Estate Planning: Final Exam Multiple choice questions and
answers for Estate Planning final exam prep solved 100%
You are a CFP certificant with ABC Financial Solutions. A client has come to you for estate
planning assistance. You should inform the client of which of the following?
I. You cannot ethically provide the client with any estate planning assistance and must refer the
case in its entirety to an attorney.
II. You can be involved in data gathering, identifying estate planning goals, and identifying
possible weaknesses and problem areas in the client's current situation.
III. Your role will be working with and coordinating specialists such as attorneys, accountants,
and trust officers whose expertise will be necessary to analyze tax and legal implications of
suggested actions and to draft needed documents.
IV. You can review the client's current estate planning documents to interpret the contents and
indicate what the legal implications of the document are for the client.
A. II, III, and IV
B. II and III
C. III only - -B. II and III
Both statements II and III are legitimate and accepted roles of a non-attorney financial planner
in the estate planning process. The other answers are incorrect for various reasons. A financial
planner is not legally or ethically prohibited from assisting a client with his or her estate plan.
Interpreting the contents of a client's estate planning documents and informing him or her of
the legal implications of those documents is not part of the non-attorney financial planner's
role in estate planning since it usually involves interpretation of state law, which is considered
the unauthorized practice of law.
LO 1.1.1
-Which of the following statements regarding the goals of estate planning is CORRECT?
A. An estate planner is in the best position to determine which goals the client should prioritize.
B. An estate planner must choose between two or more estate planning techniques that will
achieve his or her client's objectives.
C. A client and an estate planner must mutually agree on the client's most important estate
planning objective in the event that all such objectives cannot be satisfied.
D. A client may have to choose between two or more estate planning techniques that will
achieve his or her objectives. - -D. A client may have to choose between two or more estate
planning techniques
that will achieve his or her objectives.
Although there may be two or more techniques that will achieve the client's stated objectives,
the client's choice will be based on a preference for one technique's characteristics or tax
consequences over those of the other technique(s).
LO 1.2.1
,-Your client has an estate valued at $4 million. Two months ago, his wife died. He and his now
deceased wife did not have any children together, but she had two children from a prior
marriage. His will, drafted in 2012, leaves everything to his wife. No contingent beneficiary is
named in the will, and it does not contain a residuary clause.
Included in the client's estate are real estate holdings in three other states. He wants to retain
lifetime ownership of these properties because of the income they provide him. He would like
the real estate holdings to pass to his wife's children in equal shares upon his death. He would
like the remainder of his estate to go to his brother.
Which of the following are serious estate planning pitfalls that can be avoided if your client
amends his will to carry out his objectives?
I. Having the estate pass under the laws of intestacy
II. Having the estate assets distributed through - -D. I and IV
Statement II is false because probate, especially from CFP Board's perspective, should be
avoided and wills go through probate. Statement III is false because amending a will won't have
any effect on the estate tax calculation, and the estate isn't even close to large enough to worry
about estate taxes.
LO 1.2.2
-Your client, Rafer, owns a vacation home in another state. Rafer recently married for the
second time and wants to include his new wife, Edna, on the title to the vacation home. At your
last client meeting, he stated that his primary concern is that this property be left to Edna
outside probate at his death while restricting her disposition of the property prior to his death
without his consent. Rafer revoked his old will upon his marriage to Edna, but has not yet
executed a new will.
You are researching property ownership to identify the most appropriate form of titling for the
vacation home in preparation for your next meeting with your client and his attorney. Which
one of the following statements presents the most appropriate form of titling for the vacation
home?
A. Tenancy by the entirety will prevent lifetime disposition without Rafer's consent.
B. Tenancy in common with Edna will eliminate the need for anci - -A. Tenancy by the entirety
will prevent lifetime disposition without Rafer's consent.
Tenancy by the entirety has a survivorship feature, which will pass the property to Edna outside
of probate and will not allow Edna to transfer her interest while Rafer is alive without his
consent
- Joint tenancy would allow Edna to transfer her interest without Rafer's consent, and because
the form of property ownership does not affect either owner's right to make a will.
