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Estate Planning > Estate Planning > Flashcards

Estate Planning Flashcards

1
Q
  1. Which of the following would an advisor do in the “implement the plan” step of the selling/planning process?

(A) Review the changes in the client’s circumstances and the financial environment.
(B) Identify the strengths and weaknesses of the client’s present financial condition.
(C) Gather considerable information from the client using a fact finder.
(D) Motivate and help the client acquire all necessary financial products and services.

A

(D) Motivate and help the client acquire all necessary financial products and services.

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2
Q
  1. Which of the following is the primary purpose of estate planning?

(A) to make certain that all heirs are treated equitably
(B) to minimize or avoid taxes
(C) to assure that the distribution of the estate avoids the probate process
(D) to ensure that property is distributed according to the estate owner’s wishes

A

(D) to ensure that property is distributed according to the estate owner’s wishes

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3
Q
  1. In which step of the selling/planning process does the advisor identify the solutions and alternatives that will address the prospect’s needs, and explain the advantages and disadvantages of each?

(A) Implement the plan.
(B) Present the plan.
(C) Meet the prospect.
(D) Service the plan.

A

(B) Present the plan.

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4
Q
  1. Common characteristics, common needs, and a communication network system are all components of which of the following?

(A) natural market
(B) market analysis
(C) target market
(D) segmented market

A

(C) target market

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5
Q
  1. Which of the following statements regarding estate planning is correct?

(A) A client’s failure to deal with death may be an obstacle to estate planning.
(B) Estate planning is concerned only with the conservation of assets.
(C) The best estate plan is always the one that minimizes taxes.
(D) It is not necessary to periodically review existing estate plans because of inflation.

A

(A) A client’s failure to deal with death may be an obstacle to estate planning.

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6
Q
  1. Which of the following statements concerning estate planning is (are) correct?

I. Its primary purpose is to minimize taxes.
II. An individual’s estate is made up of all the property he or she owns and controls at the moment of his or her death.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(B) II only

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7
Q
  1. Which of the following statements concerning intestate succession statutes is (are) correct?

Their primary purpose is to minimize taxes and other transfer costs in order to maximize the estate for heirs.
They are a statutory scheme for the disposition of property at death in the event that the resident dies without a valid will.
(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(B) II only

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8
Q
  1. Which of the following statements regarding the estate planning team is (are) correct?

I. A client’s accountant is the most likely member of the estate planning team to have contact with the client on an annual basis.
II. An attorney is generally not needed as a member of the estate planning team.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(A) I only

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9
Q
  1. AN the following are objectives of estate conservation EXCEPT

(A) to pass on income-producing property to replace the income of the deceased breadwinner
(B) to minimize taxes and other transfer costs in order to maximize the estate for heirs
(C) to dispose of property according to the wishes of the estate owner
(D) to provide adequate liquidity to avoid the forced sale of estate assets

A

(C) to dispose of property according to the wishes of the estate owner

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10
Q
  1. All the following are obstacles to effective estate planning EXCEPT

(A) lack of liquidity
(B) failure to consider inflation
(C) acceptance of one’s mortality
(D) improper tax planning

A

(C) acceptance of one’s mortality

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11
Q
  1. Which of the following statements concerning estate planning is correct?

(A) Estate planning involves the creation, conservation, and distribution of an estate.
(B) Estate planning is primarily concerned with the conservation of assets.
(C) The best estate plan is always the one that minimizes taxes and expenses.
(D) Estate planning is the eight-step process to complete the sale and service the client.

A

(A) Estate planning involves the creation, conservation, and distribution of an estate.

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12
Q
  1. Identifying conditions that are preventing a prospect from achieving his or her goals is accomplished in which step of the selling/planning process?

(A) Gather information and establish goals.
(B) Analyze the information.
(C) Develop and present the plan.
(D) Service the plan.

A

(B) Analyze the information.

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13
Q
  1. Which of the following is a group of people with common characteristics and common needs?

(A) natural market
(B) prospect list
(C) strategic alliance
(D) target market

A

(D) target market

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14
Q

4.The most basic legal instrument of all estate plans is which of the following?

(A) health care proxy
(B) power of attorney
(C) trust
(D) will

A

(D) will

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15
Q
  1. Which of the following represent(s) objectives of estate conservation?

I. to provide adequate liquidity in order to avoid forced sale of estate assets
II. to maximize taxes and other transfer costs in order to minimize the estate that heirs will inherit

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(A) I only

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16
Q
  1. Which of the following statements regarding estate planning is (are) correct?

I. Lack of estate liquidity may force an estate to sell assets under disadvantageous conditions.
II. A Ilene’s failure to deal with the inevitability of death may be an obstacle to the estate planning process.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

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17
Q
  1. Which of following statements is (are) correct regarding the purposes of estate conservation?

I. to pass on income-producing property to replace the income of the breadwinner
II. to minimize taxes and other transfer costs in order to maximize the estate for heirs

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

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18
Q
  1. All of the following are steps in the selling/planning process EXCEPT

(A) Identify the prospect.
(B) Obtain referrals.
(C) Implement the plan.
(D) Meet the prospect.

A

(B) Obtain referrals.

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19
Q
  1. All of the following statements regarding a center of influence (COI) are correct EXCEPT

(A) A COI must be a client before he or she can be a center of influence.
(B) A COI is active in the community or sphere of influence.
(C) A COI is an influential person who knows you favorably.
(D) A COI agrees to introduce or recommend you to others.

A

(A) A COI must be a client before he or she can be a center of influence.

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20
Q
  1. All of the following statements regarding estate planning are correct EXCEPT

(A) Estate planning is only concerned with the conservation of assets.
(B) Inflation makes it necessary to periodically review existing estate plans.
(C) Everyone has an estate plan established by the intestate succession statutes.
(D) A common reason for procrastination in estate planning is the feeling to accomplish that the task is too overwhelming to accomplish.

A

(A) Estate planning is only concerned with the conservation of assets.

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21
Q

Which of the following is an example of personal property?
(A) a small vacation home near a lake
(B) undeveloped land held for investment
(C) a mobile home with the wheels in place
(D) a mobile home with the wheels removed

A

(C) a mobile home with the wheels in place

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22
Q
  1. Which of the following is an example of a fee simple estate?

(A) a married couple jointly owns land
(B) John, a single man, owns his home outright
(C) Tom and Jim own their business assets as partners
(D) an association of homeowners owns the park in its neighborhood

A

(B) John, a single man, owns his home outright

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23
Q
  1. Under a life estate, the owner has the right to

(A) get back all property after it has been transferred to another person
(B) possess property for the span of the measuring life (either his or hers or another person’s)
(C) possess property for a specified time period, such as 10 years
(D) own property in the future as a remainderman

A

(B) possess property for the span of the measuring life (either his or hers or another person’s)

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24
Q
  1. Which of the following can be individually owned in a community-property state?

