CFP Understanding Living Trusts Exam Study Guide

Transcription

1 CFP Understanding Living Trusts Exam Study Guide This document contains the questions that will be on the exam. When you have studied the course materials, reviewed the questions in this document, and feel that you are ready to take the exam, return to the login page to take the online exam. A Center for Continuing Education 1465 Northside Drive, Suite 213 Atlanta, Georgia (404) (800) Fax: (404) Revised 3/2013 1

2 1. Estate planning is an important activity for individuals with property and responsibilities to survivors. a. All b. Most c. Some d. Few 2. Jordan s estate is made up of tangible and intangible property. All of the following property is part of his intangible property, except: a. Stocks and bonds b. Social security benefits c. Real estate d. Bank accounts 3. is essentially the creation of a blueprint outlining where property goes after an individual dies. a. Probating b. Estate planning c. Asset allocation d. Investing 4. Distributing estate property through a trust, life insurance, or joint ownership is commonly referred to as using: a. Will substitutes b. Complementary methods c. Dual property d. Balanced distributions 5. Estate planning is in the United States today. a. Grossly underused b. Slightly underused c. Adequately used d. Slightly overused 6. Estate planning is beneficial for: a. Older people, only b. Middle-aged to older people, only c. Middle-aged people, only d. Young, middle-aged and older people 7. A(n) is the person responsible for the care or a minor s person or property. a. Administrator b. Guardian c. Trustee d. Warden 8. A professionally drawn-up estate plan: a. Costs at least $5,000 b. Costs at least $10,000 c. Costs at least $20,000 d. Varies in cost Revised 3/2013 2

3 9. When an individual dies without an estate plan he or she is said to have died: a. Intestate b. Dependent c. Conditionally d. Pro tem 10. How common is it for a deceased to leave no living relatives? a. Very common b. Somewhat common c. Somewhat rare d. Very rare 11. State intestate distribution plans are usually: a. Quite simple b. Somewhat simple c. Somewhat complex d. Quite complex 12. If an individual dies intestate leaving a spouse but no children, states require that the estate be inherited entirely by the spouse, to the exclusion of any other blood relatives. a. All b. Many c. Some d. Very few 13. If an individual dies and no spouse or children are left, then the estate is inherited first by: a. Siblings b. Nephews and nieces c. Cousins d. The state 14. Intestate property passes entirely to a state. This kind of property transfer falls under the legal doctrine of: a. Pro tem b. Escheat c. Prima fascia d. Codicil 15. In certain states, property acquired during marriage is owned equally by each spouse. This property is known as: a. Community property b. Separate property c. Equal property d. Fundamental property 16. Property acquired by a spouse prior to marriage and property received as a gift or through inheritance is: a. Community property b. Separate property c. Equal property d. Fundamental property Revised 3/2013 3

4 17. Which state applies modified community property laws in certain circumstances, such as at a spouse s death? a. California b. Arizona c. Texas d. Wisconsin 18. The legal term Per Stirpes means: a. Your children downwards b. Equal distribution c. For perpetuity d. Direct transfer 19. What process ensures clear title to property in an estate before the property is transferred to beneficiaries upon the death of the property owner? a. Intestacy b. Probate c. Escheat d. Estate planning 20. The person named in a will to administer the estate at the death of the individual who made the will is the estate: a. Administrator b. Executor c. Trustee d. Guardian 21. An estate executor is the attorney who drew up the will. a. Always b. Often c. Rarely d. Never 22. A female executor is also known as a(n): a. Executant b. Executrix c. Executite d. Executive 23. The most official type of probate is: a. Supervised probate b. Unsupervised probate c. Small-estate probate d. Grand-estate probate 24. The most costly probate method available is: a. Supervised probate b. Unsupervised probate c. Small-estate probate d. Grand-estate probate Revised 3/2013 4

5 25. In states, supervised probate is optional and is used for contested estates, when an interested party desires it, or when the executor s ability is doubted. a. All b. Most c. Some d. A few 26. Unless the will involved specifically requests unsupervised probate, the consent of beneficiary(ies) is usually required. a. All b. The majority of c. Only the primary d. No 27. The simplest probate method is: a. Supervised probate b. Unsupervised probate c. Small-estate probate d. Grand-estate probate 28. The quickest form of probate is: a. Supervised probate b. Unsupervised probate c. Small-estate probate d. Grand-estate probate 29. In states that allow it, the small-state probate method applies to estates that range from in value (depending on state law). a. $500 to $1,000 b. $1,000 to $10,000 c. $1,000 to $100,000 d. $1,000 to $500, Small-estate probate usually takes a few: a. Days b. Weeks c. Months d. Years 31. Common law from England is the basis for what kind of law in the United States? a. Common law, only b. Constitutional law, only c. Both common and constitutional law d. Neither common nor constitutional law 32. In the English probate system, the first courts to handle probate cases were: a. King s courts b. Ecclesiastical courts c. Theological courts d. Equity courts Revised 3/2013 5

