CTFA Level 1 EXAM(Graded A+ actual test)

Tangible Personal Property - Answer-personal property that can be moved (ex. gold bar, jewelry) Probate Estate - Answer-the property of a decedent that is subject to administration by the executor or administrator of an estate Under joint tenants with rights of survivorship, when one tenant dies which of the following best describes the result? - Answer-Her share passes to the surviving joint tenant regardless of what her will says In cutting down a tree, which of the following occurs? - Answer-Real property is converted to personal property A decrease in the money supply will: - Answer-slow the economy The most important factor in the long term performance of equity (stock) investments - Answer-the management of the corporation The most important factor in the short term performance of equity (stock) investments is: - Answer-the economy Cyclical changes in the business cycle would most likely have the greatest effect on a : - Answer-machine tool company Example of the use of fiscal policy to stimulate the economy: - Answer-An increase in spending by the federal government on new highway construction Effect of strengthening the U.S. dollar in comparison to other currencies - Answer-Foreign imports are more competitive than U.S. goods & U.S. exports are less competitive than domestic goodsDisintermediation - Answer-When interest rates rise and yields on money market instruments increase well above interest rates offered by banks. Therefore investors invest in higher yielding funds they have withdrawn from banks. Federal Reserve Stimulating Economy - Answer-Buying U.S. Gov securities in the open market & Lowering reserve requirements & reducing margin requirements. When a member bank of the Federal Reserve System borrows from the Federal Reserve, it would pay - Answer-Discount rate Uniform Prudent Investor Act - Answer-Modern portfolio theory Which of the following types of companies is cyclical - Answer-Household appliances The auto industry is considered which of the following - Answer-Cyclical Investment representing ownership - Answer-Stocks Stocks of companies whose earnings are growing at a faster annual rate than the earnings of companies in general - Answer-Growth Term for stocks of companies whose earnings are less affected by the economic cycles of business activity - Answer-Defensive Receipts representing shares of foreign stocks that are held on behalf of an investor by a financial institution in the United States are: - Answer-Multinationals The opportunity to buy unissued common stock at a specified price, over a long period of time, is provided to the holder of a - Answer-Warrant A preferred stock that is entitled to dividends in arrears is known as - Answer-CumulativeStocks that carry a stated, typically fixed, dividend rate are known as - Answer-Preferred stock Preferred stock which permits the owner to exchange it for common stick under set terms and conditions is: - Answer-convertible preferred stock Most contractual, least fiduciary relationship - Answer-Agency A trust created by a written document is called - Answer-Express The trustee named has a duty to serve as trustee IF - Answer-the trustee accepts trusteeship Expectation of conduct for corporate fiduciaries - Answer-A higher standard than individual fiduciaries How often does Reg. 9 require that the trust department must have an audit? - Answer-At least annually, unless an adequate continuous audit system is in place Maximum federal estate tax bracket in 2020 - Answer-40 Can be included in either the decedent's final 1040 income tax return or on the Form 706 Estate Tax - Answer-Medical expenses relating to the decedent's last illness Includable in the gross estate of the donor (if made within 3 years of death) - Answer-Gift of $8,000 cash value life insurance policy to son How are death benefits from a life insurance policy, in which the decedent held incidents of ownership, regarded for tax purposes? - Answer-Not subject to federal income tax An insurance policy on the life of a decedent is included in his estate policy IF: - Answer--gifted to his spouse 2 years prior to his death -gifted to his spouse 4 years prior to his death, and he retained the right to change the beneficiary -owned by his spouse, and his estate was the beneficiaryIn 2019, having made no prior gifts, Don began making annual gifts to his son of $55,000. What is the first tax year for which he will have to file a gift tax return? - Answer-2019 Relative advantage of gift versus estate tax - Answer-There are still tax advantages to making lifetime gifts Qualifies for gift tax annual exclusion - Answer--simple trust -life estate -Complex trust with "Crummey" power Acceptable methods to creating a QDOT - Answer--By terms of trust or will -Initiated by spouse or executor and completed before a timely filing of the estate tax return -By irrevocable assignment of interest to an arrangement which meets QDOT requirements QTIP - Answer-Allows the testator to appoint beneficiaries after death of surviving spouse Pecuniary Amount Clause - Answer-"an amount equal to... should be placed in trust" Scenarios that qualify for the marital deduction - Answer--Lump sum distribution of the decedent's qualified retirement plan to the surviving spouse -Specific bequest in the decedent's will of intangible personal property to the surviving spouse -Joint property that passes to the surviving spouse by statue Characteristics of QDT - Answer--At least one trustee must be a US Citizen or domestic corporation -Executor of the donor's estate must irrevocably elect to have the trust treated at a QDT -The U.S. trustee must have the right to withhold federal estate taxes from any distribution Qualifications for portability of unused exemption amounts - Answer--timely estate tax return being filed -executor electing portability-couple being married at the time of death General power of appointment - Answer--Power to appoint the property at death to one's own estate -The power to demand the greater of $5,000 or 5% of the trust corpus -The power to appoint assets to your creditors at your death Taxation of an individual holding a testament general power of appointment - Answer-She will not be taxed on income as a result of the power, but the full value of the property subject to the power will be included in her estate The existence of a "5 by 5" power will cause which of the following tax implications - Answer-The beneficiary will be taxed on the income from the withdrawal portion of the trust, whether or not the power is exercised In a transfer A to B, B has what kind of interest following the transfer? - Answer-Fee simple Needed to probate a decedent/owner's insurance policy proceeds - Answer-Valid beneficiary other than the decedent or her estate is named If you die without a valid will, what is true? - Answer-The estate is passed according to the state's intestacy laws Dorothy is having trouble lighting a fire in her fireplace. She grabs a bunch of papers and crumples them under the wood. She lights the papers and they burn completely. Dorothy was unaware that her will was among those papers. A copy is kept at her attorney's office. Has the will been revoked? - Answer-No, her actions were not intended to revoke the will, so its terms are still valid. An unmarried client dies intestate with $400,000 in her own name and $100,000 in joint tenancy with right of survivorship with one of her four children. The assets will be divided as follows: - Answer-$200,000 to one child, $100,000 to each of the others.Which of the following best defines a caveat? - Answer-An action filed in probate court objecting to a will. Which of the following best defines the person named in your will to administer your estate? - Answer-Personal Representative