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Missouri State University/FIN 381 TESTBANK-STATIC

Chapter 19 Testbank - Static 1. LIMRA International, a financial services research organization, provides information about estate planning to survivors in the form of a booklet. True False 2. Estate planning is a definite plan for the administration and disposition of one's property during one's lifetime and at one's death. True False 3. Estate planning is not an essential part of retirement planning. True False 4. A large percentage of people do little or nothing to provide for those who will survive them. True False 5. If you never married, you don't need to organize your financial affairs. True False 6. Estate planning is useful only to rich and elderly people. True False 7. Estate planning is an integral part of financial planning. True False 8. Most people cannot afford the expense of using trusts. True False 9. Estate planning includes a subject most people would rather avoid: death-your own or that of your spouse. True False 10. An estate plan is usually implemented by a will and one or more trust agreements. True False 11. Millions of nontraditional households have unique estate planning problems. True False 12. Unmarried couples face formidable retirement and estate planning challenges. True False 13. Last-minute "death-bed" estate planning may fail to carry out your wishes. True False 14. When death occurs, proof of claims must be produced or the claims will not be processed. True False 15. If you die without a valid will, you die intestate. True False 16. A will is a legal declaration of a person's mind as to the disposition of his or her property after death. True False 17. If you die intestate, the state's law of descent and distribution becomes your will. True False 18. It is unnecessary to modify your will when you divorce or remarry. True False 19. If you marry after you have made a will, the will is revoked automatically unless certain conditions are met. True False 20. If you marry after you have made a will, you are better off drawing a new will to fit your new circumstances. True False 21. The cost of preparing a will varies from place to place. True False 22. Generally, the cost of writing a will is more than that for writing a living trust. True False 23. Probate is a legal procedure of proving a valid or invalid will. True False 24. You should avoid probate because it is expensive, lengthy, and public. True False 25. A living trust avoids probate at your death. True False 26. Another name for an executor is an executrix. True False 27. Wills have existed for thousands of years; the oldest known will was written by an Egyptian pharaoh in 2448 BC. True False 28. A simple will creates lower overall taxation for all individuals. True False 29. A statutory will is one type of formal will. True False 30. Your executor can be the trust department of a bank. True False 31. A guardian is a person or an institution that holds property for the benefit of someone else. True False 32. Making any changes on the face of your will can invalidate it. True False 33. A codicil is a document that explains, adds, or deletes provisions in your existing will. True False 34. A prenuptial agreement is a documentary agreement between spouses after marriage. True False 35. The adjusted gross estate is equal to the gross estate minus debts and costs. True False 36. Probate is less expensive, quicker, and private than a living trust. True False 37. The main advantage of the exemption trust will is that it eliminates future taxation of the exemption amount and any growth in it. True False 38. A formal will may be either typed or on a preprinted form. True False 39. A beneficiary is a person who has been named to receive property under the will. True False 40. Joint ownership is a good substitute for a will. True False 41. The state law sets the fees for executors, whether professionals or friends. True False 42. If only a few changes are needed in your will, adding a codicil may be the best choice. True False 43. A living will provides for your wishes to be followed if you become so physically or mentally disabled that you are unable to act on your own behalf. True False 44. A living will is a good substitute for a traditional will. True False 45. Most states do not recognize living wills. True False 46. An ethical will is a way to pass on your values and beliefs to your heirs. True False 47. Related to the concept of a living will is a durable power of attorney also known as a health care proxy. True False 48. You can assign a durable power of attorney to anyone you choose. True False 49. A letter of last instruction can provide your heirs with important information. True False 50. Your estate consists of everything you own, including interests in trusts