Lesson 4 Flashcards
An individual with special needs is the discretionary beneficiary of several trusts. The trusts provide for
supplemental needs of the beneficiary other than food and shelter. The state must be reimbursed for
Medicaid expenditures made on Jim’s behalf from which of the following trusts at the time of the
individual’s death?
A. A self-settled special needs trust.
B. An irrevocable life insurance trust funded by life insurance covering the individual’s grandparents.
C. An irrevocable life insurance trust funded by life insurance covering the individual’s parents.
D. A supplemental needs trust funded by a bequest from the individual’s uncle.
A. A self-settled special needs trust.
Which of the following, in whole or in part, may be deducted from gross income to determine adjusted
gross income?
A. A charitable contribution from an individual to a qualified charity
B. The standard deduction
C. The business expenses of self-employed taxpayers
D. Alimony payments (for a divorce occurring in 2019 or later)
C. The business expenses of self-employed taxpayers
This year, Pete has unreimbursed medical expenses totaling $9,500. If Pete has an adjusted gross
income (AGI) of $80,000 and he itemizes his deductions, how much of the medical expenses will he be
allowed to deduct for income tax purposes?
A. $600
B. $3,500
C. $8,000
D. $9,500
B. $3,500
Which of the following statements concerning a payback special needs trust (SNT) is correct?
A. The SNT is prohibited from making distributions to the beneficiary with special needs during the
beneficiary’s lifetime.
B. The beneficiary with special needs may not bequeath any assets remaining in the trust at death.
C. The payback trust is a better option over the pooled trust when medical expenses are expected to
be high.
D. The remainder of the SNT’s assets at the death of the beneficiary with special needs must
first be used to reimburse the state for expenditures from Medicaid before distribution to
heirs.
D. The remainder of the SNT’s assets at the death of the beneficiary with special needs must
first be used to reimburse the state for expenditures from Medicaid before distribution to
heirs.
Which one of the following statements concerning a pooled special needs trust is correct?
A. The pooled trust should be used as a repository for substantial gifts or inheritances that family
members intend to provide for a beneficiary with special needs.
B. The pooled trust is preferred over the payback trust when medical expenses are expected to be
low.
C. The beneficiary with special needs may bequeath assets remaining in the pooled trust at death.
D. The assets in the pooled trust remain in the trust at the death of the individual with special
needs for the benefit of other disabled individuals.
D. The assets in the pooled trust remain in the trust at the death of the individual with special
needs for the benefit of other disabled individuals.
Mr. and Mrs. Counsell have a substantial estate and would like to provide the highest quality of life
possible for their child with special needs. They intend to fund a third-party supplemental needs trust
for the child with special needs with survivorship (second to die) life insurance. Which of the following
statements concerning this plan is correct?
A. The ILIT should not include other beneficiaries besides the child with special needs because the
state must be the remainder beneficiary of the trust.
B. The contributions to the ILIT avoid gift taxes because this is treated as a disability trust.
C. The ILIT should not provide Crummey withdrawal powers for the beneficiary with special
needs because such withdrawal rights could affect the beneficiary’s eligibility for SSI and
Medicaid benefits.
D. The ILIT should direct the trustee to provide distributions for the food and shelter of the child with
special needs.
C. The ILIT should not provide Crummey withdrawal powers for the beneficiary with special
needs because such withdrawal rights could affect the beneficiary’s eligibility for SSI and
Medicaid benefits.
During the past taxable year, Susan sold some common stock she had held for several years and
incurred a capital loss of $6,000. Susan had no capital gains during the year, and her other income for
the year was $60,000. How much of the capital loss can Susan deduct for the taxable year?
A. None
B. $3,000
C. $5,000
D. $6,000
B. $3,000
Which of the following statements is correct in regards to the child and dependent care credit?
A. Assuming the same amount of qualifying expenses are incurred, lower AGI tax filers will
benefit more than high AGI tax filers
B. It can reduce a filer’s tax liability by as much as $6,000 for one child
C. It can be claimed if care is provided by a dependent spouse or other family member
D. It provides the same credit for each child claimed, regardless of how many are claimed
A. Assuming the same amount of qualifying expenses are incurred, lower AGI tax filers will
benefit more than high AGI tax filers
Which of the following statements is correct in regards to education for individuals with special needs?
A. The Special Education Fund Credit may help indirectly reduce the cost of education for individuals
with special needs.
B. Depending on the nature of the special needs, certain educational expenses may be
deductible as medical expenses.
C. Most children with special needs are educated in special schools.
D. If a child with special needs is educated at a regular school, that school’s tuition and fees are never
deductible as a medical expense.
B. Depending on the nature of the special needs, certain educational expenses may be
deductible as medical expenses.
Which one of the following statements is true regarding ABLE accounts?
A. An individual can have more than one ABLE account as long as the accounts are in different
states.
B. Contributions to an ABLE account may be made by the individual, family members of the
individual, or friends of the individual.
C. An ABLE account may be established only if the individual qualifies under the means and resource
tests for SSI and Medicaid.
D. An individual is eligible for an ABLE account regardless of when his or her disability occurred.
B. Contributions to an ABLE account may be made by the individual, family members of the
individual, or friends of the individual.
Which of the following statements regarding income tax filing statuses is correct?
A. The Tax Cut and Jobs Act of 2017 eliminated all tax rate differences among filing statuses.
B. The Tax Cut and Jobs Act of 2017 eliminated the tax rate differences between Married Filing Jointly
and Married Filing Separately.
C. Income tax rates brackets are progressive and increase with AGI regardless of the filer’s
filing status.
D. Per filer, Single generally has the highest tax rates at any given AGI.
C. Income tax rates brackets are progressive and increase with AGI regardless of the filer’s
filing status.
Which of the following individuals may make contributions to an ABLE account?
I. The account beneficiary or family members of the beneficiary
II. Friends of the beneficiary
C. Both I and II
Mr. and Mrs. Foley have a child with severe disabilities and questionable competency. The child will
incur significant medical and long-term care expenses for the rest of his lifetime. Which of the following
statements concerning the wills for Mr. and Mrs. Foley is (are) correct?
I. The Foleys should provide a direct bequest to the child with special needs to
cover his medical and long-term expenses.
II. The Foleys should fund a supplemental needs trust with their probate assets
to provide discretionary benefits to the child with special needs.
B. II only
Which one of the following statements regarding investing in ABLE account funds is (are) correct?
I. ABLE account funds may only be invested in federally backed securities.
II. The beneficiary must include investment gains in taxable income regardless of
whether distributions from the ABLE account are made.
D. Neither I nor II
Which one of the following statements is (are) true regarding eligibility for an ABLE account?
I. An individual, or his/her family, may establish an ABLE account if that
individual incurred a significant disability before age 26 and meets SSI
eligibility criteria.
II. Individuals already receiving SSI and/or SSDI are automatically eligible to
establish an ABLE account.
A. I only
