse gave her in the will

Bill owns a vacation home in another state. Bill wants to include his new wife on the title to the vacation home, wants to avoid probate, and does not want his new wife to be able to dispose of the property before his death without his consent. Which of the following statements concerning the most appropriate form of titling is correct? A) Sole ownership enables bill to leave the home to Edna outside of probate B) Tenancy in common with Edna will eliminate the need for ancillary probate C) Tenancy by the entirety will prevent lifetime disposition without Bill's consent D) JTWROS will prevent lifetime disposition without Bill's consent

C) Tenancy by the entirety; this requires consent of both spouses to dispose of property. JTWROS will not. Sole ownerships will require probate. Tenancy in common will not eliminate need for ancillary probate, as Bill's share of the property will require probate

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

C) an oral will

Which one of the following statements regarding beneficiary deeds is correct? A) Beneficiary deeds are most commonly used for intangible personal property B) Beneficiary deed will not remove the asset from donor's probate estate C) Beneficiary deeds are irrevocable once made D) Creator of beneficiary deed has total control over asset until death

D) Creator has total control until death; beneficiary deed is revocable, grantor retains total control of the trust assets. Only used with real property. They are will substitutes and avoid probate.

Which of the following is an example of tangible personal property? A) residence B) stocks and bonds C) land D) Furniture

D) Furniture; tangible personal property is asset that can be touched and has physical form not including land or anything attached to land. Stocks and bonds or any other securities are intangible personal property

James 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) Testamentary trust and simple will B) Revocable living rust and pourover will C) Irrevocable ttrust and pourover will D) Testamentary trust and complex will

D) Testamentary trust and complex will; testamentary trust is trust that is created in a will; complex will includes testamentary trust

All of the following property transfer mechanisms would be appropriate for a client who wishes to avoid probate except: A) Titling property as JTWROS with her daughter B) Naming her niece beneficiary of her life insurance policy C) Transferring assets to a trust for benefit of her grandchildren D) Titling property as tenants in common with her brother

D) Titling property as tenants in common; TC doesn't avoid probate when an owner dies

If a decedent's property does not pass to someone by will substitute or by will, and there are no legal heirs under the applicable state intestate succession statute, the property will:

Escheat to the state; property is held by state for number of years and if no legal heirs under intestacy statutes come forward, property escheats to state

Chad recently died a resident of Ohio, owning several bank accounts in his own name and a vacation house in West Virginia in his own name alone. His will leaves all of his assets to his son. What of the following statements are correct regarding the probate proceedings? I. Chad's real estate can only be probated in the state in which it is located II. Chad's bank accounts can all be probated in a single state

I and II; Real assets must be probated in their own state, while intangible assets can be probated in any state, usually together in domicile state

Which of the following statements correctly characterizes property interests held by the decedent that, at death, pass by operation of law? I. If property passes by operation of law it avoids probate II. If property passes by operation of law it will not be included in decedent's gross estate III. If property passes by operation of law it will not qualify for marital deduction IV. Titling on the instrument determines who shall receive the property

I and IV; operation of law avoids probate, may qualify for marital deduction, and is transferred to survivors listed on title

Which of the following situations would ancillary probate be necessary? I. Thomas dies a resident of Virginia; he owns a ranch in Texas II. Melba dies without a valid will III. Earl dies and his spouse elects against his will IV. Stanley dies a resident of Louisiana; he owns furniture in a vacation home he rented in Florida

I only

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

I only; when decedent dies testate, with a valid will, probate is necessary to prove validity of the will and transfer the decedent's assets according to its provisions. Property held as TE passes by operation of law (survivorship rights) and is not subject to probate.

Which of the following is generally required for executing a valid will and testament? I. Testator is 18+ years old II. Testator must not be under undue influence of another III. Testator must have sufficient legal capacity to understand consequences of creating a will IV. will must be attested to and witnessed by required number of non-beneficiary individuals

I, II, III, IV

Property can be transferred at death by: I. The terms of a valid will II. Contract III. operation of law

I, II, and III

Which of the following is property that passes by contract and avoids probate at death? I. Pensions with a named beneficiary other than decedent's estate II. Life insurance with a named beneficiary other than the decedent's estate III. Profit-sharing plans with a named beneficiary other than decedent's estate

I, II, and III

Elaine has consulted a CFP for help in preparing her estate plan. She has a relatively small estate, and her main objective is to avoid probate. Which of the following actions will help Elaine achieve her objective? I. Designate her daughter as beneficiary of her IRA II. Open a payable on death (POD) bank account with her son III. Transfer assets to a revocable living trust IV. Retitle her house as tenants in common with her sister.