and powers of appointment. True False 51. A trust is a legal arrangement through which a trustee holds your assets for your benefit or that of your beneficiaries. True False 52. An inter vivos trust is a property management arrangement that you establish while you are alive. True False 53. A credit-shelter trust is perhaps the most common estate-planning trust. True False 54. A disclaimer trust is designed for the couple who do not yet have enough assets to need a credit-shelter trust. True False 55. With a marital-deduction trust, you can leave your spouse any money that doesn't go into a credit-shelter trust. True False 56. Perhaps the most popular form of marital trust is the Q-TIP trust. True False 57. A credit-shelter trust is known as a bypass trust, a "residuary" trust, an A/B trust, or a family trust. True False 58. A qualified personal residence trust, or QPRT, lets you get your home or vacation home out of your estate. True False 59. A generation-skipping trust allows people to directly leave a substantial amount of money to their grandchildren. True False 60. Community property is any property that has been acquired by only one of the spouses during the marriage, but not by gift, devise, bequest or inheritance, or, by the income therefrom. True False 61. Life insurance may be a reasonable, feasible, and economical means of paying your estate tax. True False 62. Inheritance taxes are imposed only by the state governments. True False 63. According to a recent American Association of Retired Persons survey, over 50 percent of Americans age 45 or older have not drawn up a will. True False 64. A unique feature of a self-declaration trust is that the creator of the trust is also the trustee. True False 65. Which one of the following statements is true about estate planning? A. Estate planning is only for the rich. B. It is always easy to plan for your family's financial security in the event of your death. C. Most people provide a lifetime of income for those who will survive them. D. Most people give a tremendous amount of attention to estate planning. E. Many people do little to provide for those who will survive them. 66. Which is true of estate planning? A. It includes managing your property while you are alive B. It includes dealing with what happens to your property after your death C. It is part of retirement planning D. It is part of financial planning E. All of these 67. If you are married, your estate planning involves: A. the interests of at least two people. B. fewer legal requirements. C. fewer financial responsibilities. D. seeking the services of a securities broker. E. only yourself. 68. Which one of the following statements is correct? A. Estate planning usually involves a will and trust agreements. B. Most people do extensive estate planning. C. Most people think they will live forever. D. People should not worry about estate planning until they are age 65. E. Estate planning is really only necessary if you are wealthy. 69. Estate planning has two parts. The first part consists of: A. building your estate through savings, investments, and insurance. B. transferring your estate, while you are alive, in the manner you have specified. C. deciding who is going to get what. D. evaluating your assets and liabilities. E. planning for the period right after you die. 70. Estate planning has two parts. The second part of estate planning consists of: A. building your estate through working. B. transferring your estate, at your death, in the manner you have specified. C. deciding who should be your attorney. D. evaluating your assets and liabilities. E. buying life insurance. 71. In estate planning, if you are married: A. you do not need a will as your spouse is entitled to all of your assets. B. your estate planning becomes simpler once you have children. C. you should let your spouse do all of your estate planning. D. your situation is more complex than when you were still single. E. your planning consists solely of naming beneficiaries for your life insurance. 72. Which of the following is a part of estate planning? A. Making a will B. Setting up a trust C. Accumulating funds for your future D. Disposing of your property at your death E. All of these are part of estate planning. 73. Which of the following is true if you are an unmarried couple? A. A partner has the same legal rights as a spouse. B. Unmarried couples can use the marital deduction. C. Estate planning is less important for unmarried couples. D. If your partner is not named as the beneficiary, your pension plan proceeds will go to your closest blood relative. E. All of these are true about unmarried couples. 74. Which of the following is an important document needed for estate planning? A. Your driver's license B. Your transcript from college C. Your birth certificate D. Your birthday cards E. All of these documents are needed in estate planning. 