Estate Planning Final Exam questions
well answered already passed
All of the following are included in the gross estate except:
A. Proceeds from a life insurance policy owned by the decedent insured that was assigned to an
ILIT two years before death of the insured.
B. A CRAT where the income beneficiary was the decedent.
C. Property where the decedent had a reversionary interest of less than 10% of the value.
D. Gift taxes paid two years prior to the decedent's date of death for gifts made four years
earlier. - correct answer ✔✔ Solution: The correct answer is D.
Incidence of ownership of life insurance policies assigned within three years of death are
includible in the decedent's estate, as are CRATs and CRUTs. Any amount subject to the gross up
rule is includible in the taxable estate but must be for gifts made within three years of death.
Gift taxes paid on gifts made within 3 years of death must be added back to the gross estate but
if the gift tax paid is on an older gift, it does not get added to the gross estate.
This is an oral expression of testamentary intentions restricted to tangible personalty:
A. A last expression of wishes.
B. A holographic will.
C. A nuncupative will.
D. A dying declaration. - correct answer ✔✔ Solution: The correct answer is C.
Answer "C" is an oral will with two witnesses which is valid in some states, and not in others.
Usually only includes personalty assets, not realty.
Which of the following statements accurately describes a QTIP (qualified terminable interest
property) trust?
,A. A QTIP may have multiple beneficiaries of the income interest as long as the principal
beneficiary is the surviving spouse.
B. The QTIP is permitted to accumulate income.
C. The surviving spouse must have a general power of appointment over the trust assets.
D. The trustee may have the power to invade the corpus for the spouse for an ascertainable
standard. - correct answer ✔✔ Solution: The correct answer is D.
A QTIP trust qualifies for the unlimited marital deduction. It does not give the spouse an
unlimited general power. A QTIP trust must distribute income annually only to the surviving
spouse. Only one beneficiary is permitted in a QTIP trust in order to qualify for the marital
deduction. The trustee may have the power to invade for the HEMS of the spouse only.
Which of the following is not a principal reason for establishing a revocable living trust?
A. Reducing the grantor's gross estate.
B. Grantor trust income tax treatment.
C. Probate Avoidance.
D. Management of assets. - correct answer ✔✔ Solution: The correct answer is A.
A revocable living trust is primarily established so that the trust assets avoid the probate
process and provides for management of assets and grantor trust income tax status. The trust
assets will transfer per the trust document and will not need to pass through probate. A
revocable living trust does not reduce a grantor's gross estate. The assets of a revocable living
trust are included in a grantor's gross estate at the fair market value at the grantor's date of
death.
Which of the following statements regarding SCINs is correct?
A. If the seller outlives the SCIN term, the buyer has paid no more than the FMV.
B. The payments received by the seller under a SCIN are treated as interest income.
C. A SCIN can give the seller a collateral interest in the property sold.
D. If the seller dies before the end of the SCIN term, the seller is deemed to have made a taxable
gift to the buyer equal to the difference between the payments made and the total principal
payments due on the SCIN. - correct answer ✔✔ Solution: The correct answer is C.
, Answer "A" is incorrect because the buyer of a SCIN pays the FMV plus the SCIN premium.
Answer "B" is incorrect because each payments received by the seller consists of (1) interest
income, (2) capital gain, and (3) return of adjusted basis. Answer "D" is incorrect because the
transferee bought the right to cancel thus no gift.
Of the following statements, which is false?
A. The unlimited marital deduction merely postpones the potential estate tax due.
B. Property that is not included in the decedent's gross estate cannot qualify for the unlimited
marital deduction.
C. The death benefit of a life insurance policy included in a decedent's gross estate is not eligible
for the unlimited marital deduction.
D. An individual can use the unlimited marital deduction during life to fund the surviving
spouse's applicable estate tax credit. The best property to transfer is the property that is
expected to appreciate in value. - correct answer ✔✔ Solution: The correct answer is C.
Answer "C" is a false statement. If the death benefit of a life insurance policy is included in a
decedent's gross estate, the value of the death benefit will be eligible for the unlimited marital
deduction. All of the other answers are true statements.
The Generation Skipping Transfer Tax (GSTT) has all the following characteristics, except:
A. GST outright gifts qualifying for the annual exclusion are not subject to the tax.
B. Assets transferred to a trust that has a grandchild as the sole beneficiary may be subject to
both gift and generation skipping transfer tax.
C. If all of the beneficiaries of a trust are grandchildren (whose parents are living) of the grantor
then the trust is subject to GSTT.
D. A "skip person" is a person who is one or more generations younger than the grantor. -
correct answer ✔✔ Solution: The correct answer is D.
Answers "A" through "C" are true, but in the case of "D," a grandchild whose parent has died
moves up a generation with regard to skip-person considerations. A skip beneficiary is generally
a person who is two or more generations younger than grantor.
