CTFA 2024 QUESTIONS WITH COMPLETE SOLUTIONS

This is a test - Answer-Test Nyu student - Answer-Steven Rules governing the actions of a trustee are determined by: - Answer-Governing Trust instrument State Trust Law Federal laws such as federal tax & environmental laws Legal title to trust property is vested in: - Answer-Trustee Equitable title to trust property is held by: - Answer-Beneficiaries Can settlor create trust by oral expression of intent? - Answer-Yes When a settlor creates a trust declaring herself or himself as a trustee of their own property, or transferring said property to another trustee - What type of trust? - Answer-Express Trust What are non-express trusts? - Answer-They are IMPLIED TRUSTS created under operation of law and are imposed by courts. Resulting trusts: Essentially a intent-enforcing trust.. A court imposes this type of trust when it determines that property was transferred to one person with the intent that it be held in trust for another. A resulting trust is based on the presumed or unexpressed intent of transferor. Constructive trusts: Essentially a fraud-rectifying trust generally, the courts impose constructive trusts if t finds that a person has obtained property through a wrongful act and declare that the property be held in trust for the rightful owners.What type of trust form is when a settlor DECLARES he is acting as trustee of certain property for benefit of specified beneficiaries? - Answer-Declaration of Trust When the settlor transfers property to a third person for the third person to hold the property for benefit of beneficiaries you have a: - Answer-Trust Agreement How can express trust be created? - Answer-By exercise of power of appointment Can agent under POA have authority to create a trust on settlor's behalf - Answer-Yes, if POA expressly gives agent that authority What are five common law requirements of a valid express trust: - Answer-Intent to create trust - intent to impose enforceable legal duties on trustee -- No precatory words Present declaration or act of transfer -- intent to transfer is not sufficient Existence of trust corpus Naming of trustee with duties to perform Identification of definite and identifiable beneficiaries Will a trust fail without a trustee - Answer-No, a court with jurisdiction will appoint a trustee rather than let the trust fail. Reasons for creating a trust: - Answer-Tax planning avoiding probate Ability to control wealth in the future (Dead Hand Control) Professional management of investment Ability to select a post-death fiduciaryProtect family wealth from creditors or imprudent beneficaries Expert management of special assets Special Needs of disabled beneficiaries Creditor protection Under the UTC, it is presumes that all trusts are: - Answer-Revocable unless the trust terms provide otherwise (State law provide a trust is irrevocable unless power to revoke is reserved in trust instrument) What are principal reasons to create an irrevocable trust? - Answer-Provide a vehicle for completing a gift short of outright transfer to donee Producing a transfer tax savings as the result of a completed gift What are four types of Marital Trusts - Answer-Power of appointment trust Estate Trust QTIP Trust QDOT Under a power of appointment trust, what are the requirements for it to qualify for the marital deduction? - Answer-Surviving spouse must be entitled to all trust income The Trust income must be payable to surviving spouse at least annually Spouse's power of appointment must be exercisable by spouse alone in all events No other person may have the power to appoint the trust property to anyone other than the surviving spouse Under a QTIP trust, the deceased spouse: - Answer-Retains control of ultimate disposition of the property while still qualifying for marital deduction because spouse may only be given limited power of appointment over trust property Estate Trust - Answer-Surviving spouse and his estate are the only beneficiaries Upon death of survivor remaining trust property must be distributed to that spouse's estateIncome does not have to be paid to surviving spouse Surviving spouse cannot appoint trust property Credit Shelter Trust - Answer-Bypass Trust - typically funded with an amount equal to the deceased spouse's unused "unified credit" or estate tax exclusion amount What amount must be paid annually to the noncharitable beneficiaries in a CRAT charitable remainder annuity trust? - Answer-Must be a sum CERTAIN and cannot be less than 5% or more than 50% of the initial fair market value of the trust What amount must be paid annually to the noncharitable beneficiaries in a CRUT charitable remainder unitrust? - Answer-An annual amount that is a fixed percentage of at least 5% but not more than 50% of the annual FMV of the trust How does a Charitable Lead Trust differ from a CRT - Answer-There is no minimum payout Trust is not limited to a maximum term What is a GRIT grantor-retained income trust? - Answer-An irrevocable trust where the grantor retains the right to receive all of the trust income for a fixed term of years. If the grantor survives the income term, the GRIT corpus passes to remainder beneficiaries without being included in grantor's estate. Corpus is limited to personal residence Is corpus of GRAT grantor retained annuity trust limited to a particular type of asset? What does grantor receive - Answer-No Retains the right to receive fixed annuity payments for a term of years. When are beneficiaries deemed to receive their share of estate income? - Answer-On the last day of the estate's fiscal year. If DOD September 2015 and fiscal year elected for Jan. 31st, a distribution to beneficiaries on 12/1/15 will be treated as received by the beneficiaries on 1/31/16. When must representative make QTIP election? - Answer-On the estate tax returnWhat are duties of custodian of assets ? - Answer-Are limited to protecting and preserving the principal's assets -- no fiduciary duties