FIN 538 - Estate Planning Exam 1 (Ch.
1-4, 7) questions with answers
Homework 1 - ANS ✔✔Questions/Answers
Which of the following activities would be considered the unauthorized practice of law for a
financial planner who is not a licensed attorney?
→ Helping a client to identify his financial planning goals.
→ Explaining a law to a client.
→ Preparing financial statements for a prospective client.
→ Preparing a will for a client. - ANS ✔✔Preparing a will for a client.
Making arrangements to deal with the possibility of physical or mental incapacity is an
important area of estate planning. Which of the following arrangements may be used to deal
with such unexpected incapacity?
1. A springing durable power of attorney.
2. A revocable living trust.
3. A health care directive.
4. A living will. - ANS ✔✔1, 2, 3, and 4
Harold, a non-attorney, prepares his own will. Harold handwrites all of the provisions of the will
and signs and dates it but fails to have it witnessed by anyone. What type of will does Harold
have, and is it enforceable in Missouri?
,→ A nuncupative will that IS enforceable in Missouri.
→ A holographic will that IS enforceable in Missouri.
→ A holographic will that IS NOT enforceable in Missouri.
→ A nuncupative will that IS NOT enforceable in Missouri. - ANS ✔✔A holographic will that IS
NOT enforceable in Missouri.
A power of attorney that gives the agent the authority to do anything the principal can do,
remains in effect if the principal becomes incapacitated and only becomes effective if the
principal is not in the country is described as:
→ special, durable, springing
→ general, not durable, springing
→ special, durable, not springing
→ general, durable, springing - ANS ✔✔general, durable, springing
Hope Solo died. She is survived by two children and three grandchildren. Her son, Fred, is living
and has no children. Her daughter, Debbie, is living and has one child. Her son, George, is dead
and has two living children. If Hope's estate is distributed to her descendants, per stirpes, it is
distributed as follows:
→ All of the living children and grandchildren each receive 1/5.
→ 1/4 Fred, 1/4 Debbie, 1/4 Debbie's child, 1/3 each to George's children.
→ 1/3 Fred, 1/3 Debbie, 1/6 each to George's children.
→ 1/4 Fred, 1/4 Debbie, 1/4 each to George's children. - ANS ✔✔1/3 Fred, 1/3 Debbie, 1/6
each to George's children.
→ Per Stirpes, the early death of Hope's third child, George, will not cut off George's children
from receiving the same share of inheritance as George would have received. So, Hope's estate
is divided between her two children whom are alive, Fred and Debbie, and her two
,grandchildren, from her deceased third child, George. Thus, the two grandchildren will split
their portion given to them in half because there are two of them.
Homework 2 - ANS ✔✔Questions/Answers
Teresa and her brother Michael decide to purchase a condo together. They both want to use the
condo for family vacations. The price of the condo is $620,000. Michael expects to use the
condo 60% of the time and Teresa 40% of the time. Michael contributed $372,000 and Teresa
contributed the balance. Their ownership percentage equals their contribution percentage.
Which type of property titling must the condo be to reflect their ownership interest?
→ Community Property.
→ JTWROS.
→ Tenancy in Common.
→ Tenancy by the Entirety. - ANS ✔✔Tenancy in Common
Cody and Chelsi, who are married to each other, own their home together titled as community
property. They purchased the home three years ago for $200,000. After improvements and a
surge in the market, the home is now worth $400,000. If Cody died today and left his share of
the home to his daughter Alyssa, what is Alyssa's federal income tax basis in the home?
$50,000.
$100,000.
$150,000.
$200,000. - ANS ✔✔$200,000
→ All of the assets that Cody and Chelsi acquired during their marriage are owned 50% by each
spouse. If the home is now worth $400,000, Cody would now own $200,000 of the home and
Chelsi would own $200,000. Therefore, if Cody left his share to his beneficiary who is his
, daughter, Alyssa, then Alyssa's federal income tax basis in the home would be $200,000 because
that was Cody's 50% share on the day that he died.
Dennis died recently leaving all of his assets in a trust for his wife, Sandy. Dennis was concerned
that Sandy would not be able to manage her money adequately to maintain her standard of
living. Therefore, Dennis placed the assets into a spendthrift trust and gave Sandy the right to
receive a certain amount of income each year. Dennis appointed his good friend Richard to be
the trustee of the trust. How is Richard's ownership classified?
→ Richard holds a life estate over the property.
→ Richard holds the legal title to the property.
→ Richard holds the equitable title to the property.
→ Richard does not hold an interest in the property. - ANS ✔✔Richard holds the legal title for
the property.
Cate owns the following property:
- A personal residence titled as tenants by entirety with her husband valued at $400,000.
- A $500,000 life insurance policy on her own life. The named beneficiary is Cate's brother
James, who died 6 months ago leaving two children Michael and Carol.
- A car valued at $20,000 titled JTWROS with Cate's mother.
- An IRA valued at $200,000 with no named beneficiary.