Which of the following is NOT a Will substitute?
well answered already passed
All of the following are included in the gross estate except:
A. Proceeds from a life insurance policy owned by the decedent insured that was assigned to an
ILIT two years before death of the insured.
B. A CRAT where the income beneficiary was the decedent.
C. Property where the decedent had a reversionary interest of less than 10% of the value.
D. Gift taxes paid two years prior to the decedent's date of death for gifts made four years
earlier. - correct answer ✔✔ Solution: The correct answer is D.
Incidence of ownership of life insurance policies assigned within three years of death are
includible in the decedent's estate, as are CRATs and CRUTs. Any amount subject to the gross up
rule is includible in the taxable estate but must be for gifts made within three years of death.
Gift taxes paid on gifts made within 3 years of death must be added back to the gross estate but
if the gift tax paid is on an older gift, it does not get added to the gross estate.
This is an oral expression of testamentary intentions restricted to tangible personalty:
A. A last expression of wishes.
B. A holographic will.
C. A nuncupative will.
D. A dying declaration. - correct answer ✔✔ Solution: The correct answer is C.
Answer "C" is an oral will with two witnesses which is valid in some states, and not in others.
Usually only includes personalty assets, not realty.
Which of the following statements accurately describes a QTIP (qualified terminable interest
property) trust?
,A. A QTIP may have multiple beneficiaries of the income interest as long as the principal
beneficiary is the surviving spouse.
B. The QTIP is permitted to accumulate income.
C. The surviving spouse must have a general power of appointment over the trust assets.
D. The trustee may have the power to invade the corpus for the spouse for an ascertainable
standard. - correct answer ✔✔ Solution: The correct answer is D.
A QTIP trust qualifies for the unlimited marital deduction. It does not give the spouse an
unlimited general power. A QTIP trust must distribute income annually only to the surviving
spouse. Only one beneficiary is permitted in a QTIP trust in order to qualify for the marital
deduction. The trustee may have the power to invade for the HEMS of the spouse only.
Which of the following is not a principal reason for establishing a revocable living trust?
A. Reducing the grantor's gross estate.
B. Grantor trust income tax treatment.
C. Probate Avoidance.
D. Management of assets. - correct answer ✔✔ Solution: The correct answer is A.
A revocable living trust is primarily established so that the trust assets avoid the probate
process and provides for management of assets and grantor trust income tax status. The trust
assets will transfer per the trust document and will not need to pass through probate. A
revocable living trust does not reduce a grantor's gross estate. The assets of a revocable living
trust are included in a grantor's gross estate at the fair market value at the grantor's date of
death.
Which of the following statements regarding SCINs is correct?
A. If the seller outlives the SCIN term, the buyer has paid no more than the FMV.
B. The payments received by the seller under a SCIN are treated as interest income.
C. A SCIN can give the seller a collateral interest in the property sold.
D. If the seller dies before the end of the SCIN term, the seller is deemed to have made a taxable
gift to the buyer equal to the difference between the payments made and the total principal
payments due on the SCIN. - correct answer ✔✔ Solution: The correct answer is C.
, Answer "A" is incorrect because the buyer of a SCIN pays the FMV plus the SCIN premium.
Answer "B" is incorrect because each payments received by the seller consists of (1) interest
income, (2) capital gain, and (3) return of adjusted basis. Answer "D" is incorrect because the
transferee bought the right to cancel thus no gift.
Of the following statements, which is false?
A. The unlimited marital deduction merely postpones the potential estate tax due.
B. Property that is not included in the decedent's gross estate cannot qualify for the unlimited
marital deduction.
C. The death benefit of a life insurance policy included in a decedent's gross estate is not eligible
for the unlimited marital deduction.
D. An individual can use the unlimited marital deduction during life to fund the surviving
spouse's applicable estate tax credit. The best property to transfer is the property that is
expected to appreciate in value. - correct answer ✔✔ Solution: The correct answer is C.
Answer "C" is a false statement. If the death benefit of a life insurance policy is included in a
decedent's gross estate, the value of the death benefit will be eligible for the unlimited marital
deduction. All of the other answers are true statements.
The Generation Skipping Transfer Tax (GSTT) has all the following characteristics, except:
A. GST outright gifts qualifying for the annual exclusion are not subject to the tax.
B. Assets transferred to a trust that has a grandchild as the sole beneficiary may be subject to
both gift and generation skipping transfer tax.
C. If all of the beneficiaries of a trust are grandchildren (whose parents are living) of the grantor
then the trust is subject to GSTT.
D. A "skip person" is a person who is one or more generations younger than the grantor. -
correct answer ✔✔ Solution: The correct answer is D.
Answers "A" through "C" are true, but in the case of "D," a grandchild whose parent has died
moves up a generation with regard to skip-person considerations. A skip beneficiary is generally
a person who is two or more generations younger than grantor.
Which of the following is NOT a Will substitute?