6 33. The American founding fathers bundled the English probate process into how many systems? a. One system b. Two systems c. Three systems d. Four systems 34. In the probate process, who is responsible for locating the will? a. The deceased s heirs b. The executor c. A court appointed attorney d. Creditors 35. In the probate process, who has the will proved valid? a. The deceased s heirs b. The executor c. A court appointed attorney d. Creditors 36. The reason that certain property does not go through probate is because the structure of the property ownership allows for the passing of the property to beneficiaries. a. Cost-efficient b. Indirect c. Direct d. Subjective 37. The probate process is something that many people believe should be avoided. a. Always b. Often c. Rarely d. Never 38. Statutory probate fees are established by: a. Congress b. Individual state legislatures c. Attorneys d. Insurance companies 39. Statutory probate fees apply to the normal duties of during the probate process. a. Beneficiaries, only b. Executors, only c. Attorneys, only d. Executors and/or attorneys, only 40. Extraordinary probate fees approved by the probate court. a. Always must be b. Usually must be c. Rarely must be d. Never must be Revised 3/2013 6

7 41. What kinds of probate fees are often charged by attorneys for services related to the probate process? a. Statutory fees, only b. Extraordinary fees, only c. Both statutory and extraordinary fees d. Neither statutory nor extraordinary fees 42. Certain states require that legal fees relating to probate be based upon certain specific factors, rather than upon the statutory and extraordinary fee structure. Any of the following could be one of those factors, except: a. The amount of time it takes the attorney to settle the estate b. The complexity of the estate and the activities that result from that complexity c. The amount of responsibility an attorney is required to assume to carry out decisions d. The ethnicity or racial background of the decedent 43. The actual cost of probate: a. Is always 5% of an estate b. Is always 10% of an estate c. Is always 20% of an estate d. Varies significantly from estate to estate 44. The value of an estate before any liabilities are subtracted is referred to as: a. The gross estate b. The net estate c. The complete estate d. The aggregate estate 45. Most states have simplified probate procedures for smaller estates, which are usually those under: a. $50,000 b. $100,000 c. $250,000 d. $500, Full distribution of property from an estate cannot occur until the probate process is: a. Started b. At least 50% complete c. At least 90% complete d. Complete 47. Generally, the shortest the probate process takes is: a. 6 months b. 12 months c. 18 months d. 24 months 48. Which of the following statements regarding the length of the probate process is false? a. The length of time the probate process takes is seen as necessary to ensure property is properly appraised and creditors are accurately paid. b. While an estate is going through probate, it is possible that heirs c. Probate procedures have been reformed in all states so that a surviving spouse, minor children and disabled children may obtain needed money almost immediately (regardless of whether the entire estate has cleared probate or not). d. The length of the probate process can affect the value of the property. Revised 3/2013 7

8 49. The fair market value of bonds owned individually by a deceased on the date of his or her death was $80,000. After the probate process was complete, the bonds, because of market fluctuations, were worth $65,000. For tax purposes, the bonds generally must be valued in the estate at: a. $80,000 b. $65,000 c. $40,000 d. $15, A will becomes a public record when: a. It enters the probate process b. The probate process is finished c. It is written d. It is signed 51. the assets of an estate are made public and filed at the local County Clerk s office in order to give notice to any creditors with claims against the estate. a. All b. Most of c. Some of d. Very few of 52. All documents involved in the probate proceedings may be accessed by: a. A decedent s family, only b. A decedent s family, or an attorney, only c. A decedent s family, an attorney, or anyone with a significant interest in the proceedings, only d. Anyone 53. The probate process limits the time a creditor has to file a claim against an estate. This is generally seen as a aspect of the probate process. a. Positive b. Neutral c. Slightly negative d. Very negative 54. The probate process provides that improper distribution of an estate s assets is guarded against by a probate court. This court oversight is seen as a aspect of the probate process. a. Positive b. Neutral c. Slightly negative d. Very negative 55. How many different ways are there of avoiding probate? a. Numerous ways b. Some ways c. Few ways d. Practically no ways 56. An estate is liable for the federal estate tax when it exceeds the amount. a. Complete redemption b. Available exemption c. Federal requirement d. Existing exclusion Revised 3/2013 8

9 57. In 2013, Louisa may pass assets to her estate beneficiaries without incurring federal estate taxes if the value of those assets is less than: a. $1,000,000 b. $5,120,000 c. $5,250,000 d. Any amount, due to the estate tax repeal 58. According to EGTRRA, in 2010, Matt was able to pass assets to his estate beneficiaries without incurring federal estate taxes if the value of those assets is less than: a. $1,000,000 b. $2,000,000 c. $3,500,000 d. Any amount, due to the estate tax repeal 59. The federal estate tax rates that apply to the amount of an estate that exceed the available exemption amount have since a. Increased steadily b. Increased erratically c. Remained the same d. Decreased steadily 60. In 2012, the maximum federal estate tax rate was: a. 0% b. 45% c. 40% d. 35% 61. EGTRRA includes a provision that the terms of the Act will not apply to tax, plan or limitation years after a certain date. This provision is known as a(n): a. Repeal provision b. Actuary provision c. Sunset provision d. Executive provision 62. If Congress had not specifically acted in order to continue the estate tax after 2012, then the tax law would have returned to laws applying to the years before: a b c d According to the provisions of ATRA 2012, the 40% top estate tax rate: a. is permanent b. expire in 2014 c. must be extended by Congress annually in order to stay at this level d. sunset in ATRA 2012 was signed into law by President Obama: a. in June 2012 b. in October 2012 c. in December 2012 d. in January 2013 Revised 3/2013 9