75. Gerry Legere has died without writing a will. What is the legal term for this? A. Probate B. Intestate C. Testamentary D. Statutory E. Codicil 76. Gerald Wilkins owns a home worth $250,000, a car worth $15,000, various investments worth $600,000 and other personal assets worth $25,000. What are these things to Gerald? A. Estate B. Will C. Trust D. Probate E. Liabilities 77. Joseph Vu has assets worth $1,200,000. He has written a legal document that specifies that these assets be divided equally between his wife and his two sons upon his death. What is this legal document? A. Estate B. Will C. Trust D. Probate E. Liabilities 78. Grady Perdue has assets worth $1,500,000 and has written a legal document that specifies that all of his money go to his children. After he dies, there is a legal process to determine whether his document specifying how his assets be divided is valid. This is also the legal process by which his executor manages and distributes his property. What is this legal process called? A. Estate B. Will C. Trust D. Probate E. Terms of distribution 79. A will is: A. a way to transfer your property according to your wishes after you die. B. a synonym for a prenuptial agreement. C. a legal document authorizing someone to act on your behalf. D. a synonym for a letter of last instruction. E. a legal arrangement through which your assets are held by someone else. 80. Which one of the following statements is correct regarding wills? A. Only married people need a will. B. Only married people with dependents need a will. C. Only the rich with considerable estates need a will. D. Every adult should have a will. E. Only senior citizens need a will. 81. If you die without a valid will: A. the IRS confiscates your property. B. a federal court decides how your property will be distributed. C. your closest relative will receive all your property according to federal law. D. your letter of instruction becomes your will. E. your state's law of descent and distribution becomes your will. 82. Which one of the following wills is called an "I love you" will? A. Simple B. Traditional marital share C. Exemption trust D. Stated dollar amount E. Holographic 83. Which one of the following wills leaves everything to your spouse? A. Simple B. Traditional marital share C. Exemption trust D. Stated dollar amount E. Living 84. Which will is sufficient for most smaller estates? A. Simple B. Traditional marital share C. Exemption trust D. Stated dollar amount E. Living 85. Which one of the following wills automatically leaves one-half of your adjusted gross estate to your spouse? A. Simple B. Traditional marital share C. Exemption trust D. Stated dollar amount E. A/B trust 86. Under what type of will is half of your estate taxed at your death and half at your spouse's death? A. Simple B. Traditional marital share C. Exemption trust D. Stated dollar amount E. A/B trust 87. Under what type of will does everything pass to your spouse, with the exception of an amount equal to the exemption, which passes into trust? A. Simple B. Traditional marital share C. Exemption trust D. Stated dollar amount E. Living 88. Which type of will allows you to pass to your spouse any amount that satisfies your family objective? A. Simple B. Traditional marital share C. Exemption trust D. Stated dollar amount E. A/B trust 89. A handwritten will is called a: A. holographic. B. formal. C. statutory. D. exemption trust. E. informal. 90. Which will should be written, dated, and signed entirely in your own handwriting? A. Informal B. Marital trust C. Formal D. Statutory E. Holographic 91. Which one of the following provides for the disposition of your assets and is usually prepared with an attorney's assistance? A. Medical directives B. Holographic will C. Formal will D. Letter of last instruction E. Living will 92. Which type of will involves serious risks of invalidity and may be out of date with respect to current law? A. Marital share B. Statutory C. Formal D. Exemption trust E. Living 93. A person who will follow your instructions specified in your will is called a: A. beneficiary. B. trustor. C. witness. D. executor. E. codicil. 94. You should review your will if: A. you move to a different state. B. you have sold property mentioned in the will. C. the size and composition of your estate has changed. D. you have married, divorced, or remarried. E. you have done any of these things listed in the other answers. 