CERTIFIED ESTATE PLANNER (CEP) PRACTICE EXAM
100 Multiple Choice Questions with Answer Key & Explanations
INSTRUCTIONS: Choose the single best answer for each question.
QUESTION 1:
What is the primary purpose of an estate plan?
A) Minimize income taxes during life
B) Ensure assets pass according to wishes with minimal costs and delays
C) Avoid all probate proceedings
D) Maximize charitable donations
ANSWER: B
EXPLANATION: The primary purpose of estate planning is to ensure assets transfer
according to the client's wishes with minimal costs, taxes, and delays, while providing for
loved ones and addressing incapacity concerns.
QUESTION 2:
Which document allows an individual to appoint someone to make healthcare decisions if
they become incapacitated?
A) Durable Power of Attorney
B) Healthcare Power of Attorney (Healthcare Proxy)
C) Living Will
D) Testamentary Trust
ANSWER: B
EXPLANATION: A Healthcare Power of Attorney (also called Healthcare Proxy or Medical
Power of Attorney) appoints an agent to make medical decisions when the principal is
incapacitated.
QUESTION 3:
What is the annual gift tax exclusion for 2024?
A) $15,000
B) $16,000
C) $17,000
D) $18,000
,ANSWER: C
EXPLANATION: The annual gift tax exclusion for 2024 is $17,000 per recipient. This amount
is adjusted periodically for inflation.
QUESTION 4:
Which type of trust becomes irrevocable upon the grantor's death?
A) Revocable Living Trust
B) Testamentary Trust
C) Charitable Remainder Trust
D) Qualified Personal Residence Trust
ANSWER: A
EXPLANATION: A revocable living trust becomes irrevocable upon the grantor's death,
even though it was revocable during the grantor's lifetime.
QUESTION 5:
What is the portability amount for the estate tax exemption for a surviving spouse in 2024?
A) $12.92 million
B) $13.61 million
C) $25.84 million
D) $27.22 million
ANSWER: B
EXPLANATION: For 2024, the basic estate tax exemption is $13.61 million per person.
Portability allows a surviving spouse to use their deceased spouse's unused exemption,
effectively doubling it to $27.22 million for the surviving spouse.
QUESTION 6:
Which of the following assets typically avoids probate?
A) Life insurance with a named beneficiary
B) Real estate owned jointly with rights of survivorship
C) Retirement accounts with designated beneficiaries
D) All of the above
ANSWER: D
EXPLANATION: All these assets typically avoid probate when proper beneficiary
designations or ownership forms are used.
,QUESTION 7:
What is the primary advantage of a Credit Shelter Trust (Bypass Trust)?
A) Provides for a surviving spouse
B) Preserves both spouses' estate tax exemptions
C) Avoids all income taxes
D) Eliminates probate entirely
ANSWER: B
EXPLANATION: A Credit Shelter Trust (also called Bypass Trust or Family Trust) preserves
the first spouse's estate tax exemption by placing assets in trust rather than passing them
directly to the surviving spouse.
QUESTION 8:
Which document expresses end-of-life medical treatment preferences?
A) Durable Power of Attorney
B) Healthcare Proxy
C) Living Will
D) Do Not Resuscitate Order
ANSWER: C
EXPLANATION: A Living Will (also called Advance Directive) expresses preferences about
end-of-life medical treatment, particularly regarding life-sustaining measures.
QUESTION 9:
What is the generation-skipping transfer (GST) tax exemption for 2024?
A) $13.61 million
B) $13.61 million indexed for inflation
C) Equal to the estate tax exemption
D) Both B and C
ANSWER: D
EXPLANATION: The GST tax exemption for 2024 is $13.61 million and is equal to the estate
tax exemption, with both amounts indexed annually for inflation.
, QUESTION 10:
Which type of trust provides income to a surviving spouse with remainder to charity?
A) Charitable Remainder Trust
B) Charitable Lead Trust
C) Qualified Terminable Interest Property (QTIP) Trust
D) Grantor Retained Annuity Trust (GRAT)
ANSWER: A
EXPLANATION: A Charitable Remainder Trust provides income to non-charitable
beneficiaries (like a surviving spouse) for a term, with the remainder passing to charity.
QUESTION 11:
What is the "step-up in basis" rule for inherited assets?
A) Assets receive a new basis equal to fair market value at date of death
B) Assets retain the decedent's original basis
C) Assets receive a basis equal to the average of purchase price and date-of-death value
D) Assets receive no basis adjustment
ANSWER: A
EXPLANATION: Under the step-up in basis rule, inherited assets receive a new basis equal
to their fair market value at the date of death (or alternate valuation date).
QUESTION 12:
Which estate planning tool allows avoidance of probate for real estate?
A) Lady Bird Deed
B) Transfer on Death Deed
C) Joint Tenancy with Rights of Survivorship
D) All of the above
ANSWER: D
EXPLANATION: All these tools can help avoid probate for real estate, though availability
and effectiveness vary by state.
QUESTION 13:
What is the purpose of a "pour-over will"?
