Estate Planning Practice Questions
with complete solutions
Which of the following are factors that a financial planner should monitor for every client?
I. Changes in the client's objectives
Changes in the client's marital status
Changes in property laws
IV. Changes in the amount of lifetime gifts made by the client - correct answer ✔✔ I, II, III, and
IV
Which of these statements best describes a CFP® certificant's role in defining a client's financial
goals, needs, and priorities?
I. The role of the planner is to facilitate the goal-setting process.
The role of the planner is to assist clients in recognizing the implications of unrealistic goals and
objectives.
The role of the planner is to make sure a client's goals and objectives are consistent with the
client's values and attitudes.
IV. The role of the planner in this process will involve exploring a client's expectations and time
horizons. - correct answer ✔✔ I, II, III, and IV
Your client has an estate valued at $3 million. Two months ago, his wife died. He and his
deceased wife did not have any children together, but she had two children from a prior
marriage. His will, drafted in 2007, leaves everything to his wife. Nocontingent 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
Having the estate assets distributed through probate
Ha - correct answer ✔✔ I and IV
Which of the following statements correctly identify estate planning activities that can be
performed by a financial planner who is not also a licensed attorney?
I. Advise a client as to who would receive property under the state intestacy statutes
Estimate a client's potential federal gift tax liability
Advise a client that he or she needs a new will
IV. Draft a living will for a client to execute - correct answer ✔✔ II and III
Rollie plans on purchasing some U.S. savings bonds with his son, Steven. He has been told that
he can title the bonds either as "Rollie or Steven" or "Rollie payable on death to Steven."
Which of the following statements are CORRECT regarding advantages and disadvantages of
these two methods of titling?
I. "Rollie or Steven" would not avoid probate of the bonds.
"Rollie payable on death to Steven" would give Rollie sole control of the bonds during his life.
"Rollie payable on death to Steven" would allow Rollie to remove Steven as beneficiary.
IV. "Rollie or Steven" would allow the survivor to become the sole owner of the bonds without
the bonds going through probate. - correct answer ✔✔ II, III, and IV
Lauren and Roger are spouses. Lauren has assets with a market value of $50 million titled in her
name alone. Roger has assets valued at less than $1 million. Lauren drafts a will making an
outright bequest of all of her assets to Roger. Which of the following are potential
disadvantages of Lauren's approach?
I. Lauren will not use her estate tax applicable exclusion amount when she dies.
Roger may become legally incapacitated and not be able to manage the property.
,When Roger dies, the property must be included in Roger's gross estate to the extent Roger has
not spent it or consumed it during his lifetime.
IV. The DSUE amount may not be available in some circumstances. - correct answer ✔✔ I, II, III,
and IV
Rolando owned a parcel of real estate as an equal tenant in common (TIC) with his wife, Liz, and
his brother, Sam. Rolando and Liz each contributed $50,000 to the original purchase price, and
Sam contributed $20,000. Rolando recently died and is survived by Liz and Sam.
Which of the following statements are CORRECT concerning a tax implication of this form of
property ownership?
1. Rolando's estate must include one-third of the property's fair market value (FMV) as of the
date of death.
When they took title as TIC, both Rolando and Liz made a gift to Sam.
Rolando's estate must include 41.66% of the property's FMV at the date of death, unless his
personal representative can prove contribution by Sam.
IV. After Rolando's death, Liz will be entitled to receive 83.33% of the income from the property
because she will receive Rolando's interest by right of survivorship. - correct answer ✔✔ I and II
Paul and Cheryl are husband and wife who initially lived 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, Cheryl liquidated stock that she had purchased prior to her marriage, and
placed the proceeds in the emergency fund. There have been many deposits and withdrawals
from the fund since that time. Last year, Paul filed for divorce.
Cheryl is seeking to recover the full value of the stock proceeds that she placed in the
emergency fund as her sole and separate property, and half of the remaining emergency fund.
Paul claims he is entitled to half of the entire emergency fund.
Which one of the following statements is CORRECT regarding Paul's and Cheryl's rights in the
emergency fund? - correct answer ✔✔ The stock proceeds are community property, and Cheryl
and Paul are each entitled to one-half of the total emergency fund.
, Which one of the following statements regarding Henry, who recently married for the first time,
is CORRECT? - correct answer ✔✔ In a community property state, Henry's earnings from his job
subsequent to the date of his marriage will be considered community property.
All of the following items of property would be considered community property in a community
property state except - correct answer ✔✔ real estate received by one spouse during marriage
as an inheritance from her mother.
Which of the following are CORRECT statements about the filing requirements and/or the
responsibility for payment as they relate to federal transfer taxes?
I. A donee can be held responsible for paying the gift tax on a transfer that she has received if
the IRS cannot collect from the donor.
A federal estate tax return need not be filed unless an estate owes estate taxes in excess of the
unified credit.
The beneficiary is responsible for paying the generation-skipping transfer tax on a distribution
from a trust and must file a tax form.
IV. A federal gift tax return need not be filed for a gift that is split with the donor's spouse. -
correct answer ✔✔ I and III
Which of the following are important characteristics of the gift tax marital deduction?
I. It enables the donor to avoid gift tax liability by transferring the entire liability for gift taxes to
the donee spouse.
It allows the donor to avoid gift tax liability on up to one-half of the value of the gifted property
that is received by the donee spouse.
It allows the donor to avoid gift tax liability on the amount of the gift in excess of the annual
exclusion amount.
IV. It allows the donor to avoid gift tax liability on a gift to a donee spouse. - correct answer ✔✔
III and IV
with complete solutions
Which of the following are factors that a financial planner should monitor for every client?