95. Which document identifies the will being amended, confirms the unchanged sections of the will, and changes a provision(s) in the will? A. Codicil B. Tracer C. Addendum D. Rider E. Floater 96. A documentary agreement between spouses before marriage in which one or both parties often waive a right to receive property under the other's will or under state law is called a: A. letter of last instruction. B. codicil. C. prenuptial agreement. D. marital agreement. E. marital share will. 97. A person who assumes the responsibilities of providing the children with personal care and of managing the estate for them is called a: A. beneficiary. B. executor. C. trustee. D. guardian. E. executrix. 98. A person or institution that holds or generally manages property for the benefit of someone else under a trust agreement is called a: A. beneficiary. B. executor. C. trustee. D. guardian. E. executrix. 99. A legal document authorizing someone to act on your behalf is called a: A. codicil. B. rider. C. durable power of attorney. D. trustor. E. proxy. 100. Benjamin Wiley is married and has assets totaling $7 million. What type of will would most likely result in the lowest overall amount of federal estate taxes? Assume the exemption amount is $3 million. A. Simple B. Traditional marital share C. Exemption trust D. Stated dollar amount E. Living 101. Matthew Miller has created a will and left everything to his wife Kate. What type of will has he created? A. Simple B. Traditional marital share C. Exemption trust D. Stated dollar amount E. Living 102. Kate Wilson has created a will that leaves one-half of her adjusted gross estate to her husband, Matthew. What type of will has she created? A. Simple B. Traditional marital share C. Exemption trust D. Stated dollar amount E. Living 103. Will Jones has created a will that leaves everything to his wife except an exemption amount of $2 million. This exemption amount passes into a trust. What type of will has Will created? A. Simple B. Traditional marital share C. Exemption trust D. Stated dollar amount E. Living 104. James Fitzwater has created a will that leaves exactly $2 million to his wife in anticipation of her income needs. What type of will has James created? A. Simple B. Traditional marital share C. Exemption trust D. Stated dollar amount E. Living will 105. Brenda Johnson has used a preprinted form that she got from a stationery store to create her will. What type of will has she created? A. Holographic B. Formal C. Statutory D. Casual E. Living 106. Brenda Johnson has used a preprinted form that she got from the internet to create her will. However, she was unhappy with one section of the will and crossed out the parts she didn't like and hand wrote the changes she wanted. The changes that she made most likely made her will: A. invalid. B. an A/B trust. C. a letter of last instruction. D. a marital trust. E. an exemption trust. 107. Benjamin Barry has been named by Andie Anderson to follow her instructions and distribute her assets as she has designated in her will, pay any bills, and collect any money owed to her. To which position has Benjamin been named? A. Executor B. Trustee C. Guardian D. Beneficiary E. Agent 108. Hugh Bowersox has been selected by Sandra Tyler to assume the responsibility of raising her children and managing her estate for those children if she were to die. In what capacity would Hugh be acting? A. Executor B. Trustee C. Guardian D. Beneficiary E. Agent 109. Lucy Kelson has been selected to manage the trust assets of Rodney Peterson until he reaches the age of 30. Rodney is currently 21. In what capacity would Lucy be acting? A. Executrix B. Trustee C. Guardian D. Beneficiary E. Administrator 110. George Wade has been selected to receive the assets of his brother Kyle in the event of Kyle's death. What is George? A. Executor B. Trustee C. Guardian D. Beneficiary E. Agent 111. A legal arrangement through which your assets are held by a trustee for your benefit or that of your beneficiaries is called a: A. codicil. B. power of attorney. C. proxy. D. rider. E. trust. 112. If you establish a ____________ trust, you retain the right to end the trust or change its terms during your lifetime. A. irrevocable B. revocable C. living D. self-declaration E. testamentary 113. If you establish a ____________ trust, you cannot change its terms or end it. A. irrevocable B. revocable C. living D. self-declaration E. testamentary 114. A ____________ trust is a property management arrangement that you establish while you are alive. A. guardian B. trustee C. living D. power of attorney E. estate 115. A trust established by your will that becomes effective upon your death is called a ____________ trust. A. testamentary B. living C. revocable D. irrevocable E. insurance 116. Under what type of ownership is the property considered owned 50-50 for estate tax purposes and passed automatically to your spouse at your death? A. Tenants in common B. Tenancy by the entirety C. Joint tenants with the right of survivorship D. Tenancy by seniority E. Tenancy by default 117. In what type of joint ownership may neither spouse sell the property without the consent of the other? A. Tenancy by default B. Tenancy by the entirety C. Tenancy in common D. Joint tenants with the right of survivorship E. Simple tenancy 118. A surgeon, who will soon finish paying off college loans, might want to set up a: A. credit-shelter trust. B. marital-deduction trust. C. living trust. D. inter vivos trust. E. disclaimer trust. 