A) Distributes assets not transferred to trust during lifetime
B) Creates a testamentary trust
100 Multiple Choice Questions with Answer Key & Explanations
INSTRUCTIONS: Choose the single best answer for each question.
QUESTION 1:
What is the primary purpose of an estate plan?
A) Minimize income taxes during life
B) Ensure assets pass according to wishes with minimal costs and delays
C) Avoid all probate proceedings
D) Maximize charitable donations
ANSWER: B
EXPLANATION: The primary purpose of estate planning is to ensure assets transfer
according to the client's wishes with minimal costs, taxes, and delays, while providing for
loved ones and addressing incapacity concerns.
QUESTION 2:
Which document allows an individual to appoint someone to make healthcare decisions if
they become incapacitated?
A) Durable Power of Attorney
B) Healthcare Power of Attorney (Healthcare Proxy)
C) Living Will
D) Testamentary Trust
ANSWER: B
EXPLANATION: A Healthcare Power of Attorney (also called Healthcare Proxy or Medical
Power of Attorney) appoints an agent to make medical decisions when the principal is
incapacitated.
QUESTION 3:
What is the annual gift tax exclusion for 2024?
A) $15,000
B) $16,000
C) $17,000
D) $18,000
,ANSWER: C
EXPLANATION: The annual gift tax exclusion for 2024 is $17,000 per recipient. This amount
is adjusted periodically for inflation.
QUESTION 4:
Which type of trust becomes irrevocable upon the grantor's death?
A) Revocable Living Trust
B) Testamentary Trust
C) Charitable Remainder Trust
D) Qualified Personal Residence Trust
ANSWER: A
EXPLANATION: A revocable living trust becomes irrevocable upon the grantor's death,
even though it was revocable during the grantor's lifetime.
QUESTION 5:
What is the portability amount for the estate tax exemption for a surviving spouse in 2024?
A) $12.92 million
B) $13.61 million
C) $25.84 million
D) $27.22 million
ANSWER: B
EXPLANATION: For 2024, the basic estate tax exemption is $13.61 million per person.
Portability allows a surviving spouse to use their deceased spouse's unused exemption,
effectively doubling it to $27.22 million for the surviving spouse.
QUESTION 6:
Which of the following assets typically avoids probate?
A) Life insurance with a named beneficiary
B) Real estate owned jointly with rights of survivorship
C) Retirement accounts with designated beneficiaries
D) All of the above
ANSWER: D
EXPLANATION: All these assets typically avoid probate when proper beneficiary
designations or ownership forms are used.
,QUESTION 7:
What is the primary advantage of a Credit Shelter Trust (Bypass Trust)?
A) Provides for a surviving spouse
B) Preserves both spouses' estate tax exemptions
C) Avoids all income taxes
D) Eliminates probate entirely
ANSWER: B
EXPLANATION: A Credit Shelter Trust (also called Bypass Trust or Family Trust) preserves
the first spouse's estate tax exemption by placing assets in trust rather than passing them
directly to the surviving spouse.
QUESTION 8:
Which document expresses end-of-life medical treatment preferences?
A) Durable Power of Attorney
B) Healthcare Proxy
C) Living Will
D) Do Not Resuscitate Order
ANSWER: C
EXPLANATION: A Living Will (also called Advance Directive) expresses preferences about
end-of-life medical treatment, particularly regarding life-sustaining measures.
QUESTION 9:
What is the generation-skipping transfer (GST) tax exemption for 2024?
A) $13.61 million
B) $13.61 million indexed for inflation
C) Equal to the estate tax exemption
D) Both B and C
ANSWER: D
EXPLANATION: The GST tax exemption for 2024 is $13.61 million and is equal to the estate
tax exemption, with both amounts indexed annually for inflation.
, QUESTION 10:
Which type of trust provides income to a surviving spouse with remainder to charity?
A) Charitable Remainder Trust
B) Charitable Lead Trust
C) Qualified Terminable Interest Property (QTIP) Trust
D) Grantor Retained Annuity Trust (GRAT)
ANSWER: A
EXPLANATION: A Charitable Remainder Trust provides income to non-charitable
beneficiaries (like a surviving spouse) for a term, with the remainder passing to charity.
QUESTION 11:
What is the "step-up in basis" rule for inherited assets?
A) Assets receive a new basis equal to fair market value at date of death
B) Assets retain the decedent's original basis
C) Assets receive a basis equal to the average of purchase price and date-of-death value
D) Assets receive no basis adjustment
ANSWER: A
EXPLANATION: Under the step-up in basis rule, inherited assets receive a new basis equal
to their fair market value at the date of death (or alternate valuation date).
QUESTION 12:
Which estate planning tool allows avoidance of probate for real estate?
A) Lady Bird Deed
B) Transfer on Death Deed
C) Joint Tenancy with Rights of Survivorship
D) All of the above
ANSWER: D
EXPLANATION: All these tools can help avoid probate for real estate, though availability
and effectiveness vary by state.
QUESTION 13:
What is the purpose of a "pour-over will"?
A) Distributes assets not transferred to trust during lifetime
B) Creates a testamentary trust