(A) Property that was owned prior to the marriage.
(B) Property that was a contest prize won during marriage.
(C) Property that purchased with income earned by only one spouse during the marriage.
(D) Property that purchased with joint funds, but one spouse wants individual ownership.

A

(A) Property that was owned prior to the marriage.

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25
Q
  1. A gift that is given with limits or restrictions, deferring full control or enjoyment to some future time, is called a gift of

(A) reversionary interest
(B) life estate
(C) present interest
(D) future interest

A

(D) future interest

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26
Q
  1. Which of the following statements is correct regarding how life insurance death proceeds pass directly to the beneficiary?

(A) They pass by will.
(B) They pass by intestacy.
(C) They pass by right of contract.
(D) They pass by right of survivorship

A

(C) They pass by right of contract.

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27
Q
  1. Which of the following statements is (are) correct regarding wills?

I. A will is operative until a person’s death.
II. A typical requirement of a will is that the document be signed at the end.

(A) I only
(B) II only
(C) Both I and ll
(D) Neither I nor II

A

(B) II only

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28
Q
  1. Which of the following questions is (are) correct regarding domicile?

I. An estate is generally probated and distributed according to the laws of the decedent’s state of domicile.
II. The situs of property is generally considered to be the domicile of the property owner.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(A) I only

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29
Q
  1. All of the following statements regarding wills are correct EXCEPT

(A) A codicil is a modification of a will.
(B) The executor is responsible for collecting estate assets and probating the will.
(C) Charitable donations can be specified in the will.
(D) A decedent must have testamentary capacity at the time of death for the decedent’s will to be upheld as valid.

A

(D) A decedent must have testamentary capacity at the time of death for the decedent’s will to be upheld as valid.

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30
Q
  1. All of the following are examples of types of joint ownership EXCEPT

(A) tenancies in common
(B) joint tenancies with right of survivorship
(C) tenancies by the entirety
(D) fee simple estate

A

(D) fee simple estate

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31
Q

Which of the following statements regarding intestate succession statutes is correct?

(A) Their primary purpose is to minimize taxes.
(B) They are a statutory scheme for the disposition of property at death if that resident dies without a valid will.
(C) They are legal instruments a person can use to dispose of his or her property at death.
(D) They allow a decedent to leave property at his or her death to a charity or a friend.

A

(B) They are a statutory scheme for the disposition of property at death if that resident dies without a valid will.

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32
Q
  1. Which of the following statements regarding a reversionary interest is correct?

(A) It gives the owner (grantor) the right to have all or part of the property that he or she originally owned returned to his or her estate.
(B) It is a present interest in property that gives an immediate right to use and enjoy it.
(C) The holder of a reversionary interest has the current right to income from the property.
(D) The grantor has a present right to possess and enjoy the property concurrently with the present estate owner.

A

(A) It gives the owner (grantor) the right to have all or part of the property that he or she originally owned returned to his or her estate.

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33
Q
  1. If you are not an attorney, giving your prospects and clients legal advice is considered

(A) a good way to build rapport and credibility
(B) illegal and unethical
(C) unavoidable in estate planning
(D) an undesirable but necessary sales practice

A

(B) illegal and unethical

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34
Q
  1. Which of the following statements concerning naming a decedent’s estate as the beneficiary of life insurance proceeds is correct?

(A) The proceeds are beyond the claims of the estate’s creditors.
(B) The proceeds are not subject to the cost of administration.
(C) The proceeds are not subject to an executor’s fee.
(D) The proceeds are considered to be probate property.

A

(D) The proceeds are considered to be probate property.

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35
Q
  1. A life insurance policy death benefit paid to a named beneficiary is an
    example of a transfer of property by operation of

(A) will
(B) law
(C) contract
(D) intestacy

A

(C) contract

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36
Q
  1. Which of the following statements concerning tenancy by the entirety is
    correct?

(A) It is limited to co-ownership of property held by a husband and Wife.
(B) It is available for use only with personal property.
(C) During his or her lifetime, a co-owner may convey his or her interest to a third party without the consent of the other tenant.
(D) At the first co-owner’s death, that co-owner’s interest can pass by will to someone other than the other co-owner.

A

(A) It is limited to co-ownership of property held by a husband and Wife.

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37
Q
  1. Which of the following statements regarding property ownership is (are) correct?

I. All property that is not real property is personal property.
II. A fee simple estate may not be left to a property owner’s heirs.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(A) I only

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38
Q
  1. Which of the following statements concerning joint tenancy with right of survivorship is (are) correct?

I. Property held jointly with right of survivorship passes to the survivor by operation of law, rather than under a will.
II. All joint tenants with right of survivorship must have equal rights and obligations with respect to the property.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

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39
Q
  1. All of the following are ways that property can be transferred EXCEPT

(A) sold or exchanged for valuable consideration
(B) made as a gift of either present or future interest
(C) distributed at death
(D) a promise to sell the property in the future

A

(D) a promise to sell the property in the future

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40
Q
  1. A will’s simultaneous death and survivor provisions in the event that both wife and husband die in a common accident does all of the following EXCEPT

(A) The simultaneous death provision allows the will to define who will be considered the “survivor” when it is impossible to determine who died first.
(B) Simultaneous death and survivor provisions can have a significant tax effect by controlling the way assets are distributed.
(C) A will’s survivor provision deals with cases in which the husband and wife do not die simultaneously but within a few hours, days, or weeks of each other.
(D) The survivor provision in a will is used when husband and wife die simultaneously in a common disaster.

A

(D) The survivor provision in a will is used when husband and wife die simultaneously in a common disaster.

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41
Q
  1. By using inter vivos gifts, an estate owner can accomplish which of the following?

(A) elimination of the need for estate planning
(B) distribution of estate property prior to his or her death
(C) continued control over property while removing the property from the estate
(D) distribution of estate property after his or her death according to the terms of the will

A

(B) distribution of estate property prior to his or her death

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42
Q
  1. A trust that a grantor has the power to change is known as which of the following?

(A) perpetuity trust
(B) irrevocable trust
(C) revocable trust
(D) pour-over trust

A

(C) revocable trust

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43
Q
  1. Which of the following statements regarding gifts is correct?

(A) A gift tax is imposed on the person who gives the property.
(B) Gift splitting means that an individual donor splits the gift among several donees.
(C) The donee generally receives a basis in gifted property equal to the fair market value of the property at the time of the lifetime transfer.
(D) Payment of rife insurance premiums for another person is not considered a gift.

A

(A) A gift tax is imposed on the person who gives the property.

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44
Q
  1. Which of the following statements concerning trust income taxation is correct?

(A) Trusts are not subject to taxation.
(B) Irrevocable trusts are considered separate taxpaying entities.
(C) Income that accumulates from assets in a revocable trust is taxed to the beneficiary.
(D) Income taxation of trusts should be of little concern to the estate planner.

A

(B) Irrevocable trusts are considered separate taxpaying entities.