119. In what type of ownership is each individual considered to own a proportionate share for tax purposes with only your share being included in your estate? A. Tenancy by default B. Tenancy by the entirety C. Tenants in common D. Joint tenants with the right of survivorship E. Tenancy by performance 120. Gary Ruhle has assets worth $2,400,000. Since he plans to travel and does not want to oversee these assets, he has created a legal arrangement so the assets can be managed by an officer of his local bank. What type of legal arrangement has he likely made? A. Guardianship B. Statutory will C. Trust agreement D. Living will E. Letter of instruction 121. Which of the following would be a benefit of establishing a trust? A. It can reduce or provide payment for estate taxes. B. It can allow you to avoid probate and transfer assets immediately to beneficiaries. C. It can free you from managing your assets, while providing you a regular income. D. It can ensure that your property serves a desired purpose after you die. E. A trust can do all of these things. 122. Sally Forth has a trust that she can end at any time she wants. She has assets in the trust that she thinks she may need to use at a later date. What type of trust does Sally have? A. Revocable trust B. Irrevocable trust C. Bargain trust D. Negotiable trust E. Non-negotiable trust 123. A federal tax levied on the right of a deceased person to transmit his or her property and life insurance at death is called a ____________ tax. A. estate income B. trust income C. inheritance D. gift E. estate 124. A tax levied on the right of an heir to receive all or part of the estate and life insurance proceeds of a deceased person is called a ____________ tax. A. estate income B. trust income C. inheritance D. gift E. estate 125. A federal and state tax levied on the privilege of making gifts to others is called a ____________ tax. A. estate income B. trust income C. inheritance D. gift E. estate 126. As of 2016, what is the maximum yearly amount that an individual can give as a gift without incurring gift tax liability or having to report the gift to the IRS? A. $5,000 B. $14,000 C. $15,000 D. $20,000 E. $25,000 127. How many months after your death is the federal estate tax due and payable in cash? A. 3 B. 6 C. 9 D. 12 E. 15 128. Gerald Wilkins owns a home worth $250,000, a car worth $15,000, various investments worth $600,000 and other personal assets worth $25,000. He still owes $125,000 on his mortgage and $5,000 on a car loan. The probate and administration costs of his estate are estimated at $5,000. What is his estimated net taxable estate? A. $850,000 B. $870,000 C. $875,000 D. $755,000 E. $760,000 129. Advance directives are legal documents that allow you to state what kind of health care you want if you were too ill to speak for yourself. Advance directives most often include which of the following? A. Living will B. Health care proxy C. Letter of last instruction D. Advance directives include all of these provisions. E. Durable power of attorney 130. George Smith worries that his deteriorating health is going to make him incapacitated and unable to conduct his personal affairs. He wants to grant his nephew, Brandon Smith, the ability to act on his behalf. To do this, what document would he most likely need? A. Letter of last instruction B. Durable power of attorney C. Will D. Revocable trust E. Irrevocable trust 131. Maryanne Strothman wants to leave some words of encouragement and spiritual advice to her children to encourage their faith in the event that something happens to her. What type of document would be best for her to prepare? A. Ethical will B. Durable power of attorney C. Letter of last instruction D. Codicil E. Formal will 132. Which of the following is not a true statement about a holographic will? A. It is handwritten. B. It should be dated in your own handwriting. C. It is always prepared by an attorney. D. It should be signed in your own handwriting. E. Some states may not recognize it. 133. Which of the following would keep you from being an executor of a will? A. Being in the military B. Being 16 years of age C. Being unmarried D. Being over 65 years of age E. Being a family member of the deceased 134. Which of the following would keep you from being an executor of a will? A. Having been convicted of a felony B. Being over 70 years of age C. Being married D. Being a coworker of the deceased E. Being a child