I. Changes in the client's objectives
Changes in the client's marital status
Changes in property laws
IV. Changes in the amount of lifetime gifts made by the client - correct answer ✔✔ I, II, III, and
IV
Which of these statements best describes a CFP® certificant's role in defining a client's financial
goals, needs, and priorities?
I. The role of the planner is to facilitate the goal-setting process.
The role of the planner is to assist clients in recognizing the implications of unrealistic goals and
objectives.
The role of the planner is to make sure a client's goals and objectives are consistent with the
client's values and attitudes.
IV. The role of the planner in this process will involve exploring a client's expectations and time
horizons. - correct answer ✔✔ I, II, III, and IV
Your client has an estate valued at $3 million. Two months ago, his wife died. He and his
deceased wife did not have any children together, but she had two children from a prior
marriage. His will, drafted in 2007, leaves everything to his wife. Nocontingent 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
Having the estate assets distributed through probate
Ha - correct answer ✔✔ I and IV
Which of the following statements correctly identify estate planning activities that can be
performed by a financial planner who is not also a licensed attorney?
I. Advise a client as to who would receive property under the state intestacy statutes
Estimate a client's potential federal gift tax liability
Advise a client that he or she needs a new will
IV. Draft a living will for a client to execute - correct answer ✔✔ II and III
Rollie plans on purchasing some U.S. savings bonds with his son, Steven. He has been told that
he can title the bonds either as "Rollie or Steven" or "Rollie payable on death to Steven."
Which of the following statements are CORRECT regarding advantages and disadvantages of
these two methods of titling?
I. "Rollie or Steven" would not avoid probate of the bonds.
"Rollie payable on death to Steven" would give Rollie sole control of the bonds during his life.
"Rollie payable on death to Steven" would allow Rollie to remove Steven as beneficiary.
IV. "Rollie or Steven" would allow the survivor to become the sole owner of the bonds without
the bonds going through probate. - correct answer ✔✔ II, III, and IV
Lauren and Roger are spouses. Lauren has assets with a market value of $50 million titled in her
name alone. Roger has assets valued at less than $1 million. Lauren drafts a will making an
outright bequest of all of her assets to Roger. Which of the following are potential
disadvantages of Lauren's approach?
I. Lauren will not use her estate tax applicable exclusion amount when she dies.
Roger may become legally incapacitated and not be able to manage the property.
,When Roger dies, the property must be included in Roger's gross estate to the extent Roger has
not spent it or consumed it during his lifetime.
IV. The DSUE amount may not be available in some circumstances. - correct answer ✔✔ I, II, III,
and IV
Rolando owned a parcel of real estate as an equal tenant in common (TIC) with his wife, Liz, and
his brother, Sam. Rolando and Liz each contributed $50,000 to the original purchase price, and
Sam contributed $20,000. Rolando recently died and is survived by Liz and Sam.
Which of the following statements are CORRECT concerning a tax implication of this form of
property ownership?
1. Rolando's estate must include one-third of the property's fair market value (FMV) as of the
date of death.
When they took title as TIC, both Rolando and Liz made a gift to Sam.
Rolando's estate must include 41.66% of the property's FMV at the date of death, unless his
personal representative can prove contribution by Sam.
IV. After Rolando's death, Liz will be entitled to receive 83.33% of the income from the property
because she will receive Rolando's interest by right of survivorship. - correct answer ✔✔ I and II
Paul and Cheryl are husband and wife who initially lived 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, Cheryl liquidated stock that she had purchased prior to her marriage, and
placed the proceeds in the emergency fund. There have been many deposits and withdrawals
from the fund since that time. Last year, Paul filed for divorce.
Cheryl is seeking to recover the full value of the stock proceeds that she placed in the
emergency fund as her sole and separate property, and half of the remaining emergency fund.
Paul claims he is entitled to half of the entire emergency fund.
Which one of the following statements is CORRECT regarding Paul's and Cheryl's rights in the
emergency fund? - correct answer ✔✔ The stock proceeds are community property, and Cheryl
and Paul are each entitled to one-half of the total emergency fund.
, Which one of the following statements regarding Henry, who recently married for the first time,
is CORRECT? - correct answer ✔✔ In a community property state, Henry's earnings from his job
subsequent to the date of his marriage will be considered community property.
All of the following items of property would be considered community property in a community
property state except - correct answer ✔✔ real estate received by one spouse during marriage
as an inheritance from her mother.
Which of the following are CORRECT statements about the filing requirements and/or the
responsibility for payment as they relate to federal transfer taxes?
I. A donee can be held responsible for paying the gift tax on a transfer that she has received if
the IRS cannot collect from the donor.
A federal estate tax return need not be filed unless an estate owes estate taxes in excess of the
unified credit.
The beneficiary is responsible for paying the generation-skipping transfer tax on a distribution
from a trust and must file a tax form.
IV. A federal gift tax return need not be filed for a gift that is split with the donor's spouse. -
correct answer ✔✔ I and III
Which of the following are important characteristics of the gift tax marital deduction?
I. It enables the donor to avoid gift tax liability by transferring the entire liability for gift taxes to
the donee spouse.
It allows the donor to avoid gift tax liability on up to one-half of the value of the gifted property
that is received by the donee spouse.
It allows the donor to avoid gift tax liability on the amount of the gift in excess of the annual
exclusion amount.
IV. It allows the donor to avoid gift tax liability on a gift to a donee spouse. - correct answer ✔✔
III and IV