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45
Q
  1. Which of the following is the advisor’s best course of action when dealing with an analytical social style?

(A) Focus on objectives, move right along, be efficient, and provide options and probabilities.
(B) Focus on dreams, take time to listen, be interesting, and provide incentives and testimony.
(C) Focus on relationships, be personal and cooperative, and provide personal assurances.
(D) Focus on principles and thinking, be logical and accurate, and provide evidence.

A

(D) Focus on principles and thinking, be logical and accurate, and provide evidence.

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46
Q
  1. Which of the following statements concerning gifting is (are) correct?

I. The amount of the gift is the fair market value of the property on the date the gift becomes complete.
II. The donee’s cost basis of a gift is carried over from the adjusted cost basis of the donor.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

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47
Q
  1. Which of the following statements concerning trusts is (are) correct?

I. A disadvantage of an irrevocable trust is that it passes through probate.
II. A testamentary trust may be irrevocably established during the grantor’s lifetime.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(D) Neither I nor II

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48
Q
  1. All the following statements regarding gifting are correct EXCEPT

(A) Gifting can remove assets that will appreciate significantly from the estate.
(B) Gifts of income-producing assets can reduce the donor’s income tax.
(C) No gift taxes have to paid until the grantor makes cumulative taxable gifts in excess of the applicable gift tax exclusion amount, which is$1 million in 2014.
(D) Gifting provides potential reduction of probate and administrative costs.

A

(C) No gift taxes have to paid until the grantor makes cumulative taxable gifts in excess of the applicable gift tax exclusion amount, which is$1 million in 2014.

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49
Q

The initial interview includes all the following objectives EXCEPT

(A) Establish rapport and credibility.
(B) Identify the prospects’s needs and concerns.
(C) Reach an agreement to work together to respond to the prospect’s needs and concerns.
(D) Propose solutions to the prospect’s needs and concerns.

A

(D) Propose solutions to the prospect’s needs and concerns.

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50
Q
  1. The IRS allows a taxpayer to make unlimited gifts in all of the following situations without tax consequences EXCEPT

(A) to a provider of medical care for services received by the donee
(B) as forgiveness of a debt between family members
(C) to a political organization if the gift is for the use of the political organization
(D) to an educational institution for tuition for education or training

A

(B) as forgiveness of a debt between family members

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51
Q

Taxable gifts are reported on which of the following tax forms?

(A) Form 706
(B) Form 709
(C) Form 1040
(D) Schedule G

A

(B) Form 709

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52
Q
  1. If property is transferred for adequate consideration, it is considered

(A) a gift
(B) a gratuitous transfer
(C) a sale
(D) income tax deductible for individual taxpayers

A

(C) a sale

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53
Q
  1. Which social style is generally outgoing and enthusiastic, enjoys telling about personal projects and dreams, and wants to be recognized?

(A) a driver
(B) an amiable
(C) an analytical
(D) an expressive

A

(D) an expressive

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54
Q
  1. A wife makes an outright gift of $96,000 to her son, and her husband agrees to split the gift with her. Which of the following correctly states the amount of taxable gifts? Assume an annual gift tax exclusion amount is $14,000.

(A) wife $70,000, husband $26,000
(B) wife $34,000, husband $34,000
(C) wife $48,000, husband $48,000
(D) wife $82,000, husband $0

A

(B) wife $34,000, husband $34,000

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55
Q
  1. Which of the following statements concerning a testamentary trust is
    correct?

(A) It is a type of inter vivos trust.
(B) It cannot exist for more than 5 years.
(C) It is created by will.
(D) At its termination the trust property must revert to the grantor.

A

(C) It is created by will.

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56
Q
  1. Which of the following typically occur(s) in the initial interview?

I. Identify the prospect’s needs and concerns.
II. Build rapport and establish your own credibility.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

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57
Q
  1. Which of the following statements concerning gifting is (are) correct?

I. The donee generally receives a basis in gifted property equal to the fair market value of the property at the time of the transfer.
II. No gift tax return is currently required until a present-interest gift by one individual to another individual in a calendar year exceeds the annual gift tax exclusion amount.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

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58
Q
  1. All of the following are factors that help build credibility with the prospect EXCEPT

(A) perspective
(B) commonality
(C) competence
(D) propriety

A

(A) perspective

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59
Q
  1. All of the following are considered gifts EXCEPT

(A) A father lends his son $100,000 and later cancels the note.
(B) A person pays bills or purchases food or clothing for a spouse or minor children.
(C) A father gives his minor daughter a $50,000 ring.
(D) A father makes payments on an adult son’s car.

A

(B) A person pays bills or purchases food or clothing for a spouse or minor children.

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60
Q
  1. All of the following statements concerning a simple trust are correct EXCEPT

(A) Accumulation of trust income is allowed.
(B) The trust is treated as a separate tax entity.
(C) No charitable gifts can be made by this type of trust.
(D) Beneficiaries are taxed on the distributed income.

A

(A) Accumulation of trust income is allowed.

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61
Q
  1. The purpose of the probate process is to

(A) collect estate taxes for the federal government
(B) determine if the distribution is equitable to all parties
(C) validate the will and supervise the distribution of property
(D) ensure that the will distributes property according to the state’s intestacy laws

A

(C) validate the will and supervise the distribution of property

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62
Q
  1. An executor is a fiduciary. This means that he or she

(A) must protect his or her own interest
(B) must make a full disclosure of all transactions to the beneficiary(ies)
(C) may delegate responsibilities that are inconvenient to perform to others
(D) may profit at the expense of the beneficiary as long as assets are exchanged at their fair market value

A

(B) must make a full disclosure of all transactions to the beneficiary(ies)

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63
Q
  1. Fair market value is defined as

(A) the original purchase price increased by an inflation factor
(B) the price set by a willing seller who is under no compulsion to sell
(C) the price at which property would change hands between a willing buyer and a willing seller
(D) the price a reasonable buyer who had incomplete information about the property would be willing to pay

A

(C) the price at which property would change hands between a willing buyer and a willing seller

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64
Q
  1. The concept of “highest and best use” is based on the idea that

(A) a seller always makes the best use of property
(B) property may have a value greater than its fair market value
(C) a willing buyer will always pay more than the fair market value
(D) estate property always has a value greater than fair market value

A

(B) property may have a value greater than its fair market value

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65
Q
  1. The estate value of the stock of a decedent passed through his will is

(A) the fair market value per share on the valuation date
(B) the par value of the stock
(C) the decedent’s basis in the stock
(D) discounted in the estate calculation to allow for sales transaction costs

A

(A) the fair market value per share on the valuation date

66
Q
  1. The problem in valuing a closely held business comes from the fact that

(A) it is impossible to place a value on the time and effort invested by the owner
(B) goodwill, the largest asset in a small business, is difficult to value
(C) a tax court is required to place a value on a closely held business
(D) the stock is not traded on the open market