10 65. A bypass trust will be used in conjunction with the federal marital estate tax deduction. a. Always b. Commonly c. Rarely d. Never 66. A bypass trust contains assets the amount of applicable exclusion. a. Significantly greater than b. Slightly greater than c. Equal to d. Less than 67. A bypass trust is structured to allow a transfer of at least the exemption amount free of estate taxes to children and other beneficiaries. a. Equal b. Double c. Triple d. Quadruple 68. Federal income taxes to the receipt of an asset received from a deceased individual and, when such an asset generates income, it to income tax on the beneficiary s tax return. a. Apply; is subject b. Do not apply; is subject c. Apply; is not subject d. Do not apply; is not subject 69. A beneficiary required to pay income taxes on income received by that beneficiary that was originally received by the deceased s estate and was eventually paid to that beneficiary. a. Must be b. May be c. Is usually d. Is never 70. The annual exclusion amount for gifts in 2013 is: a. $10,000 b. $14,000 c. $18,000 d. $20, In 2013, spouses may make split gifts to donees within the annual exclusion amount rules equal to: a. $13,000 b. $28,000 c. $30,000 d. $50, Which of the following gifts is subject to gift taxes, no matter in what amount they are given? a. Payment for medical care b. Payment for medical insurance premiums c. Payment for housing d. Payment for tuition Revised 3/

11 73. gifts that are made within the annual gift tax exclusion amount may be repeated without limitation year after year. a. All b. Most c. Some d. Few 74. In 2013, a cumulative tax-free lifetime gift is allowed. a. $5,250,000 b. $2,000,000 c. $3,500,000 d. $5,120, The lifetime exemption amount for estate, gift and generation skipping transfers in 2013 is: a. $5,000,000 b. $5,250,000 c. $5,120,000 d. $2,000, In 2011, the top rate of tax on the excess above the amount of a lifetime tax-free gift was: a. 0% b. 45% c. 35% d. 55% 77. In 2012, the top rate of tax on the excess above the amount of a lifetime tax-free gift was: a. 0% b. 35% c. 55% d. 45% 78. In 2013, the top rate of tax on the excess above the amount of a lifetime tax-free gift is: a. 0% b. 45% c. 40% d. 55% 79. In 2013, the top rate of tax on the excess above the amount of a lifetime tax-free gift increased by what percentage from the prior year? a. 10% (from 35% to 45%) b. 5% (from 35% to 40%) c. 15% (from 35% to 50%) d. 20% (from 35% to 55%) 80. complete gift(s) made, regardless of size, reduce(s) the size of the probatable estate. a. Every b. Most c. Some d. Few Revised 3/

12 81. When gifts are given to a spouse through a trust, the trust must meet certain requirements in order to maintain the gift s tax-free status. One such requirement is that withdrawal power must be held by the spouse acting as the donee. a. Full b. Partial c. Full or partial d. No 82. Any gifts made to a(n) charity are entitled to a charitable deduction from an individual s taxable base. a. Approved b. Needful c. Qualified d. Long-established 83. Which of the following kinds of debts owed by an individual are not deductible against his or her taxable base at his or her death? a. Home mortgage payments b. Credit card debt c. Car payments d. All debts owed by an individual are deductible 84. An estate pick-up tax is charged by states. a. All b. Most c. Some d. Few 85. A state pick-up estate tax the maximum credit that the Internal Revenue Code allows to the taxpayer for state inheritance taxes. a. Is greater than b. Equals c. Is slightly less than d. Is significantly less than 86. A state pick-up estate tax charges a taxpayer how much in addition to the federal estate taxes owed? a. 10% more b. 15% more c. 25% more d. It does not charge a taxpayer amounts in addition to the federal estate taxes owed 87. State estate taxes resemble federal estate taxes in that they are charged on the estate of a deceased. a. Gross b. Net c. Complete d. Aggregate Revised 3/

13 88. When an individual transfers assets to individuals generations below himself, a generation skipping transfer has been made. a. One or more b. Two or more c. Three or more d. One, two or three 89. In what year was the generation skipping transfer tax 0%? a. In 2009 b. In 2010 c. In 2011 d. In In 2013, the exemption that applies to lifetime generation skipping split transfers with a spouse is: a. $0 b. $3,500,000 c. $10,500,000 d. $5,000, In 2012, the exemption that applied to lifetime generation skipping transfers was: a. $3,500,000 b. $1,000,000 c. $2,000,000 d. $5,120, Which of the following statements regarding term life insurance is false? a. It is simple insurance. b. Its only advantage is a death benefit. c. A moderate cash value is built up by accumulated premiums. d. If an insured does not pass away while the term insurance is in effect, all premiums paid revert to the insurance company. 93. Usually, how long is a term life insurance policy s term? a. 6 months b. 12 months c. 18 months d. 24 months 94. A term life insurance policy owner may borrow against what percentage of the policy s death benefit? a. 15% b. 30% c. 50% d. The death benefit may not be borrowed against 95. The premiums of term life insurance policies that have decreasing coverage: a. Decrease predictably b. Decrease erratically c. Remain the same d. Increase predictably Revised 3/

