Section 101 Unit 10

Question 1

Property Settlement

Answer 1

Is considered to be a nontaxable exchange between the divorcing spouses.

Question 2

Qualified Domestic Relations Orders

Answer 2

Should be used to divide qualified retirement plan assets among spouses at the time of divorce. Example 401K

Question 3

Living Will AKA Advanced Directive

Answer 3

This document is drafted by individuals when in full capacity, giving personal directions to a physician regarding health care in the event of being severely disabled or suffering from a terminal illness

Question 4

Durable Power of Attorney for Health Care AKA Health Proxy

Answer 4

This is a written document executed by one person, known as the principal, authorizing someone else, known as the agent or attorney in fact, to make medical decisions on the principal’s behalf.

Question 5

Durable Power of Attorney

Answer 5

Survives the principal’s incapacity.

Question 6

Nondurable Power of Attorney

Answer 6

Ceases when the principal’s incapacity begins.

Question 7

Revocable Living Trust

Answer 7

One use is appointment of a successor trustee to take over the client’s property management in the even that he is no longer able to do so.

Question 8

Durable Power of Attorney for Property

Answer 8

Similar to durable power of attorney for health, but it concerns the incapacitated person’s property, rather than personal care.

Question 9

Springing Power of Attorney

Answer 9

Becomes effective only upon the principal’s legal incapacity

Question 10

Nonspringing Power of Attorney

Answer 10

Becomes effective upon the date of execution of the power.

Question 11

Palimony Agreement

Answer 11

Similar to a premarital agreement but is for domestic partners.

Question 12

Special Needs Trust SNT

Answer 12

Permits individuals who meet the Social Security disability definition to maintain eligibility for certain public benefits, such as Medicaid, while at the same time preserving private assets to provide for services not available through public programs.

Question 13

Settlement/Litigation Special Needs Trusts

Answer 13

This type of SNT is established with proceeds obtained on behalf of a disabled individual from a personal injury action.

Question 14

Pooled Special Needs Trust

Answer 14

This category of SNT trust uses pooled assets for investment purposes and preserves Medicaid benefits for disabled individuals over age 65 whose own assets are used to fund the trust.

Question 15

Third Party Special Needs Trust

Answer 15

A third party SNT is created by interested third parties to benefit a disabled individual.

Question 16

Family Special Needs Trust

Answer 16

These types of SNT trust are used in traditional estate planning for families with disabled individuals.

Question 17

Structured Settlement

Answer 17

Is a method of compensating a victim for injuries arising, in most cases, as a result of a personal injury lawsuit.

Question 18

Compensatory Damages

Answer 18

Damages arising out of the personal injury lawsuit are considered only to make the injured party whole. Income tax free. Unless it’s only a defamation of character then it’s taxable.

Question 19

Punitive Damages

Answer 19

Damages arising out of a personal injury lawsuit are intended to punish the tortfeasor for her acts. Taxable. Unless it’s a wrongful death suit then it’s income tax free.

Question 20

Dependency Exemption

Answer 20

For income tax purposes is awarded to the parent who has custody of the children for the greater part of the calendar year.