A

(D) the stock is not traded on the open market

67
Q
  1. The estate value of life insurance owned by the decedent on his or her own life is

(A) its cash value
(B) the amount due the beneficiary
(C) the death benefit less the cash value
(D) not include in the gross estate unless proceeds are payable to the estate

A

(B) the amount due the beneficiary

68
Q
  1. Which of the following statements is (are) correct regarding probate?

I. Probate is the act or process of proving the will.
II. The executor is normally the person named in the decedent’s will to settle the estate at the decedent’s death.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

69
Q
  1. The primary goal of fact finding is to develop a mutual understanding of all of the following EXCEPT

(A) the type, amount, and ownership of the assets in the client’s estate
(B) realistic estate planning objectives for the client
(C) the problems in achieving these objectives
(D) solutions to the client’s problems

A

(D) solutions to the client’s problems

70
Q
  1. All of the following regarding a fiduciary are true EXCEPT

(A) A fiduciary delegates responsibilities whenever possible.
(B) A fiduciary acts for the sole benefit of the beneficiary.
(C) A fiduciary manages the property as a “prudent person” would.
(D) A fiduciary makes a full disclosure of all transactions to the beneficiary.

A

(A) A fiduciary delegates responsibilities whenever possible.

71
Q
  1. The prudent-person rule states that a fiduciary must

(A) provide the same judgment and care that a prudent person would for the disposition of his or her own property
(B) follow the advice and recommendations of a prudent attorney or accountant in disposing of estate property
(C) be prudent in protecting his or her own interest when acting in a fiduciary capacity
(D) not make any misjudgments in acting for another person

A

(A) provide the same judgment and care that a prudent person would for the disposition of his or her own property

72
Q
  1. Which of the following property items is usually the most difficult to value for estate valuation purposes?

(A) stocks
(B) closely held corporations
(C) marketable securities
(D) life insurance

A

(B) closely held corporations

73
Q
  1. Which of the following statements about the income taxation of estates is correct?

(A) Estates are exempt from income taxation.
(B) Estate income and expenses are reported as income in respect of a decedent.
(C) Estates are entitled to itemize and take deductions if they exceed 2 percent of the estate’s adjusted gross income.
(D) Estates must report revenue generated by estate assets as income but are allowed to deduct the expenses.

A

(D) Estates must report revenue generated by estate assets as income but are allowed to deduct the expenses.

74
Q
  1. Unless an extension is granted, how long after the decedent’s death are estate taxes due?

(A) 3 months
(B) 6 months
(C) 9 months
(D) 12 months

A

(C) 9 months

75
Q
  1. Which of the following statements concerning a fiduciary relationship is correct?

(A) A court does not regulate trusts, so there is no fiduciary relationship between the trustee and the beneficiary.
(B) An executor named in the will has no fiduciary relationship with the beneficiaries.
(C) A trustee is generally given authority to act by the courts.
(D) Violation of the trust held in the fiduciary can lead to the beneficiary taking legal action against the trustee.

A

(D) Violation of the trust held in the fiduciary can lead to the beneficiary taking legal action against the trustee.

76
Q
  1. John Williams bought XYZ stock for $50 a share. The XYZ stock is worth $125 a share when John dies. How much of each share’s value is included in John’s gross estate for federal estate tax purposes?

(A) $50
(B) $75
(C) $125
(D) $175

A

(C) $125

77
Q
  1. Which of the following statements regarding probate is (are) correct?

I. It provides a means of dispute resolution for estate issues, including guardianship of minors.
II. A lack of privacy exists because the decedent’s will, beneficiary information, and the claims of creditors are a matter of public record.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

78
Q
  1. Which of the following statements regarding the probate process is (are) correct?

I. The will must be filed with the appropriate probate court in the state where the deceased resided.
II. The probate estate contains all the property owned solely by the decedent that is distributed under the will.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

79
Q
  1. In order to accomplish the goals of fact finding, you must involve the client in a process of establishing all of the following EXCEPT

(A) providing the data on assets
(B) establishing priorities and setting realistic objectives for the distribution of the estate
(C) understanding the problems that stand in the way of the client’s objectives
(D) choosing and implementing the most appropriate solutions

A

(D) choosing and implementing the most appropriate solutions

80
Q
  1. All of the following are methods to avoid probate EXCEPT

(A) naming beneficiaries other than the decedent’s estate to receive insurance proceeds
(B) using a self-proving will to transfer property owned by the decedent
(C) titling property as joint tenants with right of survivorship
(D) placing property in a living trust

A

(B) using a self-proving will to transfer property owned by the decedent

81
Q
  1. Which of the following statements concerning the gross estates is correct?

(A) A person’s gross estate includes everything he or she owns or is deemed to own at death.
(B) The gross estate includes only tangible real property; all other property is excluded.
(C) Personal property is not part of the gross estate, regardless of its value.
(D) Taxes are calculated on the value of the gross estate.

A

(A) A person’s gross estate includes everything he or she owns or is deemed to own at death.

82
Q
  1. Which of the following statements concerning administration expenses for property subject to claims against the gross estate is correct?

(A) They are an allowable adjustment to the gross estate.
(B) They are ignored in the calculation of the taxable estate.
(C) They are credited against the estate tax due.
(D) They are deducted against the taxable estate.

A

(A) They are an allowable adjustment to the gross estate.

83
Q
  1. In which of the following situations is the unlimited marital deduction allowed?

(A) Dave leaves his entire estate to his spouse, Maria, a Colombian citizen.
(B) Dan is killed on his honeymoon. His will stipulates that his entire estate goes to his new bride.
(C) Vi leaves her home to her spouse for his lifetime. At his death, the property will go to Vi’s son Bill
(D) Mark transfers his entire estate to his son, who then gives his mother a condo that was included in Mark’s estate.

A

(B) Dan is killed on his honeymoon. His will stipulates that his entire estate goes to his new bride.

84
Q
  1. Which of the following statements concerning gift taxation of gifts between spouses is correct?

(A) Spouses can make unlimited gifts to each other without incurring gift taxes.
(B) No gift tax is imposed only if the transfer is of jointly titled property.
(C) There is no gift tax as long as the gift is of terminal-interest property.
(D) Spouses must pay tax on the value of the gift that exceeds the annual gift tax exclusion.

A

(A) Spouses can make unlimited gifts to each other without incurring gift taxes.

85
Q
  1. Which of the following statements concerning the federal estate tax is correct?

(A) All transfers made within 3 years of death must be brought back into the gross estate for federal estate tax purposes.
(B) Jointly held property is not subject to federal estate tax.
(C) Property passing outside the probate estate is not subject to federal estate tax.
(D) The federal estate tax applies to the entire estate and is imposed on the estate itself, which is primarily liable for payment of the tax.

A

(D) The federal estate tax applies to the entire estate and is imposed on the estate itself, which is primarily liable for payment of the tax.

