Question 1

According to the Certified Financial Planner Board of Standards, Inc. who is to explain to clients the estate planning process?

Accepted Answer

A) Accountant 
B) Lawyer 
C) Financial Planner 
D) Investment Broker

Question 2

Property held in a trust is called the principle, regardless of type of property. A trust is to ensure beneficiaries receive property from the grantor. What is a trust to do with assets of the trust?

Accepted Answer

A) Hold the assets 
B) Manage the assets 
C) Distribute the assets 
D) All of the above.

Question 3

Which of the following might you work with to analyze estate liquidity?

Accepted Answer

A) Attorneys 
B) Tax preparers 
C) Insurance agents 
D) All of the above

Question 4

Sheila was is 96 years old and paid-off her mortgage 60 years ago. The price of the house was a whopping $23,000. The date of death is used for valuation purposes. At this time, if Sheila gifts her house to her grandson, what method would be used to determine federal transfer taxes?

Accepted Answer

A) Original market price 
B) Fair market price 
C) Above market price 
D) Valuation tax price

Question 5

Peggy and Lenard, at their death, wish to transfer their property to their great-grandson, the only one they actually like. What will the IRS impose on the gift?

Accepted Answer

A) Settlement Tax 
B) Inheritance Tax 
C) Generation-skipping Transfer Tax 
D) "Grandparent" Tax

Question 6

Jack's daughter has creditors seeking money from her, over $70,000 is owed by his daughter. He is currently creating a will, what provision would Jack be wise to include?

Accepted Answer

A) Perpetuity Clause 
B) Sprinkling Provision 
C) Spendthrift Clause 
D) Support Provision

Question 7

What is the distinguishing feature of charitable lead trusts?

Accepted Answer

A) They can hold tax-exempt securities. 
B) Additional contributions are not allowed. 
C) Must invade corpus when income is insufficient for payout. 
D) The donor in the charitable lead trust gives away an income stream and receives a remainder interest.

Question 8

Mr. Rich lived and died in Missouri and owns real estate in New Jersey. What should his will contain to address this issue?

Accepted Answer

A) Law Operations 
B) Tenancy in common 
C) Ancillary probate proceedings 
D) Ownership property

Question 9

The term "gross-up" deals with the taxation of what?

Accepted Answer

A) Income 
B) Gifts 
C) Property costs 
D) General taxation

Question 10

Nancy is afraid that she will be hit by a car and be disable or incapable to act on her own behalf. She wants to plan for her children's guardianship. What parties is not involved with the process?

Accepted Answer

A) The ward. 
B) The judge. 
C) The guardian. 
D) The state.

Question 11

Matt doesn't own any property, but is worth millions that collects high levels of interest income. He wants to forward the interest income to beneficiaries. What type of trust does Matt need?

Accepted Answer

A) Simple Trust 
B) Irrevocable Living Trust 
C) Complex Trust 
D) Revocable Trust

Question 12

What is true of IRC Section 2056 (d)?

Accepted Answer

A) It deals with American citizens. 
B) It deals with minors. 
C) It deals with noncitizen spouses. 
D) None of the above.

Question 13

Tony wants to avoid both public proceedings and the need to determine the status of the principal when planning for incapacity planning. What is his best option for what he wants?

Accepted Answer

A) Conservatorship 
B) Durable power of attorney 
C) Living trust 
D) None of the above

Question 14

Jeff is taking a test to become a financial planner. The test wants to know what a living will is also known as:

Accepted Answer

A) Trusts 
B) Medical life-support directive 
C) Grantor 
D) General Powers

Question 15

What are gifts made during life, which are either in excess of a donor's annual exemption or are not a present interest?

Accepted Answer

A) Net Gifts 
B) Liability Gifts 
C) Taxable Gifts 
D) Voluntary Gifts

Question 16

What is true of charitable remainder unitrusts?

Accepted Answer

A) Cannot hold tax-exempt securities. 
B) Cannot hold sprinkling provisions. 
C) The remainderman is not the charity. 
D) None of the above.

Question 17

Judi is confused about taxes, gifts, and unified credit. She can't figure it all out. What would you tell her about unified credit?

Accepted Answer

A) The taxpayer has the right to pay taxes in lieu of using the unified credit. 
B) Taxes due is not on the dollar-for-dollar basis. 
C) The credit must be used the first time a gift tax or an estate tax is required to be paid. 
D) All of the above.

Question 18

Stock can be given as a gift. However, what percent of the adjusted gross estate must be kept to qualify for the Section 303 redemption?

Accepted Answer

A) 40 percent. 
B) 35 percent. 
C) 50 percent. 
D) 10 percent.

Question 19

Tracy is designing a gifting program and is concerned with the buildup of revenue in the estate and taxes. What would you recommend Tracy to do?

Accepted Answer

A) Give assets with high rates of return. 
B) Give assets with low rates of return. 
C) Give stagnant assets. 
D) Opt for gifting installment obligations.

Question 20

Joan and Seth decided to leave their only son a substantial gift of property and monies. They are not sure what to do to ensure compliance with filing requirements. What form must they fill out after giving a gift?

Accepted Answer

A) Form 717 
B) Form 7089 
C) Form 709 
D) Form 734

Exam 2: Estate Planning