G.58 Sources for estate liquidity Flashcards
Learners will develop an understanding of and be able to identify various sources for estate liquidity, including life insurance, savings, investment accounts, and loans.
Which of the following is NOT a source of estate liquidity?
A. Life insurance proceeds
B. Retirement accounts
C. Real estate investments
D. Liquid assets, such as savings accounts or money market accounts
C. Real Estate Investments
G.58 Sources for estate liquidity
Which type of life insurance policy provides the highest amount of liquidity to an estate?
A. Term life insurance
B. Whole life insurance
C. Variable life insurance
D. Universal life insurance
A. Term Life Insurance
G.58 Sources for estate liquidity
Which of the following retirement accounts is NOT subject to required minimum distributions (RMDs)?
A. Traditional IRA
B. Roth IRA
C. 401(k)
D. SEP IRA
B. Roth IRA
G.58 Sources for estate liquidity
Which of the following statements about a trust as a source of estate liquidity is true?
A. A trust can only be funded with cash assets.
B. A trust can provide a source of estate liquidity while allowing the grantor to retain some control over the assets.
C. A trust must be irrevocable to be used as a source of estate liquidity.
D. A trust is subject to estate taxes on the death of the grantor.
B. A trust can provide a source of estate liquidity while allowing the grantor to retain some control over the assets.
G.58 Sources for estate liquidity
Which of the following scenarios illustrates the use of a life insurance policy as a source of estate liquidity?
A. A married couple sets up a trust to hold their assets and minimize estate taxes.
B. A wealthy individual donates assets to a charitable foundation to reduce the size of their taxable estate.
C. An individual with a large estate purchases a life insurance policy to provide cash for estate expenses and taxes.
D. A business owner sets up a buy-sell agreement with a partner to ensure the continuation of the business after their death.
C. An individual with a large estate purchases a life insurance policy to provide cash for estate expenses and taxes.
G.58 Sources for estate liquidity
Which of the following statements about annuities as a source of estate liquidity is true?
A. Annuities are always subject to income taxes when the funds are withdrawn.
B. Annuities can be a source of estate liquidity if the contract includes a death benefit.
C. Annuities must be fully annuitized before they can be used as a source of estate liquidity.
D. Annuities can be used to reduce estate taxes by reducing the size of the taxable estate.
B. Annuities can be a source of estate liquidity if the contract includes a death benefit.
G.58 Sources for estate liquidity
Which of the following scenarios illustrates the use of a retirement account as a source of estate liquidity?
A. A business owner sets up a 401(k) plan for their employees to provide retirement benefits.
B. An individual makes contributions to a traditional IRA to reduce their taxable income.
C. A surviving spouse inherits a deceased spouse’s IRA and takes distributions over their lifetime.
D. An individual names their children as beneficiaries of their Roth IRA to avoid income taxes on withdrawals.
C. A surviving spouse inherits a deceased spouse’s IRA and takes distributions over their lifetime.
G.58 Sources for estate liquidity
Which of the following strategies can be used to reduce the size of a taxable estate and provide liquidity to the estate?
A. Charitable gifting
B. Grantor retained annuity trust (GRAT)
C. Family limited partnership (FLP)
D. Qualified personal residence trust (QPRT)
A. Charitable gifting
G.58 Sources for estate liquidity
Which of the following scenarios illustrates the use of a trust as a source of estate liquidity?
A. An individual sets up a revocable trust to manage their assets during their lifetime and avoid probate.
B. A wealthy individual donates assets to a charitable foundation to reduce the size of their taxable estate.
C. An individual sets up an irrevocable trust to hold their life insurance policy and provide cash for estate expenses and taxes.
D. A business owner sets up a buy-sell agreement with a partner to ensure the continuation of the business after their death.
C. An individual sets up an irrevocable trust to hold their life insurance policy and provide cash for estate expenses and taxes.
G.58 Sources for estate liquidity
Which of the following types of accounts are subject to probate?
A. Joint accounts with rights of survivorship
B. Payable-on-death accounts
C. Revocable trusts
D. Irrevocable trusts
C. Revocable trusts
G.58 Sources for estate liquidity
John owns a business and wants to ensure that his family can continue to operate the business after his death. Which of the following estate planning strategies can be used to provide liquidity to his estate and ensure the continuation of the business?
A. Family limited partnership (FLP)
B. Grantor retained annuity trust (GRAT)
C. Buy-sell agreement
D. Charitable lead trust
C. Buy-sell agreement
G.58 Sources for estate liquidity
Sarah is a high-net-worth individual with a large estate. She wants to minimize estate taxes while providing liquidity to her estate. Which of the following strategies can she use?
A. Charitable gifting
B. Irrevocable life insurance trust (ILIT)
C. Qualified personal residence trust (QPRT)
D. Payable-on-death (POD) accounts
B. Irrevocable life insurance trust (ILIT)
G.58 Sources for estate liquidity
Tom is a retiree who relies on his retirement accounts for income. He wants to ensure that his beneficiaries can inherit the accounts without paying unnecessary taxes. Which of the following strategies can he use?
A. Roth IRA conversions
B. Charitable remainder trust (CRT)
C. Joint accounts with rights of survivorship
D. Family limited partnership (FLP)
A. Roth IRA conversions
G.58 Sources for estate liquidity
Anna is a business owner with multiple real estate investments. She wants to ensure that her estate has enough liquidity to cover expenses and taxes. Which of the following strategies can she use?
A. Irrevocable life insurance trust (ILIT)
B. Charitable lead trust (CLT)
C. Installment sale to an intentionally defective grantor trust (IDGT)
D. Family limited partnership (FLP)
C. Installment sale to an intentionally defective grantor trust (IDGT)
G.58 Sources for estate liquidity
Mike is a retiree with a large estate that includes a significant amount of liquid assets. He wants to ensure that his estate has enough liquidity to cover expenses and taxes, but he doesn’t want to sell his assets during his lifetime. Which of the following strategies can he use?
A. Installment sale to an intentionally defective grantor trust (IDGT)
B. Charitable remainder trust (CRT)
C. Payable-on-death (POD) accounts
D. Revocable trust
D. Revocable trust
G.58 Sources for estate liquidity