, - Tenancy in common would neither eliminate the need for probate nor prevent Edna from
selling her interest.
- Sole ownership by Rafer would require probate to transfer the property to Edna, plus she
would have no interest in the property until Rafer died.
LO 1.3.1
-Last year, your client and his wife gave their adult son a one-third interest in a commercial
office building. Each has a one-third interest as tenants in common.
If your client dies while still owning the property as a tenant in common, an estate tax
implication of this form of property ownership is that
A. your client's estate will be entitled automatically to a marital deduction of one-half of the
date-of-death value.
B. one-third of the value of the property will be included in your client's gross estate.
C. one-half of the value of the property will be included in your client's gross estate.
D. the entire value of the property will be included in your client's gross estate because his
estate cannot prove contribution by the other tenants in common. - -B. one-third of the value
of the property will be included in your client's gross estate.
Each tenant in common owns their share of the property and as owner, that share is included in
the gross estate of each.
LO 1.3.1
-Lou inherited a parcel of real estate. Five years ago, he changed the title to joint tenancy with
right of survivorship (JTWROS) with his wife, Eve. Lou would like to will the property to John, his
son from a previous marriage, so John can use the property to start a business.
What is one disadvantage of holding the property in its current form?
A. If Lou predeceases Eve, the property will pass to Eve as surviving joint tenant without regard
to the terms of Lou's will.
B. The property will be included in Lou's gross estate based upon his relative contribution.
C. Lou's one-half will not qualify for the marital deduction when it passes to Eve.
D. The testamentary transfer from Lou to John will occur without Eve's consent. - -A. If Lou
predeceases Eve, the property will pass to Eve as surviving joint tenant without regard to the
terms of Lou's will.
By owning the property as JTWROS, Lou can only transfer his interest in the property to John in
his will if he survives Eve. If Lou dies before Eve, the property will pass to her by right of
survivorship. Lou's interest would qualify for the marital deduction when it passes to Eve. The
relative contributions toward purchasing the property are irrelevant with spouses. Each spouse
is defined by law as having contributed half. Also, even though Lou has made no contribution to
acquire this property (it was inherited), his original basis would be the stepped-up basis from
, the person from whom he inherited the property. If he dies before Eve, Lou's will can have no
effect upon JTWROS property. None of the property will be received by John if Lou predeceases
Eve unless the current ownership form is changed.
LO 1.3.2
-Sharon gives Patrick the absolute right to use her vacation house for life and upon Patrick's
death, all rights to the house are assumed by Sharon again. What types of property interests do
Sharon and Patrick have, respectively?
A. Reversion and life estate
B. Fee simple estate and reversion
C. Life estate and reversion
D. Interest for a term of years and life estate - -A. Reversion and life estate
Sharon has a reversion, because she receives the property back when Patrick dies (i.e., the
property reverts to her). Patrick has a life estate, because he is entitled to use and possess the
property during his life.
LO 1.3.2
-Which statement regarding bank accounts owned jointly with right of survivorship (JTWROS) is
CORRECT?
A. There are no gift tax consequences with JTWROS accounts.
B. A gift is made upon the creation of the donee's interest.
C. There is a gift whenever a person uses personal funds to open a joint bank account.
D. A gift is made when the noncontributing joint owner (the donee) makes withdrawals. - -D. A
gift is made when the noncontributing joint owner (the donee) makes withdrawals.
There is no gift when a person uses personal funds to open a joint bank account. There is a gift
when the other joint owner (the donee) makes a withdrawal—the gift is the amount withdrawn
LO 1.3.2
-Andrew and Alicia are husband and wife who live in a community property state. Soon after
their marriage they began establishing an emergency fund using money that each earned from
their respective jobs. This fund was used to meet unexpected expenses as they arose. Three
years ago, Alicia liquidated a bond fund that she had purchased prior to their marriage, and
placed the proceeds in the emergency fund. There have been many deposits and withdrawals
from the fund since that time. Last year, Andrew filed for divorce.
Alicia is seeking to recover the full value of the bond fund proceeds that she placed in the
emergency fund as her sole and separate property, and half of the remaining emergency fund.