14 96. Group term life insurance might be provided by employers for their employees or employers may make it available to them, generally at individual term policies. a. Lower premiums than b. Comparable premiums to c. Slightly higher premiums than d. Significantly higher premiums than 97. Cash value policies are available as life insurance, which means that the coverage is guaranteed to remain at a fixed amount and level premiums must be paid. a. Universal b. Whole c. Term d. Variable 98. Cash value life insurance policies that have term and cash value portions that are divided into two separate accounts and may increase or decrease depending on where the insured is located is life insurance. a. Universal b. Whole c. Term d. Variable 99. The type of life insurance with cash values based on the performance of separate accounts is life insurance. a. Universal b. Whole c. Term d. Variable 100. If a life insurance policy is payable to a person, then the death benefit subject to probate. a. Will always be b. Will usually be c. Will occasionally be d. Will not be 101. may be named as a beneficiary under most state laws if the policy owner divorced the named beneficiary on the life insurance policy, but failed to change the designation before he or she passed away. a. An irrevocable life insurance trust b. A revocable lie insurance trust c. An estate d. The divorced spouse 102. When an irrevocable life insurance trust is used to hold life insurance, it is considered to be the of the insurance policy. a. Owner b. Trustee c. Beneficiary d. Executor Revised 3/

15 103. When the death benefit of a life insurance policy is paid to a beneficiary upon the death of an insured, the proceeds exempt from income taxes and any interest earned on the policy after the insured s death exempt from those taxes. a. Are; is b. Are; is not c. Are not; is d. Are not; is not 104. An individual is the insured and owner on a life insurance policy, but can no longer afford to pay the policy s premiums. So his uncle buys the policy from him and names himself as the new beneficiary. This transfer: a. Would be subject to income taxes b. Would not be subject to income taxes c. Would only be subject to income taxes if the individual s uncle was not his uncle by marriage d. Would only be subject to income taxes if the individual filed for bankruptcy 105. When a charity is listed as a beneficiary of an insurance policy and the owner of the policy pays the premiums the owner gets an income tax deduction for present interest gifts. This holds true as long as the beneficiary designation is or the charity is named as the of the policy. a. Revocable; beneficiary b. Revocable; beneficiary and owner c. Irrevocable; beneficiary d. Irrevocable; beneficiary and owner 106. A life insurance policy is taken out by an owner/insured, who then places ownership of the policy in the name of his beneficiary(ies). The insured may continue to give the beneficiaries annual assets for premium payments gift tax free, as long as the total gift to each beneficiary is less than: a. $5,000 b. $10,000 c. $14,000 d. $16, If property is held in joint tenancy with two owners, both parties are considered to have coownership of the property with one another. Upon the death of one of the co-owners, the surviving owner takes up full ownership in the property, exercising: a. Right of survivorship b. Right of partnership c. Right of immediacy d. Spousal priority 108. When a surviving joint tenant passes away, the jointly held property will be subject to probate if a new joint tenant was not named: a. During the pre-deceasing joint tenant s lifetime b. During the surviving joint tenant s lifetime c. Within 2 years after the pre-deceasing joint tenant s death d. Within 2 years before the surviving joint tenant s death 109. How many states recognize tenancy-by-the-entirety? a. All states b. Most states c. Some states d. Few states Revised 3/

16 110. Which of the following statements regarding a tenants-in-common agreement is false? a. It differs significantly from joint tenancy. b. Each owner only owns a share of any property, which could be an equal or unequal share. c. Each share of property may be sold without the other owner s consent. d. When one owner dies, his or her share is fully assumed by the surviving owner In a community property state, when a married couple divorces, community property is usually: a. Divided equally b. Distributed to the spouse who was granted the most parental rights c. Distributed to the spouse who initiated the divorce d. Distributed based upon each spouse s ownership of the property 112. In a community property state, pensions of either spouse are considered: a. Community property of each b. Separate property of each c. Either community or separate property, depending on the preference of each spouse d. Either community or separate property, depending on the value of the pensions 113. Some of the expense and delay of probate may still be born by a surviving joint tenant when a(n) (which may only be obtained through a probate court) is levied. a. Probate condition b. Creditor hearing c. Tax clearance d. Estate levy 114. Most types of property placed in a joint ownership agreement have been done so based on a(n) decision. a. Revocable b. Irrevocable c. Costly d. Utilitarian 115. In a joint tenancy agreement, it is to remove another person as a joint tenant. Property placed in a joint tenancy transferred to another person, including to the other joint tenant, without the permission of all tenants. a. Possible; may be b. Not possible; may be c. Possible; may not be d. Not possible; may not be 116. An expensive coin collection is owned in joint tenancy by two brothers: brother A and brother B. The will of brother A states that his share of the collection will pass to his son at his death. If brother A dies before brother B, his share of the collection will pass to: a. His spouse b. His son c. Brother B d. The state Revised 3/

17 117. Which of the following statements regarding joint tenancies is false? a. Under joint tenancy agreements, creditors are allowed to attach the individual share of property owned by an indebted joint tenant only. b. A court may never order an entire property held in a joint ownership to be liquidated so that the share of the indebted tenant may be paid to a creditor. c. Surviving joint tenants usually take possession of property after the death of the other joint tenant without any consideration of the debts of that tenant. d. While any number of joint tenants may be included in a joint tenancy ownership agreement, certain tax consequences apply For joint tenancy, in 2010 an executor of an estate was allowed to step up the cost basis of assets obtained by beneficiaries. If the beneficiary was surviving spouse, then the assets could be stepped-up to a total of: a. $900,000 b. $1.3 million c. $3 million d. $4.5 million 119. In 2010 only, the Economic Growth and Tax Relief Reconciliation Act of 2001 replaced the stepped-up basis system of determining the cost basis of inherited property contained in a decedent s gross estate with: a. A stepped-down basis system b. A modified carryover basis system c. A fair market basis system d. A free market basis system 120. Retirements accounts, found in a vast variety of forms such as IRAs and 401(k)s, are all subject to probate: a. In the same way b. In slightly different ways c. In moderately different ways d. In significantly different way 121. Funds in retirement accounts must pass through probate if: a. The deceased s estate was named as beneficiary, only b. The named beneficiaries have passed away, only c. The deceased s estate was named as beneficiary or the named beneficiaries have passed away, only d. The deceased s estate was named as beneficiary or the named beneficiaries have passed away or the funds exceed $10, Named beneficiaries may claim the funds in a retirement account: a. Directly from the account s owner b. Directly from the account s custodian c. Directly from the account d. Directly from the IRS 123. What percentage of the value of an IRA as of the date of death of the owner is included in his or her federal estate tax base? a. 10% b. 51% c. 80% d. 100% Revised 3/

