personal finance Ch 17, 19, & 20

In setting goals for estate planning, you should consider all of the following except A) creating a will. B) waiting until just the right time to engage in planning. C) establishing a plan for trusts or gifts. D) determining the need for a living will.

B

In which of the following do you no longer own the assets of the trust? A) Revocable living trust B) Irrevocable living trust C) Standard family trust D) Credit shelter trust

B

Social Security replaces approximately ________% of a worker's average annual income from his/her working years. A) 100 B) 40 C) 75 D) 85

B

The primary purpose of a marital share will is to A) give each former spouse a share of the assets in the case of multiple marriages. B) minimize taxes on the estate. C) give all assets to the surviving spouse. D) keep peace in the family.

B

The value of the estate is calculated using A) cost. B) market value. C) cost plus inflation. D) the consumer price index.

B

Which of the following is not a duty of the executor of an estate? A) Collect money owed the estate B) Decide how the assets will be distributed C) Pay debts of the estate D) Sell specific assets of the estate if necessary

B

Which of the following is not a reason to have a will? A) To distribute your assets as you wish B) To avoid paying any estate taxes C) To reduce the costs being imposed on the estate D) To appoint a legal guardian for children

B

Which of the following is not required to be an executor of an estate? A) U.S. citizenship B) Blood relationship C) Legal age D) Not a convicted felon

B

Which of the following is true about an estate and taxes? A) All of an estate is tax-free. B) A portion of an estate is excluded from taxes. C) All of an estate is taxed. D) Fifty percent of an estate is taxable.

B

You can elect to receive Social Security retirement benefits A) at the normal retirement age, which is being raised from 65 to 69. B) at age 62 and take a reduced amount. C) and limit your ability to keep on working and earning income. D) and not be taxed on them, no matter how much money you make.

B

________ is the act of planning how wealth will be allocated on or before your death. A) Asset allocation B) Estate planning C) Liquidity planning D) Management planning

B

A ________ will is suitable for larger estates because it distributes half of the estate to the spouse and the other half to any children or to a trust. A) simple B) complex C) traditional marital share D) modern marital share

C

A legal document granting a person the power to make specific health care decisions for you is called a A) living will. B) power of attorney. C) durable power of attorney for health care. D) health care directive.

C

A legal document specifying distribution of your assets upon death is a A) tax return. B) letter of last instruction. C) will. D) trust.

C

A power of attorney can give someone you designate the power to make all of the following decisions except A) sell stock in your portfolio. B) authorize that no extraordinary effort be made to prolong your life. C) decide who gets your coin collection after you die. D) select a nursing home for you to live in.

C

A tax-free gift of up to ________ per year can be given to another person. A) $1,000 B) $5,000 C) $13,000 D) $20,000

C

A(n) ________ trust is one that cannot be changed. A) revocable B) living C) irrevocable D) standard family

C

Estate taxes may be levied by A) the federal government only. B) state governments only. C) both federal and state governments. D) foreign governments only.

C

If it is your desire to have the Giddy Funeral Home handle the details of your viewing and burial, your will should include a supplement called a A) power of executor. B) codicil. C) letter of last instruction. D) living will.

C

If you die without a will, the court will appoint ________ to handle your death. A) a grantor B) an attorney C) an administrator D) a good friend

C

Payments to Social Security are based on salary and made monthly by A) employees only. B) employers only. C) both employees and employers. D) everyone except self-employed people.

C

The giving of annual individual gifts up to the allowable amount is especially important for A) those without a will. B) people in high income tax brackets. C) people whose estate value exceeds the tax-free limit. D) those with smaller estates.

C

The person who establishes and funds a trust is known as the A) executor. B) administrator. C) grantor. D) testator.

C

To qualify for Social Security benefits, your income has to be at least ________ per quarter for ten years. A) $730. B) $874. C) $1130. D) $1,123.

C

When estate taxes are levied they start in the ________% tax bracket. A) 15 B) 25 C) 35 D) 48

C

Which of the following statements about the letter of last instruction is false? A) It should provide current information on the estate. B) It should provide current financial advisors. C) It should legally determine your heirs. D) It should explain your rationale of the bequests.

C

You are recently divorced and have relocated to another state. In order to make substantial changes to your will you should A) prepare a new letter of last instruction. B) prepare a codicil. C) prepare a new will. D) have your existing will notarized in the new state.

C

Your Social Security retirement benefits are determined primarily by the amount A) of current contributions by other employees. B) of savings you have. C) you contributed to Social Security over the years. D) of the prime interest rate.