of the deceased 135. The American Taxpayer Relief Act of 2012 provides a permanent gift and estate tax exemption of how much for individuals? A. $2.0 million B. $4.5 million C. $5.45 million D. $6.75 million E. $8.0 million 136. A simple document stating that anything you may have neglected to place in your trust during your lifetime should be placed in it at your death is called a: A. letter of last instruction. B. ethical will. C. prenuptial agreement. D. codicil. E. pourover will. 137. If your beneficiary is too young or unable to handle money wisely, which kind of trust allows the beneficiary to receive small amounts of money at specified intervals? A. A spendthrift trust B. A charitable lead trust C. A charitable reminder trust D. A self-declaration trust E. A generation-skipping trust 138. Which will leaves everything to the spouse? A. traditional marital share will. B. exemption trust will. C. I love you will. D. stated dollar amount will. E. None of these. 139. Your executor can be which of the following: A. a family member. B. a friend. C. an attorney. D. an accountant. E. Your executor can be any of these. 140. Which statement is not true about a formal will? A. It is usually prepared without an attorney's assistance. B. It may be typed. C. It may be on a preprinted form. D. You must sign it in the presence of two witnesses. E. It must also be signed by the witnesses in your presence. 141. Which statement is not true about an ethical will? A. It is used to pass on your values and beliefs to your heirs. B. It is a legally binding document. C. It dispenses emotional and spiritual wealth. D. It requires earnest self-examination. E. It is a way to express love and pass on lessons learned. 142. Which statement is not true about a letter of last instruction? A. It is also known as after-death wishes. B. It should contain details about your funeral arrangements. C. It should contain names of people to be notified of your death. D. It is legally enforceable in all states. E. It should contain information about the location of your bank accounts. 143. Which of the following is the most practical first step in estate planning? A. Preparing a will B. Gathering military service records C. Obtaining court documents with legal name changes D. Reviewing automobile registrations E. Purchasing life insurance 144. Which of the following are rules to remember when writing a will? A. In most states, you must be 18 years of age or older. B. A will must be written in sound judgment and mental capacity to be valid. C. The document must clearly state that it is your will. D. The will must name an executor. E. All of these are rules to remember. 145. To be valid, a will must: A. be notarized. B. be recorded in a court of law. C. be signed in the presence of two witnesses. D. be orally stated in front of two witnesses. E. not name an executor as the court will appoint one. 146. A standard will costs: A. $200. B. between $200 and $300. C. $300. D. between $300 and $600. E. $600. 147. Which of the following is the creator of a trust? A. Estate B. Trustee C. Grantor D. Beneficiary E. Survivor 148. Which of the following is a trust established while you are living and receives your life insurance benefits upon your death and administers them in an agreed-on manner? A. Grantor retained annuity trust B. Life insurance trust C. Marital-deduction trust D. Self-declaration trust E. Charitable lead trust 149. Which of the following is a trust that shelters valuable assets that you can pass on to your heirs with minimal taxes and lets you receive an annuity for as long as the trust lasts? A. Grantor retained annuity trust B. Life insurance trust C. Marital-deduction trust D. Self-declaration trust E. Charitable lead trust 150. Which of the following is a trust that pays a specified charity income from a donated asset for a set number of years and then transfers the principal to the donor’s beneficiaries with reduced estate or gift taxes at the end of the term? A. Grantor retained annuity trust B. Life insurance trust C. Marital-deduction trust D. Self-declaration trust E. Charitable lead trust 151. There are 10 commandments of making your will listed in this chapter. Describe 5 of these. 152. If you are active online, what steps should you take to write a social media will to handle the closure of your email addresses, social media profiles, and blogs after you die? 153. What is estate planning and how does your personal situation affect that planning? 154. Explain what a will is and what occurs at your death if you do not have one. 155. How do wills and trusts help in planning your estate? 156. What are the federal and state tax considerations in estate planning? 157. What are some common benefits for establishing a trust?

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