18 124. A spouse is named as the beneficiary on a retirement account. At this spouse s death, any remaining retirement funds in the account: a. Are includable in his or her estate b. May be includable in his or her estate c. Are not includable in his or her estate d. Are surrendered to the IRS 125. Joint bank accounts usually allow: a. Only the primary owner to make deposits and withdrawals b. Both owners to make deposits, but only the primary owner to make withdrawals c. Both owners to make withdrawals, but only the primary owner to make deposits d. Either owner to make deposits or withdrawals 126. A payable-on-death bank account is also known as a: a. Totten Trust b. Crummey Power Trust c. Credit trust account d. Credit annuity 127. A payable-on-death designation may be added to what kind of new or existing accounts? a. Checking accounts, only b. Checking or savings accounts, only c. Certificate of deposit accounts, only d. Checking, savings and certificate of deposit accounts 128. Payable-on-death bank accounts may be revoked or closed: a. No sooner than 3 years after the account was established b. No sooner than 7 years after the account was established c. After a court proceeding d. At any time 129. Jane is the beneficiary of a payable-on-death bank account. When may she access the account s funds? a. At any time b. Only after she has been the beneficiary for at least 3 years c. Only after she has been the beneficiary for at least 7 years d. Only after the account owner s death 130. In certain states that have death taxes, tax liens may be placed on a payable-on-death bank account when the owner dies. If this occurs, a must be obtained before the beneficiary can receive the funds. a. Probate hearing b. Creditor hearing c. Tax clearance d. Estate levy 131. How many states have adopted the Uniform Transfer-on-Death Securities Registration Act? a. All states b. Nearly every state c. Some states d. Few states Revised 3/

19 132. The Uniform Transfer-on-Death Securities Registration Act allows individuals to name someone to inherit without being subject to probate. a. Stocks (only) b. Stocks and bonds (only) c. Brokerage accounts (only) d. Stocks, bonds, and brokerage accounts 133. Tim is the insured on a life insurance policy. His wife Tanya is the primary beneficiary. Their two children, Jane and John, are named as equal secondary beneficiaries. If Tanya is alive when Tim passes away, the death benefit will be distributed as: a. Tanya: 100%; Jane and John: 0% b. Tanya: 50%; Jane: 25%; John: 25% c. Tanya: 33%; Jane: 33%; John 33% d. Tanya: 0%; Jane: 50%; John: 50% 134. With per stirpes distributions, there is: a. A need for primary, but not secondary, beneficiaries b. A need for secondary, but not primary, beneficiaries c. A need for primary and secondary, but not tertiary, beneficiaries d. No need for beneficiaries 135. What is true about the location of heirs of beneficiaries in a per stirpes arrangement? a. It is always very simple to locate all heirs of beneficiaries b. It is usually very simple to locate al heirs of beneficiaries c. It may be difficult to locate all heirs of beneficiaries d. It is impossible to locate all heirs of beneficiaries 136. What kind of payout may be made while a life insurance beneficiary situation is being investigated after the insured s death? a. A 10% payout b. A 50% payout c. An 80% payout d. No payout 137. What kind of payout may be made while a retirement account beneficiary situation is being investigated after the owner s death? a. A 10% payout b. A 50% payout c. An 80% payout d. No payout 138. What kind of payout may be made while a joint or payable-on-death bank account beneficiary situation is being investigated after an owner s death? a. A 10% payout b. A 50% payout c. An 80% payout d. No payout 139. Wills have been used: a. For thousands of years b. For the last few hundred years c. Since the turn on the 19th century d. Since the second half of the 20th century Revised 3/

20 140. What happens if a will is deemed invalid? a. All property of a deceased passes to the state b. All property of a deceased passes to his or her spouse c. State intestacy laws apply to the deceased s property d. The deceased s property is held in trust for 3 years 141. A single individual needs to draw up a will: a. Only if he or she has children b. Only if he or she is involved in a relationship c. If he or she is of a majority age and owns property d. Under no circumstance 142. The testator or testatrix of a will must be, which usually means that he or she must understand the general nature and extent of their property, and also must know the objects of their bounty. a. Legally responsible b. Of a sound mind c. Accountable d. Appreciably mature 143. A will must contain how many substantive provisions that bequeath property? a. At least 1 b. At least 2 c. At least 3 d. Between 3 and Oral wills are: a. Never permitted b. Apply to any kind of property c. Permitted in all states and apply only to joint or community property d. Permitted in some states and apply only to personal property 145. The testator or testatrix of a will must voluntarily sign the will, unless illiteracy, illness or an accident prevents such a signature, in which case who is allowed to sign for the testator or testatrix? a. A lawyer, only b. One of the witnesses of the will, only c. A lawyer or one of the witnesses of the will, only d. A lawyer, one of the witnesses of the will, or an interested party, only 146. In order for a will to be considered valid, it appoint an executor. a. Always must b. Usually must c. Rarely must d. Need not 147. The most common structure for wills is the will. a. Testamentary trust b. Simple c. Functional d. Pourover Revised 3/