C

A married couple with four children may give gifts up to ________ each year to their children. A) $44,000 B) $66,000 C) $88,000 D) $104,000

D

A standard family trust is all of the following except A) it is established for children in a family. B) it is created by wills. C) it is used to minimize taxes. D) it is a living trust.

D

A will could be written to distribute assets in terms of the following except A) percentages. B) a specific dollar amount. C) percentages and a remainder portion. D) the discretion of the probate judge.

D

All of the following are important documents for estate planning except A) living will. B) life insurance policies. C) credit card information. D) baptismal certificate.

D

For a will to be valid, the maker must be all of the following except A) the legal required age. B) mentally competent. C) free from undue influence from others. D) related to all beneficiaries listed in it.

D

If a person who qualifies for Social Security benefits dies, all of the following are benefits provided to the survivors except A) a one-time payment to the spouse. B) monthly income payments to the spouse. C) monthly income payments to children. D) tuition reimbursement for a child attending college.

D

In choosing a guardian for your children, you should A) always pick the family member closest to your age. B) be sure to leave money for the guardian to care for your children. C) ensure that the person you select is willing to serve in this capacity. D) Both B and C are correct.

D

Social Security is all but A) a good starting point to plan for your retirement funding. B) financed through working individuals and employers. C) a government benefit paid to the elderly and disabled. D) a specific savings plan to which individuals contribute and from which they benefit.

D

The key components of a will are all of the following except A) distribution of the estate. B) naming of the executor. C) appointing of a guardian. D) spelling out funeral arrangements.

D

The probate process includes all of the following steps except A) filing a copy of the will with the court. B) filing a copy of the inventory of all assets and liabilities with the court. C) opening a bank account and depositing proceeds from the sale of estate assets. D) making extra allocations of assets based on need of the heirs.

D

Which of the following is not a type of trust? A) Revocable living trust B) Living trust C) Standard family trust D) Income trust

D

Which of the following is not accomplished during probate? A) Payment of claims against the estate B) The validation of the will C) Determination of legal heirs D) Heirs are allowed to trade assets that are left to them

D

Which of the following is not true regarding the evaluation of an estate for tax purposes? A) Assets including a home are included. B) Liabilities including home mortgage are subtracted. C) Funeral and administrative expenses are subtracted. D) Life insurance proceeds are not included.

D

Your brother is in a serious auto accident and has become incapacitated. In order to be able to make decisions in the interest of your brother, he would need to have a A) living will. B) health care directive. C) power of attorney. D) durable power of attorney for health care.

D

t/f To be eligible for Social Security full retirement benefits, a person must be retired and be at least 65 years old.

false

t/f With samples of valid wills being available on Websites and in bookstores, it is not recommended that a person incur the additional expense of hiring a lawyer to write a will.

false

t/f A living will is a simple legal document in which individuals specify their preferences if they become mentally or physically disabled.

true

t/f A marital share will is most appropriate for married couples with large estates.

true

t/f A trust involves the transfer of assets to a third party who manages these assets for a beneficiary.

true

t/f An estate represents a deceased person's assets after all debts are paid.

true

t/f By using a revocable trust, you can avoid the probate process.

true

t/f Estate planning commonly involves trusts, gifts, and contributions for the purpose of avoiding estate taxes.

true

t/f Even a parent without significant net worth needs a will to appoint a guardian for children.

true

t/f Full retirement benefits begin at age 65 to 67 depending on what year you were born.

true

t/f If a person dies without a valid will, the court will appoint an administrator, which results in additional costs being imposed on the estate.

true

t/f In determining estate taxes, the estate is valued by subtracting all liabilities including funeral expenses from the value of all assets including a home.

true

t/f In order to be valid, a will must be dated, signed, and witnessed.

true

t/f In retirement, you can still earn income and receive Social Security benefits.

true

t/f In the past 10 years or so, many employers have shifted from defined-benefit to defined-contribution retirement plans.

true

t/f Minor changes to a will can be made with a simple document called a codicil.

true

t/f Once you have a positive net worth to be distributed upon your death, you should consider creating a will.

true

t/f Once your net worth exceeds the tax-free limit of estate taxes, you should carefully plan your estate to minimize any potential tax liability.

true

t/f The Social Security system allows withdrawal of reduced benefits at an early retirement age.

true

t/f The amount of income that you receive from Social Security when you retire is dependent on the number of years you earned income and your average level of income.

true

t/f The tax-free portion of an estate is quite high—$5.12 million.

true

t/f To be eligible for Social Security retirement benefits on your own, you will need to have worked for at least 10 years, earned the minimum required income each year, and contributed to Social Security through payroll taxes.