Andrew claims he is entitled to half of the entire emergency fund.
answers for Estate Planning final exam prep solved 100%
You are a CFP certificant with ABC Financial Solutions. A client has come to you for estate
planning assistance. You should inform the client of which of the following?
I. You cannot ethically provide the client with any estate planning assistance and must refer the
case in its entirety to an attorney.
II. You can be involved in data gathering, identifying estate planning goals, and identifying
possible weaknesses and problem areas in the client's current situation.
III. Your role will be working with and coordinating specialists such as attorneys, accountants,
and trust officers whose expertise will be necessary to analyze tax and legal implications of
suggested actions and to draft needed documents.
IV. You can review the client's current estate planning documents to interpret the contents and
indicate what the legal implications of the document are for the client.
A. II, III, and IV
B. II and III
C. III only - -B. II and III
Both statements II and III are legitimate and accepted roles of a non-attorney financial planner
in the estate planning process. The other answers are incorrect for various reasons. A financial
planner is not legally or ethically prohibited from assisting a client with his or her estate plan.
Interpreting the contents of a client's estate planning documents and informing him or her of
the legal implications of those documents is not part of the non-attorney financial planner's
role in estate planning since it usually involves interpretation of state law, which is considered
the unauthorized practice of law.
LO 1.1.1
-Which of the following statements regarding the goals of estate planning is CORRECT?
A. An estate planner is in the best position to determine which goals the client should prioritize.
B. An estate planner must choose between two or more estate planning techniques that will
achieve his or her client's objectives.
C. A client and an estate planner must mutually agree on the client's most important estate
planning objective in the event that all such objectives cannot be satisfied.
D. A client may have to choose between two or more estate planning techniques that will
achieve his or her objectives. - -D. A client may have to choose between two or more estate
planning techniques
that will achieve his or her objectives.
Although there may be two or more techniques that will achieve the client's stated objectives,
the client's choice will be based on a preference for one technique's characteristics or tax
consequences over those of the other technique(s).
LO 1.2.1
,-Your client has an estate valued at $4 million. Two months ago, his wife died. He and his now
deceased wife did not have any children together, but she had two children from a prior
marriage. His will, drafted in 2012, leaves everything to his wife. No contingent beneficiary is
named in the will, and it does not contain a residuary clause.
Included in the client's estate are real estate holdings in three other states. He wants to retain
lifetime ownership of these properties because of the income they provide him. He would like
the real estate holdings to pass to his wife's children in equal shares upon his death. He would
like the remainder of his estate to go to his brother.
Which of the following are serious estate planning pitfalls that can be avoided if your client
amends his will to carry out his objectives?
I. Having the estate pass under the laws of intestacy
II. Having the estate assets distributed through - -D. I and IV
Statement II is false because probate, especially from CFP Board's perspective, should be
avoided and wills go through probate. Statement III is false because amending a will won't have
any effect on the estate tax calculation, and the estate isn't even close to large enough to worry
about estate taxes.
LO 1.2.2
-Your client, Rafer, owns a vacation home in another state. Rafer recently married for the
second time and wants to include his new wife, Edna, on the title to the vacation home. At your
last client meeting, he stated that his primary concern is that this property be left to Edna
outside probate at his death while restricting her disposition of the property prior to his death
without his consent. Rafer revoked his old will upon his marriage to Edna, but has not yet
executed a new will.
You are researching property ownership to identify the most appropriate form of titling for the
vacation home in preparation for your next meeting with your client and his attorney. Which
one of the following statements presents the most appropriate form of titling for the vacation
home?
A. Tenancy by the entirety will prevent lifetime disposition without Rafer's consent.
B. Tenancy in common with Edna will eliminate the need for anci - -A. Tenancy by the entirety
will prevent lifetime disposition without Rafer's consent.
Tenancy by the entirety has a survivorship feature, which will pass the property to Edna outside
of probate and will not allow Edna to transfer her interest while Rafer is alive without his
consent
- Joint tenancy would allow Edna to transfer her interest without Rafer's consent, and because
the form of property ownership does not affect either owner's right to make a will.
, - Tenancy in common would neither eliminate the need for probate nor prevent Edna from
selling her interest.