21 148. A testamentary trust will establishes at least how many trusts for some estate assets? a. 1 b. 2 c. 3 d What kind of will leaves some estate assets in a trust that had been established before the Testator s death and governs the distribution of the property not in the trust? a. A holographic will b. A pourover will c. A statutory will d. A testamentary trust will 150. What type of will is in the Testator s handwriting and is unwitnessed? a. A holographic will b. A pourover will c. A statutory will d. A testamentary trust will 151. A holographic will is recognized in: a. All states b. Most states c. About half the states d. Very few states 152. A joint will is created by: a. Any two people b. A husband and wife c. A parent and child d. Any blood relatives 153. A statutory will is generally in scope. a. Very broad b. Somewhat broad c. Somewhat limited d. Very limited 154. A statutory is available in how many states? a. All states b. Most states c. Some states d. Few states 155. What kind of will is in force while the property-owner is alive and does not dispose of property? a. A living trust will b. A living will c. An owner will d. A statutory will 156. A new will revokes a pre-existing will: a. Only if the new will specifically states this b. Only if the new will was created as a pourover will c. Under no circumstance d. Under any circumstance Revised 3/

22 157. Who may contest that the will does not reflect the intent of the testator? a. The testator s blood relatives, only b. The testator s spouse or blood relatives, only c. Estate beneficiaries, only d. Estate beneficiaries or any interested party 158. It is estimated that as many as of all wills are contested successfully. a. 1/3 b. 1/2 c. 3/4 d. 5/ If both parents of a minor child die, and no guardian is appointed through a will or standalone legal document (other than a trust), either a friend or relative may request guardianship from a court, or the court will choose the guardian, who is usually: a. The nearest adult relative b. The most wealthy adult relative c. A state-approved foster parent d. Any adult whom the child chooses 160. The law states that children under the age of cannot legally own more than a minimum amount of property without adult supervision. a. 14 b. 16 c. 18 d The property guardian and the personal guardian of a minor child are the same person. a. Always b. Often c. Rarely d. Never 162. The guardian of a minor child named through a trust, and a trust established to provide property itself to minor children. a. May be; may be b. May be; may not be c. May not be; may be d. May not be; may not be 163. The Uniform Gift to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA) have been adopted in: a. All states b. Almost every state c. About half of all states d. Few states 164. Property is gifted to a minor child via a custodian account. The property goes through probate: a. Before it is gifted b. Immediately after it is gifted c. No more than 3 years after it is gifted d. At no time Revised 3/

23 165. The beneficiary of a trust receives benefits from the trust during life. a. Always b. Often c. Rarely d. Never 166. All of the following terms are used to refer to the person who creates a trust, except: a. Grantor b. Settlor c. Donor d. Manager 167. A(n) has legal title to property in a trust and is responsible to pay taxes and file returns on trust property. a. Beneficiary b. Trustee c. Manager d. Heir 168. A trustee generally has what kind of powers to carry out trust related transactions? a. Very broad powers b. Semi-limited powers c. Very limited powers d. A trustee s trust-related transaction powers vary depending on the type of trust involved 169. A beneficiary receives benefits from trust property: a. At the trust s inception, only b. After the trust s inception, only c. At least 5 years after the trust s inception, only d. Either at its inception or at a later time 170. Trusts, as they are used in the U.S., have their origins in the common law of what country? a. Spain b. France c. England d. Greece 171. The use of trusts in the United States dates back to their use in: a. The 18th century b. The late 19th century c. The mid 20th century d. The turn of the 21st century 172. In the United States today, trusts are used: a. Mainly by wealthy individuals b. Mainly by individuals in the upper middle class c. Mainly by individuals in the lower middle class d. By individuals in all social strata 173. Generally, who may change a revocable trust? a. The grantor, only b. The trustee, only c. The grantor and the trustee, only d. The grantor, trustee and beneficiary(ies), only Revised 3/

24 174. What kind of tax benefits does a revocable trust offer? a. Federal estate tax benefits, only b. Federal gift tax benefits, only c. Both Federal estate and gift tax benefits d. No tax benefits 175. Under revocable trusts, the right to property placed in the trust is still seen as belonging to the: a. Trust b. Trustee c. Trust s grantor d. Trust s beneficiary(ies) 176. All of the following statements regarding irrevocable trusts are true, except: a. Property in an irrevocable trust is usually seen as a gift to the beneficiary. b. Under irrevocable trusts, the grantor does not retain the rights to the trust property; the trust itself now specifies how the property may be used and distributed. c. An irrevocable trust may not be changed or cancelled before a time specified in the trust d. An irrevocable trust provides certain tax savings not found in a revocable trust All of the following statements regarding testamentary trusts are true, except: a. A testamentary trust is created through a will b. A testamentary trust is a separate document from a will. c. A testamentary trust allows the grantor of the trust to retain the title to the property during his or her lifetime. d. In essence, a testamentary trust does not contain any assets Some charitable trusts are types of trusts, which means that a trust grantor reserves income from a trust or gives the income to a non-charitable beneficiary, while other interest goes to a charity. a. Shared b. Income division c. Split-interest d. Living 179. Charitable Remainder Trusts and Charitable Lead Trusts are normally found in what kind of form in order to comply with gift taxation laws? a. A revocable form b. An irrevocable form c. A testamentary form d. A holographic form 180. The beneficiaries of Grantor Retained Interest trusts are: a. Charitable, only b. Noncharitable, only c. Either charitable or noncharitable d. Nonexistent 181. The most common form that insurance trusts take is: a. A revocable form b. An irrevocable form c. A testamentary form d. A holographic form Revised 3/