What is the current value of Cate's probate estate?
1-4, 7) questions with answers
Homework 1 - ANS ✔✔Questions/Answers
Which of the following activities would be considered the unauthorized practice of law for a
financial planner who is not a licensed attorney?
→ Helping a client to identify his financial planning goals.
→ Explaining a law to a client.
→ Preparing financial statements for a prospective client.
→ Preparing a will for a client. - ANS ✔✔Preparing a will for a client.
Making arrangements to deal with the possibility of physical or mental incapacity is an
important area of estate planning. Which of the following arrangements may be used to deal
with such unexpected incapacity?
1. A springing durable power of attorney.
2. A revocable living trust.
3. A health care directive.
4. A living will. - ANS ✔✔1, 2, 3, and 4
Harold, a non-attorney, prepares his own will. Harold handwrites all of the provisions of the will
and signs and dates it but fails to have it witnessed by anyone. What type of will does Harold
have, and is it enforceable in Missouri?
,→ A nuncupative will that IS enforceable in Missouri.
→ A holographic will that IS enforceable in Missouri.
→ A holographic will that IS NOT enforceable in Missouri.
→ A nuncupative will that IS NOT enforceable in Missouri. - ANS ✔✔A holographic will that IS
NOT enforceable in Missouri.
A power of attorney that gives the agent the authority to do anything the principal can do,
remains in effect if the principal becomes incapacitated and only becomes effective if the
principal is not in the country is described as:
→ special, durable, springing
→ general, not durable, springing
→ special, durable, not springing
→ general, durable, springing - ANS ✔✔general, durable, springing
Hope Solo died. She is survived by two children and three grandchildren. Her son, Fred, is living
and has no children. Her daughter, Debbie, is living and has one child. Her son, George, is dead
and has two living children. If Hope's estate is distributed to her descendants, per stirpes, it is
distributed as follows:
→ All of the living children and grandchildren each receive 1/5.
→ 1/4 Fred, 1/4 Debbie, 1/4 Debbie's child, 1/3 each to George's children.
→ 1/3 Fred, 1/3 Debbie, 1/6 each to George's children.
→ 1/4 Fred, 1/4 Debbie, 1/4 each to George's children. - ANS ✔✔1/3 Fred, 1/3 Debbie, 1/6
each to George's children.
→ Per Stirpes, the early death of Hope's third child, George, will not cut off George's children
from receiving the same share of inheritance as George would have received. So, Hope's estate
is divided between her two children whom are alive, Fred and Debbie, and her two
,grandchildren, from her deceased third child, George. Thus, the two grandchildren will split
their portion given to them in half because there are two of them.
Homework 2 - ANS ✔✔Questions/Answers
Teresa and her brother Michael decide to purchase a condo together. They both want to use the
condo for family vacations. The price of the condo is $620,000. Michael expects to use the
condo 60% of the time and Teresa 40% of the time. Michael contributed $372,000 and Teresa
contributed the balance. Their ownership percentage equals their contribution percentage.
Which type of property titling must the condo be to reflect their ownership interest?
→ Community Property.
→ JTWROS.
→ Tenancy in Common.
→ Tenancy by the Entirety. - ANS ✔✔Tenancy in Common
Cody and Chelsi, who are married to each other, own their home together titled as community
property. They purchased the home three years ago for $200,000. After improvements and a
surge in the market, the home is now worth $400,000. If Cody died today and left his share of
the home to his daughter Alyssa, what is Alyssa's federal income tax basis in the home?
$50,000.
$100,000.
$150,000.
$200,000. - ANS ✔✔$200,000
→ All of the assets that Cody and Chelsi acquired during their marriage are owned 50% by each
spouse. If the home is now worth $400,000, Cody would now own $200,000 of the home and
Chelsi would own $200,000. Therefore, if Cody left his share to his beneficiary who is his
, daughter, Alyssa, then Alyssa's federal income tax basis in the home would be $200,000 because
that was Cody's 50% share on the day that he died.
Dennis died recently leaving all of his assets in a trust for his wife, Sandy. Dennis was concerned
that Sandy would not be able to manage her money adequately to maintain her standard of
living. Therefore, Dennis placed the assets into a spendthrift trust and gave Sandy the right to
receive a certain amount of income each year. Dennis appointed his good friend Richard to be
the trustee of the trust. How is Richard's ownership classified?
→ Richard holds a life estate over the property.
→ Richard holds the legal title to the property.
→ Richard holds the equitable title to the property.
→ Richard does not hold an interest in the property. - ANS ✔✔Richard holds the legal title for
the property.
Cate owns the following property:
- A personal residence titled as tenants by entirety with her husband valued at $400,000.
- A $500,000 life insurance policy on her own life. The named beneficiary is Cate's brother
James, who died 6 months ago leaving two children Michael and Carol.
- A car valued at $20,000 titled JTWROS with Cate's mother.
- An IRA valued at $200,000 with no named beneficiary.
What is the current value of Cate's probate estate?