86
Q
  1. Which of the following statements regarding seminar marketing is (are) correct?

I. Financial advisors need to stay current on the subject matter to remain credible.
II. Financial advisors should seek to establish post seminar individual appointments with attendees.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

87
Q
  1. Which of the following is (are) included in the gross estate?

I. what the estate owner actually owned at the date of death
II. what the estate owner is deemed to have owned at the date of death

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

88
Q
  1. Which of the following statements concerning state death taxes is (are) correct?
    I. State death taxes provide a deduction from the adjusted gross estate for the amount of state death taxes paid.
    II. In many states, beneficiaries of different classes are taxed at different rates.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

89
Q
  1. All the following statements concerning estate inclusion are correct EXCEPT

(A) The federal estate tax is a tax on the right to transfer property at death and is imposed on the estate itself.
(B) Property in the decedent’s estate that is located outside the United States is exempt from federal estate taxation.
(C) All property owned by the decedent at death is included in the decedent’s gross estate.
(D) Gifts of life insurance policies made within 3 years of death are not includible in the estate.

A

(D) Gifts of life insurance policies made within 3 years of death are not includible in the estate.

90
Q
  1. All the following are advantages of prospecting using seminars EXCEPT

(A) Seminars are an efficient use of time.
(B) Advisors can meet prospects in a nonthreatening way.
(C) Seminars can be used to prequalify prospects.
(D) Seminars require less planning and effort than other prospecting methods.

A

(D) Seminars require less planning and effort than other prospecting methods.

91
Q
  1. Which of the following is correct regarding the state death tax deduction?

(A) It is an allowable adjustment to the gross estate.
(B) It is disallowed if the marital deduction is used.
(C) It is a dollar-for-dollar credit against the estate tax due.
(D) It is a deduction against the adjusted gross estate.

A

(D) It is a deduction against the adjusted gross estate.

92
Q
  1. For estate tax purposes, how is jointly held property treated at the death of the first spouse?

(A) The entire value of the property is included in the estate of the first to die.
(B) Nothing regarding the jointly held property is included in the estate of the first spouse to die.
(C) Half of the property’s fair market value is included in the estate of the first spouse to die.
(D) Half of the decedent’s cost basis in the property is included in the estate of the first spouse to die.

A

(C) Half of the property’s fair market value is included in the estate of the first spouse to die.

93
Q
  1. The federal estate tax is a tax on

(A) an individual’s right to gift property to others in his or her will
(B) an individual’s right to transfer property at death
(C) the income derived from receiving an inheritance
(D) only a decedent’s probate property

A

(B) an individual’s right to transfer property at death

94
Q
  1. Which of the following is a deduction from a decedent’s gross estate in determining the adjusted gross estate?

(A) foreign death taxes
(B) state death taxes
(C) debts, funeral expenses and claims against the estate
(D) the marital deduction

A

(C) debts, funeral expenses and claims against the estate

95
Q
  1. Which of the following statements concerning the federal estate tax charitable deduction is correct?

(A) In order to be allowed as a charitable deduction for the estate, the bequest must first be includible in the donor’s gross estate.
(B) The amount of the estate tax charitable deduction is limited to a percentage of the adjusted gross estate.
(C) A donor can get a charitable deduction or an income tax deduction for a charitable gift, but not both.
(D) The amount of the deduction will be increased by the amount of any estate taxes paid from the charitable bequest.

A

(A) In order to be allowed as a charitable deduction for the estate, the bequest must first be includible in the donor’s gross estate.

96
Q
  1. Which of the following statements regarding the estate tax calculation is (are) correct?

I. Income that the decedent was entitled to receive but had not yet received at the date of death is includible in his or her gross estate as income in respect of a decedent.
II. The applicable credit amount is equal to the estate tax due on the applicable exclusion amount for the year of death.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

97
Q
  1. Which of the following statements regarding the generation-skipping transfer tax (GSTT) is (are) correct?

I. Every taxpayer is permitted to transfer up to an amount equal to the federal estate tax exclusion amount free of the GSTT either during lifetime or at death.
II. The objective of the GSTT is to obtain at least one transfer tax per generation.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

98
Q
  1. All of the following statements about estate inclusion are correct EXCEPT

(A) The federal estate tax is a tax on the right to transfer property at death and is imposed on the estate itself.
(B) Property located outside the United States but owned by U. S. citizens is exempt from federal estate taxation.
(C) All property owned by the decedent at death is included in the decedent’s gross estate.
(D) Gifts of life insurance policies made within 3 years of death are includible in the gross estate.

A

(B) Property located outside the United States but owned by U. S. citizens is exempt from federal estate taxation.

99
Q
  1. All of the following statements regarding the applicable credit amount are correct EXCEPT

(A) It may be applied at the taxpayer’s option against gift taxes during life.
(B) It must be applied against any gift taxes due during life.
(C) It is also known as the unified credit since it can be used to offset gift as well as estate taxes.
(D) It may be applied to offset federal estate taxes after someone’s death.

A

(A) It may be applied at the taxpayer’s option against gift taxes during life.

100
Q
  1. For property to qualify for the marital deduction, all of the following requirements must be met EXCEPT

(A) The spouse must be a U.S. citizen.
(B) The property must be included in the estate.
(C) The estate of the decedent spouse must pay estate tax on the marital deduction property.
(D) The property must transfer directly to the spouse.

A

(C) The estate of the decedent spouse must pay estate tax on the marital deduction property.

101
Q
  1. Making gifts to charitable organization is a technique for
    (A) dividing the estate
    (B) creating new wealth
    (C) discounting the estate tax obligation
    (D) eliminating the estate
A

(D) eliminating the estate

102
Q
  1. Which of the following is used in estate planning to maximize the value of the applicable exclusion (credit) amount?

(A) perpetuity trust
(B) irrevocable life insurance trust
(C) bypass trust
(D) pour-over trust

A

(C) bypass trust

103
Q
  1. A QTIP trust is an effective technique to do which of the following?

(A) protect the interests of other heirs (perhaps children from a prior marriage) while also providing for the surviving spouse
(B) set assets aside to apply to the applicable credit amount
(C) pass property to the surviving spouse to avoid inclusion in his/her estate
(D) give the spouse a lifetime interest in the trust property with the right to name a beneficiary during lifetime or in his or her will.

A

(A) protect the interests of other heirs (perhaps children from a prior marriage) while also providing for the surviving spouse

104
Q
  1. The purpose of a marital or “A” trust is to

(A) maximize the value of the applicable credit amount
(B) qualify assets for the marital deduction
(C) put assets beyond the reach and control of the surviving spouse
(D) over qualify the estate of the first spouse to die

A

(B) qualify assets for the marital deduction

105
Q
  1. Which of the following is correct regarding a durable power of attorney?

(A) A durable power of attorney is a document that names the person the individual wishes to make medical decisions about his or her care.
(B) A durable power of attorney is designed to continue should the grantor become incapacitated.
(C) A durable power of attorney is a legal document that addresses a person’s desires for medical treatment if he or she is unable to provide instructions.
(D) A durable power of attorney becomes legally ineffective in the case of mental incompetence or medical incapacity.