25 182. What kind of a trust is also known as an A trust, referring to its qualification as a marital deduction trust? a. A living trust b. A testamentary trust c. A power of appointment trust d. A bypass trust 183. Bypass trusts contain assets the amount of applicable exclusion. a. Less than b. Equal to c. Slightly more than d. Significantly more than 184. Under a bypass trust, the beneficiaries receive benefits when: a. The first spouse dies, only b. The second spouse dies, only c. The first spouse dies, and then again when the second spouse dies d. Neither spouse dies 185. To whom does the property in an estate trust pass upon the death of the first spouse? a. To the surviving spouse, only b. To the surviving spouse and beneficiaries the surviving spouse appoints, only c. To beneficiaries the surviving spouse appoints, only d. To beneficiaries the deceased spouse appoints, only 186. An estate trust is used when a surviving spouse does not need the entire income from a marital trust during his or her life. a. Always b. Commonly c. Rarely d. Never 187. Q-Tip trust stands for: a. Questionable transfer into probate b. Quick timing incremental pass c. Queued transportable important possessions d. Qualified terminal interest property 188. What kinds of trusts provide benefits for numerous generations of the grantor s descendants and are tax-saving trusts in that they use the federal tax exemption to leave the available amount to descendants? a. Q-Tip trusts b. Bypass trusts c. Generation-skipping trusts d. Q-tip, Bypass and generation-skipping trusts 189. Placing assets in trusts is used today to avoid probate. a. The only means b. One of the principal means c. A secondary means d. A last resort Revised 3/

26 190. Gordon establishes a living trust. What other roles may he carry out related to the trust? a. Trustee, only b. Beneficiary, only c. Trustee and beneficiary, only d. Neither trustee nor beneficiary 191. are revocable during the lifetime of the grantor. a. Almost all living trusts b. Some living trusts c. Few living trusts d. Practically no living trusts 192. A living trust may contain what kind of property? a. Personal property, only b. Personal property and securities, only c. Any property type other than real estate d. Almost any type property type 193. When spouses are involved as grantors of a living trust, who is usually named as the trustee? a. The spouse least likely to die first b. The older spouse c. An attorney for both spouses d. Both spouses (as co-trustees) 194. Which of the following statements regarding corporate trustees is false? a. They generally do not have or need a great deal of professional experience. b. They are impartial. c. They provide management stability. d. They may charge a fee of one-half percent of the assets of the trust for holding assets and providing record-keeping services If a grantor names himself as trustee, a trustee is also named on a living trust. a. Cob. b. Successor c. Functional d. Property 196. A successor trustee of a living trust may be any of the following individuals, except: a. A trusted friend b. A corporate trustee c. The original grantor of the trust d. The primary beneficiary of the trust 197. Which of the following beneficiary descriptions would be most proper to use in a trust document? a. My children b. My spouse c. My nieces Mary M. Smith and Elizabeth P. Smith d. My relatives, the Jones. Revised 3/

27 198. What is usually the percentage limit restriction that puts a cap on the amount of a grantor s estate that may be left to charity via a living trust? a. 20% b. 50% c. 75% d. 90% 199. In how many situations will married couples use an A-B trust no matter what the value of their estate? a. In all situations b. In many situations c. In few situations d. In no situations 200. Which of the following statements regarding living trusts set up as A trusts is false? a. An A Trust is organized so that all property placed in the trust remains in the trust or is distributed upon the death of the grantor. b. An A trust does not reduce potential estate taxation. c. The property in an A trust does not avoid probate. d. A living trust may be set up as an A Trust for either single persons or married couples The A-B Living Trust is used for couples. a. Always b. Usually c. Occasionally d. Rarely 202. A married couple sets up an A-B living trust. When the first spouse dies, the property in the trust is usually split in half. The deceased spouse s half goes to: a. Trust A, only b. Trust B, only c. Trust A and Trust B, only d. Trust Q-Tip, only 203. Which of the following statements regarding living trusts being set up as A-B trusts is false? a. No estate taxes will be due if the combined estate for the couple using the A-B Trust is beneath the applicable exclusion amount. b. No probate expenses are incurred when an A-B trust is used. c. Through the use of an A-B trust, the estate s heirs receive the entire estate value. d. The B Trust of an A-B living trust is always included in the surviving spouse s estate In an A-B-Q Trust set up as a living trust, at the death of the first spouse, goes to the surviving spouse s A Trust. a. The full estate b. Half of the estate c. The applicable exclusion amount d. The full value of the estate, minus the applicable exclusion amount 205. In order for an A-B-Q living trust to qualify as a Q-Tip Trust, the surviving spouse must have a right to all the income from the Q-Tip Trust for: a. At least 3 years b. At least 5 years c. At least 10 years d. His or her lifetime Revised 3/