I, II, and III; IV is incorrect because tenancy in common has no survivorship and will go to probate

Vince died during the current year. His estate consisted of the following assets: I. Traditional IRA invested in a global stock fund and a balanced mutual fund- Vince's cousin who died was the designated beneficiary which was never changed II. Life insurance policy with a cash value of $55,000 - the policy is on the life of Vince's sister. Vince's daughter is the named beneficiary III. An installment note receivable, with a 9% interest rate and remaining term of seven years. IV. Land held as tenancy by the entirety with Vince's spouse Which assets will be included in Vince's probate estate?

I, II, and III; IV is wrong because TE has survivorship rights that pass outside of probate. I will be included because beneficiary predeceased Vince. II will be subject to probate because the insured is still alive and death benefit will not be paid out, so policy can be left to heirs in his will.

Which of the following property interest will pass under a decedent's will if the decedent is married at the time of death? I. Property owned in fee simple II. Property owned as tenants in common III. Decedent's half interest in community property IV. Property owned as tenants by the entirety

I, II, and III; these are included in probate estate and pass under the decedent's will. Property owned as TE has survivorship rights, and passes to surviving spouse by operation of law

Which of the following objectives can be accomplished through a will? I. Creating a presumption of survivorship in the event of simultaneous death II. Establishing a priority for eliminating bequests if the estate has insufficient assets to pay all debts, taxes, and bequests III. Bequeathing all assets to a charity when decedent is survived by spouse and children IV. Naming a residuary beneficiary to take all assets that remain after specific bequests have been allocated

I, II, and IV; III is incorrect because all estate assets cannot be given to charity when the decedent is survived by a spouse and children, due to the spousal elective share statute and the nature of community property.

Which of the following assets avoid probate? I. Property held within an irrevocable trust II. Property owned as JTWROS III. Assets for which beneficiary is the estate of the decedent IV. Proceeds for life insurance policy with named beneficiary other than estate of the decedent

I, II, and IV; assets for which beneficiary is estate must pass through probate

Which of the following are characteristics of the probate process? I. It acts as a means of documenting title to property owned by decedent II. It simplifies 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 creditor's claims

I, III, and IV; probate is not a simple process

Which of the following property interests of a decedent will pass through probate? I. Pension plan assets with a named beneficiary other than decedent's estate II. Decedent's half interest in community property III. Life insurance proceeds with decedent's spouse as beneficiary IV. Property owned with the brother of the decedent as tenants in common

II and IV; other interests pass by contract (beneficiary designation) which is not subject to probate

Which of the following assets will pass through probate? I. Survivors' interests in a joint and survivor annuity contract payable to named beneficiaries II. solely owned real estate III. Veterans' survivor benefits payable to named beneficiaries IV. A vacation home owned by spouses as JTWROS

II only; solely owned RE subject to probate

Which of the following trusts avoid probate? I. Testamentary II. Funded revocable III. Funded Irrevocable IV. Funded inter vivos

II, III, and IV; assets in trusts are in existence at time of grantor's death avoid probate. Testamentary trusts are created by the will, so assets pass through probate before going into the trust

Which of the following people would be precluded from executing a legally valid will: I. John, age 80, with a physical disability II. Theresa, age 14

II; legal incapacity is a minor or someone who is disabled that is also deemed legally incapacitated

What is an example of partial intestacy?

John dies after executing a will, but the will does not effectively dispose of all of his probate assets

Which of the following statements regarding probate is CORRECT? I. Real estate owned by a decedent at death is probated according to the law of the deceden'ts domicile II. Personal assets owned by a decedent at death are probated according to the law of the state in which they are located

Neither I nor II; Real estate is probated in situs (where property is located), and personal assets are probated in domicile state.

In his will, Luis leaves his residence and all tangible personal property to his spouse, Anita, and leaves the remainder of his estate to his two children in equal shares. If any of his beneficiaries predecease him, that beneficiary's share passes to surviving beneficiaries in equal shares. Does Luis need to amend his will?

No, the will properly disposes of his entire estate

Roberta 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?

Simple; a simple will does not involve any transfer tax planning and leaves all property to surviving spouse

What is a person who dies testate?

Someone who does with a valid will

David and Jessica Hendricks are married. They live in a community property state and have a son. David separately owns $50,000 in assets. He possesses community property with Jessica in amount of $25,000. David 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?

The death proceeds of David's life insurance policy because the estate is the beneficiary, David's separately owned assets, and David's half interest in the community property.

When does a will most adequately dispose of the testator's estate?

The will disposes of the testator's real, tangible, and intangible personal property, AND includes a residuary clause

What is the deadline by which a qualified disclaimer must be received by a decedent's estate?

Within 9 months after the later of when the interest was made or the day on which the person disclaiming the interest reaches age 21

Larry died intestate, this means that Larry died ...

Without a valid will