- Sole ownership by Rafer would require probate to transfer the property to Edna, plus she
would have no interest in the property until Rafer died.
LO 1.3.1
-Last year, your client and his wife gave their adult son a one-third interest in a commercial
office building. Each has a one-third interest as tenants in common.
If your client dies while still owning the property as a tenant in common, an estate tax
implication of this form of property ownership is that
A. your client's estate will be entitled automatically to a marital deduction of one-half of the
date-of-death value.
B. one-third of the value of the property will be included in your client's gross estate.
C. one-half of the value of the property will be included in your client's gross estate.
D. the entire value of the property will be included in your client's gross estate because his
estate cannot prove contribution by the other tenants in common. - -B. one-third of the value
of the property will be included in your client's gross estate.
Each tenant in common owns their share of the property and as owner, that share is included in
the gross estate of each.
LO 1.3.1
-Lou inherited a parcel of real estate. Five years ago, he changed the title to joint tenancy with
right of survivorship (JTWROS) with his wife, Eve. Lou would like to will the property to John, his
son from a previous marriage, so John can use the property to start a business.
What is one disadvantage of holding the property in its current form?
A. If Lou predeceases Eve, the property will pass to Eve as surviving joint tenant without regard
to the terms of Lou's will.
B. The property will be included in Lou's gross estate based upon his relative contribution.
C. Lou's one-half will not qualify for the marital deduction when it passes to Eve.
D. The testamentary transfer from Lou to John will occur without Eve's consent. - -A. If Lou
predeceases Eve, the property will pass to Eve as surviving joint tenant without regard to the
terms of Lou's will.
By owning the property as JTWROS, Lou can only transfer his interest in the property to John in
his will if he survives Eve. If Lou dies before Eve, the property will pass to her by right of
survivorship. Lou's interest would qualify for the marital deduction when it passes to Eve. The
relative contributions toward purchasing the property are irrelevant with spouses. Each spouse
is defined by law as having contributed half. Also, even though Lou has made no contribution to
acquire this property (it was inherited), his original basis would be the stepped-up basis from
, the person from whom he inherited the property. If he dies before Eve, Lou's will can have no
effect upon JTWROS property. None of the property will be received by John if Lou predeceases
Eve unless the current ownership form is changed.
LO 1.3.2
-Sharon gives Patrick the absolute right to use her vacation house for life and upon Patrick's
death, all rights to the house are assumed by Sharon again. What types of property interests do
Sharon and Patrick have, respectively?
A. Reversion and life estate
B. Fee simple estate and reversion
C. Life estate and reversion
D. Interest for a term of years and life estate - -A. Reversion and life estate
Sharon has a reversion, because she receives the property back when Patrick dies (i.e., the
property reverts to her). Patrick has a life estate, because he is entitled to use and possess the
property during his life.
LO 1.3.2
-Which statement regarding bank accounts owned jointly with right of survivorship (JTWROS) is
CORRECT?
A. There are no gift tax consequences with JTWROS accounts.
B. A gift is made upon the creation of the donee's interest.
C. There is a gift whenever a person uses personal funds to open a joint bank account.
D. A gift is made when the noncontributing joint owner (the donee) makes withdrawals. - -D. A
gift is made when the noncontributing joint owner (the donee) makes withdrawals.
There is no gift when a person uses personal funds to open a joint bank account. There is a gift
when the other joint owner (the donee) makes a withdrawal—the gift is the amount withdrawn
LO 1.3.2
-Andrew and Alicia are husband and wife who live in a community property state. Soon after
their marriage they began establishing an emergency fund using money that each earned from
their respective jobs. This fund was used to meet unexpected expenses as they arose. Three
years ago, Alicia liquidated a bond fund that she had purchased prior to their marriage, and
placed the proceeds in the emergency fund. There have been many deposits and withdrawals
from the fund since that time. Last year, Andrew filed for divorce.
Alicia is seeking to recover the full value of the bond fund proceeds that she placed in the
emergency fund as her sole and separate property, and half of the remaining emergency fund.
Andrew claims he is entitled to half of the entire emergency fund.
