Understanding Living Trusts Exam Study Guide

Transcription

1 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) Exam Revised 3/2015 1

2 Understanding Living Trusts Final Exam 1. Megan s estate is made up of certain tangible and intangible property. All of the following property is part of her tangible property, except: A. Artwork B. Insurance policies C. Real estate D. Automobiles 2. Bill and Sarah have three children together, ages 8, 5 and 3. If both Bill and Sarah were to pass away at the same time, and neither of them left a will, a guardian for their children would be: A. Appointed by a state court in the state in which they lived B. Appointed by a federal court C. Chosen by the eldest of their three children D. The eldest of their three children 3. A husband and wife jointly own property. The agreement under which the property is held may only be terminated by both owners during their lifetimes. The husband and wife co-own the property, and the property passes to the surviving spouse upon the death of the first spouse to die. This kind of an agreement is a: A. Simple joint tenancy agreement B. Tenancy-by-the-entirety agreement C. Tenants-in-common agreement D. Community property agreement 4. Patrick is not married, does not have any children, and has no living blood relatives. If he dies without a will, his property: A. Goes to the church he was a member of B. Goes to his best friend C. Is placed in a trust D. Goes to the state in which he lived 5. Daniel sets up a living trust, while his friend Matthew only sets up a will. If both men have estates of roughly the same value, what is true of the estate taxes that each man s estate will be subject to? A. Daniel s estate will be subject to higher estate taxes B. Matthew s estate will be subject to slightly higher estate taxes C. Matthew s estate will be subject to much higher estate taxes D. Both Daniel and Matthew s estates will be subject to roughly the same amount of estate taxes Exam Revised 3/2015 2

3 6. Ned uses a pour-over will in conjunction with his living trust. Who is the primary beneficiary of the pour-over will? A. His spouse or children B. The trustee of his living trust C. The living trust D. Ned himself 7. Melba s estate passes through probate in a manner that requires that every transaction be overseen by the probate court. This kind of probate is known as: A. Supervised probate B. Unsupervised probate C. Small-estate probate D. Grand-estate probate 8. Frank is the beneficiary of his father s individual retirement account. After his father passes away, Frank: A. Will pay income taxes on the full amount of the IRA distributions he receives B. Will pay income taxes on half of the amount of the IRA distributions he receives C. Will pay income taxes on 10% of the amount of the IRA distributions he receives D. Will not pay income taxes on any portion of the amount of the IRA distributions he receives 9. Matthew lives in Arizona and passes away. His estate goes through probate. Which one of the following of his assets will be required to go through probate? A. Property he held in a trust B. Community property he held jointly with his wife C. Property that he gifted before his death D. Death benefits his wife receives from the government 10. Upon an individual s death and the subsequent probating of that individual s estate, a creditor generally has how long in which to file a claim against the estate, beginning from the start of the probate process or the publication of the notice of death? A. No more than one month B. Between three and six months C. Between six months and one year D. No more than two years Exam Revised 3/2015 3

4 11. If he died in 2015, Martin may 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. $5,430,000 C. $5,340,000 D. $3,500, Which of the following is the biggest advantage of a living trust over a will? A. The lower initial cost of the living trust B. The fact that living trusts are subject to fewer taxes than a will C. The fact that living trusts are not subject to probate D. The fact that no will is needed when a living trust is used 13. Amanda makes a gift of present interest to her brother, George, for $10,000. Later in the same year, she makes a gift of present interest to her best friend, Lisa, for $7,000. On which of these gifts must she pay the federal gift tax? A. The gift to George, only B. The gift to Lisa, only C. Both the gift to George and the gift to Lisa D. Neither the gift to George nor the gift to Lisa 14. At the time of her death, Sally is married to Tom and they have one son together. If she does not leave a will, state intestacy rules will most likely dictate that her estate: A. Goes entirely to Tom B. Is divided equally between Tom and their son C. Goes to her parents D. Is divided equally between Tom, their son, and her parents 15. Gordon draws up a testamentary trust will. All assets he places in the trust go through probate: A. Before they are placed in the trust B. After they are placed in the trust C. While they are placed in the trust D. At no time 16. Lyle makes a gift to his granddaughter Lucy. All of the following are requirements the gift must meet in order for it to be considered complete, except: A. The gift must be capable of ownership and transfer B. The gift must be worth at least $500 (in 2015) C. The gift must involve a gratuitous transfer D. Both Lyle and Lucy must be competent Exam Revised 3/2015 4

