AAMS 2026/2027 QUESTIONS AND SOLUTIONS RATED
A+
✔✔Assume each of the assets classes below has the following correlation to long-term
government bonds:
- Treasury bills: 0.67
- Corporate bonds: 0.81
- Large stocks: 0.37
- Small stocks: 0.12
Which one of the following correctly states the impact of diversification on a portfolio of
long-term government bonds? - ✔✔Small stocks provide more diversification than large
stocks
✔✔Gary Stevens has the following investment portfolio:
Stock Shares Beta FMV
ACE 100 1.1 $5,000
BDF 400 0.7 $8,000
GIK 200 1.5 $10,000
What is the overall weighted beta coefficient for Gary's portfolio? - ✔✔1.13
✔✔Tenancy in common is a form of property ownership that: - ✔✔will require probate
upon the death of a tenant
✔✔An investment professional who is NOT an attorney is engaged in the unauthorized
practice of law when he or she counsels a client regarding the: - ✔✔validity of a living
will
✔✔All of the following assets would be included in a decedent's gross estate except: -
✔✔the decedent's vested interest in a single life annuity on the decedent's life
✔✔A type of trust that is often used in incapacity planning is known as a: -
✔✔contingent (standby) trust
✔✔If the executor of a decedent's estate elects the alternate valuation date and none of
the property included in the gross estate has been sold or distributed, the estate assets
must be valued as of how many months after the decedent's death? - ✔✔6
✔✔The largest and most complete interest in property that one can own is: - ✔✔fee
simple
✔✔Which of the following is an irrevocable trust in which the grantor retains a right to
receive fixed payments at least annually for his or her life or for a term of years? -
✔✔Grantor retained annuity trust
,✔✔All of the following assets in a decedent's estate require probate except:
1. the decedent's interest in property that he owned in fee simple when the decedent
had no will
2. the decedent's interest in property held in joint tenancy with right of survivorship that
the decedent left to his son in his will
3. the decedent's interest in a limited partnership
4. the decedent's interest in property held in tenancy in common - ✔✔the decedent's
interest in property held in joint tenancy with right of survivorship that the decedent left
to his son in his will
✔✔A person who dies testate: - ✔✔has a valid will
✔✔Which of these is a characteristic of probate?
1. often a costly and complex process
2. ensures estate privacy
3. expedites estate administration
4. not applicable if there is no will - ✔✔often a costly and complex process
✔✔Which statement regarding gift splitting is NOT correct?
1. Gift splitting does not require the filing of a gift tax return
2. All gifts in that year made by both spouses to third parties must be treated as split
gifts
3. Gift splitting is permitted only between spouses
4. Gift splitting doubles the annual exclusion for gifts of present interest - ✔✔gift splitting
does not require the filing of a gift tax return
✔✔Which of these in NOT a deduction from the total gross estate in arriving at the
adjusted gross estate?
1. administrative expenses
2. funeral expenses
3. theft and casualty losses
4. gift tax paid on prior taxable gifts - ✔✔gift tax paid on prior taxable gifts
✔✔The marital deduction for a recipient spouse who is a U.S. citizen is: - ✔✔unlimited
✔✔Dorothy, age 73, is single. She has one granddaughter who is 16 years old. Dorothy
wants to help fund the granddaughter's college education. If Dorothy decides to open a
Section 529 plan for her granddaughter, what is the maximum amount Dorothy can
contribute to the plan in 2024 without making a taxable gift, assuming she has made no
prior gifts to the granddaughter? - ✔✔$90,000
✔✔Which of these is a characteristic of a living will?
, 1. Allows an individual to specify, in advance, his wishes about medical treatment and
artificial life support under specific circumstances
2. Allows an individual to make property bequests before death
3. Appoints an agent to manage an individual's affairs in the event of incapacity
4. has the same function as a living trust - ✔✔Allows an individual to specify, in
advance, his wishes about medical treatment and artificial life support under specific
circumstances
✔✔The gross estate is best defined as all property: - ✔✔subject to the federal estate
tax
✔✔What is the valuation date for gifts? - ✔✔the date on which the transfer is completed
✔✔Which type of trust is one from which the grantor receives all income earned by the
trust? - ✔✔Grantor retained income trust (GRIT)
✔✔Which form of property ownership is only available for spouses? - ✔✔tenancy by the
entirety
✔✔Which term describes the process to be followed if a person dies without a will? -
✔✔intestate
✔✔Which of these powers of attorney enables a principal to grant powers that remain in
effect throughout the principal's incapacity? - ✔✔durable power of attorney
✔✔Kurt is establishing a trust for the benefit of his nephew, Lloyd, age 26. Lloyd has a
history of financial irresponsibility and has run up significant amounts of debt since he
got out of college. Kurt wants to ensure that Lloyd is not able to assign his interest in the
trust to a creditor and that Lloyd's creditors cannot demand that the trustee pay Lloyd's
debts. Which of the following trust provisions will accomplish Kurt's objective? -
✔✔spendthrift provision
✔✔Two sisters plan to purchase an office building together. One sister will contribute
80% of the purchase price, and the other will contribute 20%. The sisters want title to
the property to reflect their respective ownership shares of 80% and 20%, and they
want the ability to leave their interests to whomever they choose under their wills. Which
of the following forms of property ownership will meet the sisters' objectives? -
✔✔tenancy in common
✔✔Carmen is considering estate-planning options and wants to gift assets to her loved
ones. All of the following are advantages to Carmen when gifting her assets except:
1. she can take advantage of the annual exclusion for gifts of future interests
2. gift tax paid is excluded from Carmen's gross estate, except for those paid on gifts