28 206. In order for an A-B-Q living trust to qualify as a Q-Tip Trust, neither the trustee nor any other power may appoint (or have the power to appoint) any part of the trust property to: a. Anyone, at any time b. Anyone other than the surviving spouse, during his or her lifetime c. Anyone other than the surviving spouse, at any time d. Anyone other than beneficiaries, at any time 207. states do not require any witnesses to make an amendment to a living trust. a. All b. Most c. Some d. Few 208. If is involved in an amendment to a living trust, then it may be necessary to have any relating documents notarized. a. Personal property b. Securities c. Real estate d. Collectibles 209. Jim establishes an irrevocable life insurance trust by placing an existing life insurance policy into the trust. After the trust is created, who is considered the insured of the life insurance policy? a. Jim b. Jim s wife c. The trustee of the trust d. The trust 210. Lula establishes an irrevocable life insurance trust by placing an existing life insurance policy into the trust. After the trust is created, who is considered the insured of the life insurance policy? a. Lula b. Lula s husband c. The trustee of the trust d. The trust 211. the insurance in an irrevocable life insurance trust avoids the probate process. a. All b. Most of c. Some of d. Little to none of 212. All of the following are the duties of an irrevocable life insurance trustee, except to: a. Pay insurance premiums with the money transferred to the trust while the grantor(s) live b. Oversee the annual notification of beneficiaries c. File the trust s tax return d. Act as the policy s insured 213. The grantor of an irrevocable life insurance trust may name as a beneficiary on the trust. a. Only a spouse b. Only a spouse or child c. Only a spouse or blood relative d. Whomever he or she chooses Revised 3/

29 214. When property is transferred to an irrevocable trust, it is considered to be a completed gift. a. Always b. Generally c. Rarely d. Never 215. What kind of life insurance policies may be used for an irrevocable life insurance trust? a. Individual life insurance policies, only b. Second-to-die policies, only c. Existing insurance policies, only d. Individual, second-to-die, and existing insurance policies 216. When an insurance policy is transferred to a trust, if the policy premium payments are made from any source other than, a gift may be considered to have occurred. a. The trustee (only) b. A trust beneficiary (only) c. Income producing assets within the trust (only) d. A trust beneficiary or income producing assets within the trust (only) 217. When an insurance policy is transferred to a trust, if a beneficiary makes premium payments to the policy, the value of the gift is: a. The full value of the premium b. Half of the value of the premium c. The part of the premium that benefits other beneficiaries d. The part of the premium that benefits the beneficiary who made the payments 218. An insurance policy is transferred to an irrevocable life insurance trust. If the policy is transferred to the trust immediately, the gift valuation is based on: a. The net premiums paid b. The cost of transferring the policy c. The cost of replacing the policy d. 10% less than its face amount 219. An insurance policy is transferred to an irrevocable life insurance trust. If the policy requires additional premium to stay in force, the gift valuation is based on: a. The net premiums paid b. The cost of transferring the policy c. The cost of replacing the policy d. 10% less than its face amount 220. If a large insurance policy is transferred to an irrevocable life insurance trust that exceeds the annual gift tax exclusion, how could the policy be restructured to take advantage of the exclusion? a. The policy could be transferred in a state that does not adhere to the annual gift tax exclusion rules b. The policy could be transferred to a revocable life insurance trust, then re-transferred to the irrevocable life insurance trust as a generalized policy c. The policy could be divided into numerous smaller policies so that each policy could be transferred annually d. The policy could be structured to allow for lump premium payments in excess of the annual exclusion amount Revised 3/

30 221. Under normal circumstances, premium payments in an irrevocable trust result in the ability of immediate use. a. Always b. Usually c. May d. Do not 222. Crummey powers are named after: a. A senator who passed essential trust legislation b. A law firm that revolutionized the trust business c. A man who structured his trust in a certain way d. A city that allowed a new kind of trust to be utilized 223. The very existence of Crummey powers as held by the beneficiaries creates: a. Future interest b. Present interest c. Gift tax exclusion d. Estate tax exclusion 224. The requirements the Crummey Power is subject to include a notification to beneficiaries. This notification is in the form of: a. A letter sent to all beneficiaries b. A phone call made to all beneficiaries c. A court summons presented to all beneficiaries d. A press release published on an insurance company s website 225. Irrevocable life insurance trusts qualify for the Generation Skipping Transfer Tax (GSTT) annual exclusion. a. Generally do b. Occasionally do c. Generally do not d. Never 226. When no non-skip beneficiaries are involved and an irrevocable life insurance trust is organized so that it meets the GSTT annual exclusion requirements, it may take advantage of: a. The annual exclusion for gift taxes, only b. The annul exclusion for the GSTT, only c. Both the annual exclusion for gift taxes and the annual exclusion for the GSTT d. Neither the annual exclusion for gift taxes nor the annual exclusion for the GSTT 227. The GSTT exemption can be used for what kind of transfers to offset the original transfer of property to irrevocable life insurance trusts and the following premium payments? a. Life transfers, only b. Transfers at death, only c. Both life transfers and transfers at death d. Neither life transfers nor transfers at death 228. An irrevocable life insurance trust generally has what kind of provisions when compared to a living trust? a. More complex provisions b. Equally complex provisions c. Slightly less complex provisions d. Significantly less complex provisions Revised 3/