A

(B) A durable power of attorney is designed to continue should the grantor become incapacitated.

106
Q
  1. When presenting your recommendations, which of the following should you focus on?

(A) Concentrate on the features of a product or recommendation.
(B) Normally the logic of their recommendations, will close the sale.
(C) When you explain a product feature, be sure to stress the benefit the prospect receives.
(D) The presentation is a detailed education in the legal and tax implications of estate planning.

A

(C) When you explain a product feature, be sure to stress the benefit the prospect receives.

107
Q
  1. Which of the following concerning power of attorney is (are) correct?

I. A general power of attorney is effective as long as the person granting the power remains in good health.
II. A general power of attorney becomes legally effective when a person suffers mental incompetence or medical incapacity.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(A) I only

108
Q
  1. Which of the following concern ing advance med ical directives is (are) correct?

I. A living will is a legal document that addresses a person’s desires for medical treatment if he or she is unable to provide instructions.
II. A health care proxy is a signed and witnessed legal document that names the person the individual wishes to make medical decisions about his or her care.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

109
Q
  1. All of the following regarding over qualifying the marital deduction are correct EXCEPT

(A) Less property passes to the surviving spouse in a qualifying manner than should have passed tax-free.
(B) The estate owner’s applicable credit amount is underutilized.
(C) At the surviving spouse’s death, more property than necessary is exposed to tax.
(D) More property than necessary to reduce the estate owner’s federal estate tax to zero goes to the surviving spouse through the marital deduction.

A

(A) Less property passes to the surviving spouse in a qualifying manner than should have passed tax-free.

110
Q
  1. All of the following are requirements to qualify property for the marital deduction EXCEPT
    (A) The surviving spouse must be a U.S. citizen.
    (B) The property must be included in the decedent’s estate.
    (C) The decedent must have been married at the date of death to the spouse receiving the property.
    (D) The property must pass to the surviving spouse through the decedent’s will.
A

(D) The property must pass to the surviving spouse through the decedent’s will.

111
Q
  1. The purpose of the credit shelter or bypass trust is to

(A) qualify assets for the marital deduction
(B) maximize the value of the applicable credit amount
(C) defer estate taxes to the death of the surviving spouse
(D) over qualify the estate of the first spouse to die

A

(B) maximize the value of the applicable credit amount

112
Q
  1. A credit shelter or bypass trust does which of the following?

(A) It gifts money to a spouse so that those assets qualify for the marital deduction.
(B) It places life insurance in a trust so that the owner avoids incidents of ownership.
(C) It defers estate taxes to the death of the surviving spouse.
(D) Assets are exposed to estate tax, but the tax obligation is covered by the applicable credit amount, and thus no taxes are due on those assets.

A

(D) Assets are exposed to estate tax, but the tax obligation is covered by the applicable credit amount, and thus no taxes are due on those assets.

113
Q
  1. Which of the following provides the holder with the ability to transfer property to anyone he or she chooses?

(A) general power of appointment
(B) general power of attorney
(C) durable power of attorney
(D) marital trust

A

(A) general power of appointment

114
Q
  1. A technique to stop its future growth by removing appreciating assets from an estate and shifting future growth to successors is known as

(A) creating an estate freeze
(B) creating tax-exempt wealth
(C) discounting the estate obligation
(D) creating future interest gift

A

(A) creating an estate freeze

115
Q
  1. Which of the following statements best describes under qualification of the marital deduction?

(A) Less property has passed tax free than should have to the surviving spouse in a qualifying manner.
(B) There is underutilization of the estate owner’s applicable credit amount.
(C) More property than necessary to reduce the estate owner’s federal estate tax to zero goes to the surviving spouse via the martial deduction.
(D) At the surviving spouse’s death, more property than necessary is exposed to tax.

A

(A) Less property has passed tax free than should have to the surviving spouse in a qualifying manner.

116
Q
  1. A legal document that expresses a person’s desires for medical treatment if he or she is unable to provide instructions is called a

(A) durable power of attorney
(B) living will
(C) health care power of attorney
(D) health care proxy

A

(B) living will

117
Q
  1. Which of the following statements regarding estate tax planning with AB trust arrangements is (are) correct?

I. There will be no estate tax due on the marital trust (A trust) portion at the first death.
II. The B trust provides management for assets taxable at the first spouse’s death and valued at approximately the applicable exclusion amount.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

118
Q
  1. Which of the following statements regarding the estate plan presentation is (are) correct?

I. Identify and evaluate alternative recommendations.
II. Compare the current and recommended plans.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

119
Q
  1. All of the following statements regarding advance medical directives (living will and health care proxy) are correct EXCEPT

(A) A living will does not guarantee that wishes regarding health care will be followed.
(B) A health care proxy is a legal document in which the individual designates who will make medical decisions on his or her benefit.
(C) A health care proxy is not effective if the principal is unable to make health care decisions.
(D) Health care directives vary widely by state law.

A

(C) A health care proxy is not effective if the principal is unable to make health care decisions.

120
Q
  1. All of the following statements regarding a durable power of attorney are correct EXCEPT

(A) Without one, the family of an incapacitated person must petition the court to be made that person’s guardian.
(B) It becomes inoperative if the principal is incapacitated.
(C) It can be designed for use in making medical care decisions.
(D) It can complement a revocable trust.

A

(B) It becomes inoperative if the principal is incapacitated.

121
Q
  1. Under which of the following conditions is insurance on the life of the decedent included in his or her estate?

(A) It is owned by a revocable trust for which the decedent was trustee.
(B) It is owned by the spouse of the decedent with proceeds payable to the spouse.
(C) It is owned by someone other than the decedent with proceeds payable to a named beneficiary.
(D) It is owned by an irrevocable trust with proceeds payable to the decedent’s children.

A

(A) It is owned by a revocable trust for which the decedent was trustee.

122
Q
  1. What is the value of life insurance owned by the decedent on his or her own life included in his or her estate?

(A) its cash value
(B) the amount paid to the beneficiary (the death benefit)
(C) the death benefit less the cash value
(D) It is not included in the gross estate unless the proceeds are payable to the estate.