5 17. Felicity s insurance policy has a savings account feature that provides variable investment returns. Her policy: A. Must be a term policy B. Must be a cash value policy C. Could be either a term or cash value policy D. Must be both a term and a cash value policy 18. Johanna is a grantor who is allowed to make gifts to her beneficiaries over an extended period of time. Johanna could be the grantor of: A. A living trust, only B. A simple will, only C. Either a living trust or a simple will D. Neither a living trust nor a simple will 19. Kendall s life insurance policy death benefit avoids probate. Any of the following could be the beneficiary of that policy, except: A. Kendall s wife B. Kendall s son C. Kendall s irrevocable life insurance trust D. Kendall s estate 20. Ellen is the owner of an insurance policy and her brother is the insured. Ellen is the primary beneficiary and her sister is the secondary beneficiary. If Ellen predeceases her brother, the cash value of the policy at the time of his death is in her estate, and the secondary beneficiary, her sister, receives the death benefit. A. Includable; tax-free B. Not includable; tax-free C. Includable; only after paying income taxes on it D. Not includable; only after paying income taxes on it 21. Vance passes away without leaving a valid will. The person who will administer his estate is known as the: A. Executor B. Administrator C. Manager D. Grantor Exam Revised 3/2015 5

6 22. Jordan and Megan are spouses who live in a community property state. Upon Jordan s death, Megan: A. Keeps the entirety of Jordan s assets B. Keeps her half of the assets, while Jordan s half becomes part of his probated estate C. Keeps her half of the assets, while Jordan s half is transferred to a trust D. Keeps only those assets that belonged to her before her marriage 23. A(n) is the person responsible for the care of a minor s person or property. a. Administrator b. Guardian c. Trustee d. Warden 24. An estate s gross worth is $100,000. The probate process for that estate will likely cost between: A. $500 to $1,000 B. $1,000 to $2,000 C. $5,000 to $10,000 D. $10,000 to $20, Edward is the beneficiary of a transfer-on-death account. When may he access the account s funds? A. At any time B. Only after he has been the beneficiary for at least 3 years C. Only after he has been the beneficiary for at least 7 years D. Only after the account owner s death 26. Mark is the owner of a life insurance policy. If the beneficiary designation for his policy is not specifically specified, then it will most likely be assumed to be a: A. Per stirpes distribution B. Per capita distribution C. Percentage distribution D. Joint distribution Exam Revised 3/2015 6

7 27. Michael is of legal age in his state to draw up a will. How old is Michael? A. At least 16 B. At least 18 C. At least 20 D. It is impossible to know because the legal age for drawing up a will varies by state 28. Jamie is a resident of the District of Columbia. If he does not leave a will upon his death, then any real estate he owns passes to his surviving spouse, Karen, and their two adult children. Karen will receive one-third of the real estate, but the balance goes to the children equally per stripes. If one of their children pass away before Jamie dies, then the real estate will be: A. Only inherited by Karen B. Only inherited by Karen and the surviving child C. Only inherited by the surviving child D. Inherited by Karen, the surviving child and the deceased child s children 29. Meredith establishes a living trust. After her death, disputes arise among the beneficiaries of her trust in relation to the distribution of the trust s assets. In order for the dispute to be settled by a court, which of the following is true? A. The trust s assets must go through probate B. A separate legal case must be filed C. A pour-over will must have been established D. A testamentary trust must have been established 30. Mary adds an amendment to her will that changes one of the beneficiaries. What has Mary added to the will? A. A modification B. A substitution C. A postscript D. A codicil 31. Paul was in a traumatic car crash. He is placed on life support in a hospital, but cannot be restored to consciousness. What kind of a will informs his doctors of his wishes in this situation? A. A holographic will B. A testamentary trust will C. A living will D. A statutory will Exam Revised 3/2015 7