made within three years before her death
A+
✔✔Assume each of the assets classes below has the following correlation to long-term
government bonds:
- Treasury bills: 0.67
- Corporate bonds: 0.81
- Large stocks: 0.37
- Small stocks: 0.12
Which one of the following correctly states the impact of diversification on a portfolio of
long-term government bonds? - ✔✔Small stocks provide more diversification than large
stocks
✔✔Gary Stevens has the following investment portfolio:
Stock Shares Beta FMV
ACE 100 1.1 $5,000
BDF 400 0.7 $8,000
GIK 200 1.5 $10,000
What is the overall weighted beta coefficient for Gary's portfolio? - ✔✔1.13
✔✔Tenancy in common is a form of property ownership that: - ✔✔will require probate
upon the death of a tenant
✔✔An investment professional who is NOT an attorney is engaged in the unauthorized
practice of law when he or she counsels a client regarding the: - ✔✔validity of a living
will
✔✔All of the following assets would be included in a decedent's gross estate except: -
✔✔the decedent's vested interest in a single life annuity on the decedent's life
✔✔A type of trust that is often used in incapacity planning is known as a: -
✔✔contingent (standby) trust
✔✔If the executor of a decedent's estate elects the alternate valuation date and none of
the property included in the gross estate has been sold or distributed, the estate assets
must be valued as of how many months after the decedent's death? - ✔✔6
✔✔The largest and most complete interest in property that one can own is: - ✔✔fee
simple
✔✔Which of the following is an irrevocable trust in which the grantor retains a right to
receive fixed payments at least annually for his or her life or for a term of years? -
✔✔Grantor retained annuity trust
,✔✔All of the following assets in a decedent's estate require probate except:
1. the decedent's interest in property that he owned in fee simple when the decedent
had no will
2. the decedent's interest in property held in joint tenancy with right of survivorship that
the decedent left to his son in his will
3. the decedent's interest in a limited partnership
4. the decedent's interest in property held in tenancy in common - ✔✔the decedent's
interest in property held in joint tenancy with right of survivorship that the decedent left
to his son in his will
✔✔A person who dies testate: - ✔✔has a valid will
✔✔Which of these is a characteristic of probate?
1. often a costly and complex process
2. ensures estate privacy
3. expedites estate administration
4. not applicable if there is no will - ✔✔often a costly and complex process
✔✔Which statement regarding gift splitting is NOT correct?
1. Gift splitting does not require the filing of a gift tax return
2. All gifts in that year made by both spouses to third parties must be treated as split
gifts
3. Gift splitting is permitted only between spouses
4. Gift splitting doubles the annual exclusion for gifts of present interest - ✔✔gift splitting
does not require the filing of a gift tax return
✔✔Which of these in NOT a deduction from the total gross estate in arriving at the
adjusted gross estate?
1. administrative expenses
2. funeral expenses
3. theft and casualty losses
4. gift tax paid on prior taxable gifts - ✔✔gift tax paid on prior taxable gifts
✔✔The marital deduction for a recipient spouse who is a U.S. citizen is: - ✔✔unlimited
✔✔Dorothy, age 73, is single. She has one granddaughter who is 16 years old. Dorothy
wants to help fund the granddaughter's college education. If Dorothy decides to open a
Section 529 plan for her granddaughter, what is the maximum amount Dorothy can
contribute to the plan in 2024 without making a taxable gift, assuming she has made no
prior gifts to the granddaughter? - ✔✔$90,000
✔✔Which of these is a characteristic of a living will?
, 1. Allows an individual to specify, in advance, his wishes about medical treatment and
artificial life support under specific circumstances
2. Allows an individual to make property bequests before death
3. Appoints an agent to manage an individual's affairs in the event of incapacity
4. has the same function as a living trust - ✔✔Allows an individual to specify, in
advance, his wishes about medical treatment and artificial life support under specific
circumstances
✔✔The gross estate is best defined as all property: - ✔✔subject to the federal estate
tax
✔✔What is the valuation date for gifts? - ✔✔the date on which the transfer is completed
✔✔Which type of trust is one from which the grantor receives all income earned by the
trust? - ✔✔Grantor retained income trust (GRIT)
✔✔Which form of property ownership is only available for spouses? - ✔✔tenancy by the
entirety
✔✔Which term describes the process to be followed if a person dies without a will? -
✔✔intestate
✔✔Which of these powers of attorney enables a principal to grant powers that remain in
effect throughout the principal's incapacity? - ✔✔durable power of attorney
✔✔Kurt is establishing a trust for the benefit of his nephew, Lloyd, age 26. Lloyd has a
history of financial irresponsibility and has run up significant amounts of debt since he
got out of college. Kurt wants to ensure that Lloyd is not able to assign his interest in the
trust to a creditor and that Lloyd's creditors cannot demand that the trustee pay Lloyd's
debts. Which of the following trust provisions will accomplish Kurt's objective? -
✔✔spendthrift provision
✔✔Two sisters plan to purchase an office building together. One sister will contribute
80% of the purchase price, and the other will contribute 20%. The sisters want title to
the property to reflect their respective ownership shares of 80% and 20%, and they
want the ability to leave their interests to whomever they choose under their wills. Which
of the following forms of property ownership will meet the sisters' objectives? -
✔✔tenancy in common
✔✔Carmen is considering estate-planning options and wants to gift assets to her loved
ones. All of the following are advantages to Carmen when gifting her assets except:
1. she can take advantage of the annual exclusion for gifts of future interests
2. gift tax paid is excluded from Carmen's gross estate, except for those paid on gifts
made within three years before her death