A

(B) the amount paid to the beneficiary (the death benefit)

123
Q
  1. In a per capita distribution, policy proceeds are paid to

(A) the decedent’s estate
(B) each surviving named beneficiary equally
(C) a trust for the benefit of the named beneficiaries
(D) to each named beneficiary, if living, and to the children of deceased beneficiaries

A

(B) each surviving named beneficiary equally

124
Q
  1. Sec. 6166 permits

(A) deferring and spreading out the payment of estate taxes attributable to a business interest
(B) a partial income tax-free stock redemption to pay estate taxes
(C) a legitimate way to increase the marital deduction for estate tax purposes
(D) a way to average dividends received over a 10-year period to lower the income tax due

A

(A) deferring and spreading out the payment of estate taxes attributable to a business interest

125
Q
  1. The need for an orderly transfer of a business interest at death can best be met with a

(A) testamentary trust
(B) credit shelter trust
(C) buy-sell agreement funded with life insurance
(D) simple will that leaves everything to the surviving spouse

A

(C) buy-sell agreement funded with life insurance

126
Q
  1. Sec. 303 permits

(A) a tax-free total redemption of closely held stock
(B) an income tax-free partial redemption of stock by a corporation
(C) 35 percent of the estate taxes due to be deferred
(D) the estate tax attributed to a business or farm to be deferred and paid in installments

A

(B) an income tax-free partial redemption of stock by a corporation

127
Q
  1. Insurance owned by an irrevocable life insurance trust (ILIT) with proceeds payable to the trust are included in the decedent’s estate if

(A) the trust pays estate expenses even though it is not required to do so
(B) the trustee has discretion over the distribution of income from the trust
(C) the trust provided income to the decedent’s surviving spouse and children
(D) the life insurance that was owned by the decedent was transferred to the trust 2 years before the decedent’s death

A

(D) the life insurance that was owned by the decedent was transferred to the trust 2 years before the decedent’s death

128
Q
  1. Which of the following statements regarding an ILIT is (are) correct?

I. Crummey withdrawal powers should be included to ensure qualification for the gift tax annual exclusion.
II. The trust grantor should participate in the life insurance application process only as trust grantor and insured, and should not sign as applicant or owner on the policy application.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

129
Q
  1. All of the following statements regarding a per stirpes distribution are correct EXCEPT

(A) “Per stirpes” means “by roots or stock.”
(B) Heirs of a deceased member take the decedent’s share by representation of the deceased ancestor, not as individuals.
(C) Each named living person receives an equal share of the proceeds.
(D) Members of a designated class, such as children of the insured (including deceased members), inherit as members of the class (rather than as named individuals).

A

(C) Each named living person receives an equal share of the proceeds.

130
Q
  1. Incidents of ownership include all of the following EXCEPT

(A) powert to name or change beneficiaries
(B) right to assign the policy
(C) right to surrender or cancel the policy
(D) right to be named the insured

A

(D) right to be named the insured

131
Q
  1. The provision used to qualify a life insurance premium paid to a trust as a present interest gift is called

(A) marital deduction
(B) Crummey powers
(C) Section 6166 extension
(D) Section 303 redemption

A

(B) Crummey powers

132
Q
  1. In a per stirpes distribution, policy proceeds are paid to

(A) the decedent’s estate
(B) each surviving named beneficiary equally
(C) a trust for the benefit of the named beneficiaries
(D) each named beneficiary, if living, and to the children of deceased beneficiaries

A

(D) each named beneficiary, if living, and to the children of deceased beneficiaries

133
Q
  1. IRC Section 6166 permits

(A) a tax-free total redemption of closely held stock
(B) 35 percent of the estate taxes due to be deferred
(C) a partial redemption of stock by a corporation to pay certain estate expenses
(D) the estate tax attributed to a business or farm to be deferred and paid in installments

A

(D) the estate tax attributed to a business or farm to be deferred and paid in installments

134
Q
  1. The inclusion of an effective QTIP provision into the terms of an irrevocable life insurance trust will assure which of the following?

(A) gifts to the trust to qualify as present interests
(B) availability of the marital deduction
(C) protection that creditors cannot attach the property
(D) qualifies surviving resident-alien spouse for marital exclusions

A

(B) availability of the marital deduction

135
Q
  1. The amount a worker will receive under Social Security if he or she retires at full retirement age or becomes disabled is called

(A) supplemental security income
(B) qualified terminable interest property
(C) primary insurance amount
(D) monthly benefit amount

A

(C) primary insurance amount

136
Q
  1. Which of the following statements (is) are correct regarding a QTIP trust?

I. It can be used to preserve the estate tax marital deduction.
II. It can be used to remove the trust assets from a surviving spouse’s estate.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(A) I only

137
Q
  1. An irrevocable life insurance trust owns the life insurance policy on an estate owner. Which of the following situations will cause the proceeds from that policy to be included in his or her estate?

I. The trust has direct or indirect responsibility to pay the insured’s estate expenses.
II. The insured possessed incidents of ownership in a policy on his or her life transferred to the trust life within 3 years of death.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

138
Q
  1. All of the following are life insurance policy settlement options EXCEPT

(A) left with the insurance company to earn interest
(B) paid in installments for a fixed period of time
(C) reduced paid-up insurance
(D) paid in installments guaranteed for the beneficiary’s life

A

(C) reduced paid-up insurance

139
Q
  1. All of the following statements concerning the attractiveness of life insurance for the purposes of charitable giving are correct EXCEPT

(A) The face amount of the life insurance policy paid to the charitable organization will not be subject to federal income taxation or probate costs.
(B) The transfer of a life insurance policy to a qualifying charitable organization will give the donor significant tax benefits, such as the current available income tax deduction.
(C) A person can make a substantial contribution to a qualifying charitable organization without a substantial out-of-pocket cost during life.
(D) The premium payments will generally be lower if a charitable organization is involved in the transaction.

A

(D) The premium payments will generally be lower if a charitable organization is involved in the transaction.

140
Q
  1. Reasons life insurance proceeds should not be payable to an insured’s
    estate include all of the following EXCEPT

(A) Life insurance premiums lose their income tax deductibility if paid to the insured’s estate.
(B) Life insurance proceeds in many states become subject to state death taxes if they are payable to the insured’s estate.
(C) Life insurance payable to a decedent’s estate subjects the proceeds to costs of probate administration.
(D) Life insurance payable to a decedent’s estate may subject the proceeds to the claims of creditors.

A

(A) Life insurance premiums lose their income tax deductibility if paid to the insured’s estate.

141
Q

Which of the following statements concerning the transfer of wealth to a child is correct?

(A) UGMA trusts can have an unfavorable impact on a student’s eligibility for financial aid.
(B) If a client gives money to a child through an UGMA trust and acts as custodian, the value of the account is not included in his or her estate.
(C) The kiddie tax applies to children until they reach age 21.
(D) Setting restrictions on a Uniform Gift to Minors account can ensure that account proceeds are used for education expenses.

A

(A) UGMA trusts can have an unfavorable impact on a student’s eligibility for financial aid.

142
Q
  1. Which of the following statements concerning a guardian of the property is correct?

(A) He or she is appointed by a trust to manage trust assets.
(B) He or she is responsible for the supervision and physical welfare of a minor or ward.
(C) He or she is responsible for managing a ward’s (child’s) assets.
(D) He or she holds title to the property of a child’s trust.

A

(C) He or she is responsible for managing a ward’s (child’s) assets.