8 32. Phyllis is the trustee of a trust on Sam, her brother s behalf, on which he is the beneficiary. What kind of responsibility does she have relating to the trust? A. Familial responsibility B. Fiduciary responsibility C. Legal structure responsibility D. Grantor responsibility 33. Upon her death, Christine s estate passes entirely to her husband, Sam. Sam does not have to pay federal estate taxes: A. Only if the estate is worth less than $500,000 B. Only if the estate is less than $1,000,000 C. Only if the estate is less than $5,430,000 D. No matter how much the estate is worth 34. Harry has equitable title to the property in a trust. Harry is the: A. Beneficiary of the trust B. Trustee of the trust C. Grantor of the trust D. Settlor of the trust 35. Lizzie establishes a pay-on-death bank account and names her sister Jan as the beneficiary. If she wants to change the beneficiary, she: A. May do so at any time B. Must wait until Jan has been the beneficiary for at least 3 years C. Must wait until Jan has been the beneficiary for at least 7 years D. Must go through a court proceeding 36. Mary establishes an irrevocable life insurance trust. Her sister, Christine, establishes a revocable life insurance trust. Whose trust is considered a living trust? A. Mary s trust, only B. Christine s trust, only C. Both Mary s trust and Christine s trust D. Neither Mary s trust nor Christine s trust 37. John and Karen establish a trust that is formed so that John gives a trustee property to be held for the benefit of Karen. When John dies, Karen will be able to decide where the property should go after her death. This kind of trust is known as a: A. Bypass Trust B. Estate Trust C. Totten Trust D. Power of Appointment Trust Exam Revised 3/2015 8

9 38. Lisa s will is not valid because it was not witnessed by at least how many competent adults? A. At least one B. At least two C. At least three D. At least four 39. A Q-Tip trust may be established by: A. Married spouses, only B. Married spouses or live-in partners, only C. Single individuals, only D. Either married spouses, live-in partners, or single individuals 40. The grantor of a living trust passes away. Upon his death, his trust: A. Changes from revocable to irrevocable B. Changes from irrevocable to revocable C. Either changes from irrevocable to revocable, or remains revocable D. Either changes from revocable to irrevocable, or remains irrevocable 41. Ben establishes a living trust according to the laws of Montana, his state of domicile. He places a vacation home located in Florida into the trust. Upon his death, which state s laws will direct the disposition of that home? A. Montana law B. Florida law C. Both Montana and Florida law D. Neither Montana nor Florida s law; federal law will apply 42. Lisa is the trustee of a living trust. If she charges a fee of one and one-half percent of the assets in the trust for her services, she is most likely: A. A grantor of the trust B. A successor trustee C. A corporate trustee D. A group trustee 43. Paul, the grantor of a trust, passes away. According to the rule against perpetuities, the trust must give ownership of the property to beneficiaries no later than how many years after Paul s death? A. 10 years B. 14 years C. 17 years D. 21 years Exam Revised 3/2015 9

10 44. Jan and Michael are spouses in a joint tenancy agreement. If they both pass away simultaneously, and neither their wills nor their trusts include a simultaneous death provision, the agreement: A. Is nullified B. Effectually converts to a tenancy-by-the-entirety agreement C. Effectually converts to a tenants-in-common agreement and one-half of the property will be includable in each of their respective estates D. Remains unchanged 45. Katie and Mark are a married couple. If they establish an A-B-Q Trust, what is true of their estate? A. It exceeds double the applicable exclusion amount B. It is no more than $1,000 above or below the applicable exclusion amount C. It does not exceed the applicable exclusion amount D. It is less than half the applicable exclusion amount 46. Gordon 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 owner of the life insurance policy? A. Gordon B. Gordon s wife C. The trust D. The beneficiary(ies) of the trust 47. A gift of life insurance is made to an irrevocable life insurance trust. The gift will be included in the gross estate of the insured if it is made within how many years of the insured s death? A. 3 years B. 5 years C. 7 years D. 10 years 48. Catherine is the grantor of a trust. If she does not retain any rights to the trust property, then the trust is: A. Revocable B. Irrevocable C. Testamentary D. Grantor-Retained Exam Revised 3/

11 49. An insurance policy is transferred to an irrevocable life insurance policy. If the policy is not new, and is paid up, the gift valuation is based on: A. The net premiums paid B. The tax value of the policy C. The cost of replacing the policy D. 10% less than its face amount 50. An irrevocable life insurance trust is structured so that the trustee is given the power to make unequal distributions to trust beneficiaries. This kind of power is known as a(n): A. income and trust power B. sprinkle and spray power C. disparate distribution power D. gifting power Exam Revised 3/