true

t/f To create a will, a person must be of legal age, be mentally competent, and not be subject to undue influence or threats of others.

true

t/f Two key goals of estate planning are to ensure that your estate passes to the proper beneficiaries and to ensure that your estate may be insulated from taxes.

true

t/f Under current tax laws, a person may give any other person up to $13,000 per year in cash or other assets and neither the giver or receiver of these gifts has a tax liability for them.

true

t/f Vesting means that employees have a claim to a portion of the retirement money that has been reserved for them upon retirement.

true

t/f The only reason for having a valid will is to have your estate distributed according to your plans.

false

t/f The quality and timing of your retirement depends mainly on the quality of your employer's retirement plan.

false

A ________ trust is created by a will. A) testamentary B) living C) bequeathed D) credit-shelter

A

A large portion of an estate is exempt from estate taxes. The portion over the next few years is A) decreasing. B) increasing. C) staying the same. D) being eliminated.

A

An executor, also called your ________, is named in your will to carry out your instructions regarding how your assets will be distributed. A) personal representative B) attorney C) friend D) brother-in-law

A

For the purpose of avoiding estate taxes, estate planning involves all but A) a living will. B) trusts. C) gifts. D) contributions.

A

In retirement planning, which of the following is false? A) Social Security is enough for retirement B) IRAs are a good investment C) Additional tax deferred investments are needed D) You should have several pension investments

A

Money donated from an estate to charitable organizations is A) not subject to estate taxes. B) added back into the value of an estate for tax purposes. C) an itemized deduction on the federal income tax return of the deceased. D) allowed a 50% credit against the value of the estate.

A

The person designated in a will to execute your instruction regarding the distribution of your assets is called a(n) A) executor. B) guardian. C) business associate. D) attorney.

A

The person specified in a will to receive a part of the estate is called a A) beneficiary. B) grantor. C) trustee. D) administrator.

A

The purpose of probate is to ensure the A) orderly distribution of assets. B) orderly distribution of liabilities. C) distribution of expenses. D) equal allocation of all financial matters.

A

The recipient of gift income within the allowable amount A) does not have to report gift income and is not subject to taxes. B) does have to report gift income and is subject to gift taxes. C) is taxed at the capital gains rate. D) is taxed at the ordinary income rate.

A

Which of the following is not necessary for a will to be valid? A) All heirs must agree to the terms of the will B) The will must be dated C) The will must be signed D) The person writing the will must be sober at the time the will is written

A

if you die without a will, you are said to have died ________. A) intestate B) unlucky C) tragically D) irresponsibly

A

A ________ is a legal document granting a person the power to make specific decisions for you in the event that you are incapable. A) letter of instruction B) power of attorney C) will D) trust

B

A ________ is a legal document in which individuals specify their preferences if they become mentally or physically disabled. A) living trust B) living will C) testamentary trust D) testamentary will

B

A legal document in which one person transfers assets to another who manages them for designated beneficiaries is called a(n) A) testamentary. B) trust. C) will. D) codicil.

B

A person who manages assets for designated beneficiaries is called a A) witness. B) trustee. C) grantor. D) executor

B

A simple will would not be appropriate if A) the estate is small. B) there is only one child. C) the person is married. D) the entire estate is to go to the spouse.

B

A(n) ________ is a document that specifies changes in an existing will. A) letter of instruction B) codicil C) amendment D) secondary will

B

If the executor of a will is not able to perform the appointed tasks, then A) the surviving spouse should take over and settle the will. B) an attorney should be hired. C) a trusted relative completes the duties. D) the will becomes invalid.

B

If you wish to be cremated when you die, this request should be included in a A) simple will. B) letter of last instruction. C) codicil. D) probate.

B

t/f The Social Security taxes you and your employer pay are put in your specific account for distribution to you at retirement.

false

t/f The document that describes funeral preferences and indicates where key financial records are kept is called the letter of last rites.

false

t/f A revocable living trust is one that cannot be changed during a person's lifetime.

false

t/f All defined-benefit plans have the same qualifications for determining when employees are vested.

false

t/f Any money donated from an estate to charitable organizations is given after estate taxes are paid.

false

t/f Defined-contribution employer-sponsored retirement plans provide you a specific amount of income when you retire, based on factors such as your salary and years of employment.

false

t/f Estate planning is the act of planning how your wealth will be allocated before your death.

false

t/f Probate is the legal process that ensures assets are distributed and guardians of children are appointed as the person who died wished it.

false

t/f Since the settling of wills is straightforward, almost anyone can do a good job as an executor of an estate.

false

t/f Social Security provides sufficient income to support the lifestyles of most individuals.

false