143
Q
  1. Which of the following trusts requires income from the trust to be distributed annually?

(A) Sec. 2503 (b) trust
(B) Sec. 2503 (c) trust
(C) UGMA trust
(D) UTMA trust

A

(A) Sec. 2503 (b) trust

144
Q
  1. Which of the following statements concerning professional and ethical behavior in estate planning is correct?

(A) The advisor should be prepared to give legal opinions and advice when working with estate plans.
(B) Compliance means following the rules for the sale of financial products.
(C) If an advisor has an insurance or NASD license, the advisor can identify himself or herself as a financial planner.
(D) An advisor holds no fiduciary position regarding the client.

A

(B) Compliance means following the rules for the sale of financial products.

145
Q
  1. Which of the following statements regarding supplemental security income (SSI) is correct?

(A) Only earned income is considered to determine eligibility for SSI.
(B) Only qualification for disability benefits is needed for eligibility; financial eligibility is not considered.
(C) The assets of a trust established for an individual are considered in the eligibility calculation.
(D) A person must meet the Social Security definition of disability and certain “means” (financial) tests of income and assets.

A

(D) A person must meet the Social Security definition of disability and certain “means” (financial) tests of income and assets.

146
Q
  1. Which of the following statements regarding naming a guardian for a minor child is correct?

(A) The guardian of the deceased’s surviving children must be the same person named as guardian of the property left to those children.
(B) The laws governing guardianship vary by state.
(C) Generally, a guardian for a decedent’s minor children is appointed by the decedent’s will.
(D) A guardian of the person has the fiduciary responsibility for managing the ward’s property.

A

(B) The laws governing guardianship vary by state.

147
Q
  1. Which of the following statements concerning the estate planning implications for two unrelated adults who live together but are not married to each other is (are) correct?

I. Although a surviving spouse automatically inherits all or a portion of the estate, cohabitants typically do not have this protection.
II. The advisor should encourage unmarried cohabitants to create wills to handle the transfer of property at death.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

148
Q
  1. Which of the following statements regarding naming a minor child as a life insurance beneficiary is (are) correct?

I. Generally, minor children cannot legally accept the proceeds of a life insurance policy.
II. Naming a guardian for minor beneficiaries in a life insurance policy will allow payment of the proceeds without the appointment of a legal guardian.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

149
Q
  1. All the following statements regarding resident aliens (noncitizens) are correct EXCEPT

(A) The property of nonresident aliens located in the United States is subject to both federal estate and gift taxation.
(B) The unlimited marital deduction is unavailable to a surviving spouse who is not a U.S. citizen.
(C) A qualified domestic trust (QDOT) can be used to transfer assets from a noncitizen spouse to a surviving resident-alien spouse.
(D) Resident aliens are noncitizens who reside or are domiciled outside the United States.

A

(D) Resident aliens are noncitizens who reside or are domiciled outside the United States.

150
Q
  1. Ethical dilemmas for members of estate planning teams arise from all the following issues EXCEPT

(A) confidentiality
(B) lack of a code of ethics
(C) conflicts of interest
(D) compensation

A

(B) lack of a code of ethics

151
Q
  1. Which of the following can be used to transfer assets to a surviving resident-alien spouse while preserving the marital deduction for such transfer?

(A) qualified terminable interest property
(B) qualified domestic trust
(C) incentive trust
(D) supplemental security income trust

A

(B) qualified domestic trust

152
Q
  1. Which of the following statements best defines compliance?

(A) an unselfish regard for the welfare of others
(B) adherence to the laws and regulations including company rules
(C) behavior that reflects the principles of right and wrong accepted by your profession
(D) specialized knowledge not generally understood by the public

A

(B) adherence to the laws and regulations including company rules

153
Q
  1. Which of the following is correct where one unmarried partner owns the home and wants to put his or her partner’s name on the title?

(A) The donor is subject to gift taxes if the transfer is worth more than the annual gift tax exclusion.
(B) The recipient is subject to gift taxes if the transfer is worth more than the annual gift tax exclusion.
(C) The donor would not be able to use his or her applicable credit amount on a taxable transfer.
(D) The recipient is subject to gift taxes if the transfer is worth more than $100,000.

A

(A) The donor is subject to gift taxes if the transfer is worth more than the annual gift tax exclusion.

154
Q
  1. Which of the following statements regarding Social Security disability benefits is (are) correct?

I. The disabled child of a parent covered by Social Security will qualify for benefits when the covered parent retires or dies if the disability started before age 22 and meets the Social Security definition of disability.
II. Social Security disability benefit payments make an individual eligible for Medicare benefits.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

155
Q
  1. Which of the following statements regarding the legal capacity of minors is (are) correct?

I. Generally insurance companies will not accept a minor as either owner or beneficiary of a life insurance policy.
II. Minors do not have the legal capacity to execute the contractual provisions of the policy.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

156
Q
  1. Which of the following statements are correct regarding planning implications for two unrelated adults who are living together but are not married?

I. A surviving spouse automatically inherits all or a portion of the estate. Cohabitants typically do not have this protection.
II. The rights and benefits of marriage at the federal and state levels aregenerally unavailable to nontraditional couples.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

157
Q
  1. Which of the following statements regarding the taxation of resident aliens is (are) correct?

I. The property of nonresident aliens located in the United States is subject to both federal estate and gift taxation.
II. The unlimited marital deduction is available only if the surviving spouse is a U.S. citizen.

(A) I only
(B) II only
(C) Both I and II
(D) Neither I nor II

A

(C) Both I and II

158
Q
  1. All of the following statements regarding the kiddie tax are correct EXCEPT

(A) Shifting wealth and income from higher-tax bracket parents to lower-tax-bracket children can save on the family’s income taxes.
(B) The kiddie tax applies to dependent children under 18 or under 24 if a full-time student.
(C) If the child is a dependent, the child’s unearned income over an excluded amount is taxed at the parent’s marginal rate.
(D) The kiddie tax eliminates all income taxes at the parent’s rate on the child’s income.

A

(D) The kiddie tax eliminates all income taxes at the parent’s rate on the child’s income.

159
Q
  1. Regarding joint tenancy as a solution for holding property by unmarried persons, all of the following are true EXCEPT

(A) One of the unmarried parties could sever a joint tenancy.
(B) Either partner may make withdrawals or obtain the property, such as joint bank accounts, irrespective of his or her percentage of contribution to the account.
(C) The creation of a joint tenancy may cause gift tax liability.
(D) The share of the unmarried partner’s property will be included in the other partner’s estate.

A

(D) The share of the unmarried partner’s property will be included in the other partner’s estate.

160
Q
  1. All of the following statements regarding UGMA/UTMA are correct EXCEPT

(A) The minor must spend the money according to the wishes of the grantor or custodian.
(B) The minor has the right to receive the property when he or she reaches the age of majority applicable in his or her state.
(C) The income from the gift will be taxed to the minor.
(D) The trust property is considered property of the minor and will count against college financial aid eligibility.

A

(A) The minor must spend the money according to the wishes of the grantor or custodian.

Estate Planning (1 decks)

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