Cannon CTFA Prep Questions with complete Answers 2023

Cannon CTFA Prep Questions with complete Answers 2023 Jean and John Simmons are married and own their own home as tenants by entirety. When John dies the home is valued at $350,000. How much will be counted in his gross taxable estate? A. None, as it passes directly to his spouse, Jean. B. $175,000 - or one-half of the value C. $225,000 - or the full amount minus the $125,000 one-time exclusion for capital gains on a person residence. D. $350,000 - the full amount is includable. B. $175,000 - or one-half the value Once a will is properly drafted it is valid: A. in all states. B. for the state for which it was prepared. C. in all states for a period of 5 years. D. for the state for which it was prepared for a period of 5 years. B. for the state for which it was prepared. In managing personal trust assets, a trustee should seek which of the following? A. maximum income B. preservation of capital C. reasonable income and preservation of capital, including purchasing power D. maximum income and reasonable preservation of capital C. reasonable income and preservation of capital including purchasing power A decedent's estate being settled by your bank contains an antique automobile. One of the directors of your bank indicates that he would like to buy it. You should do which of the following? A. Sell it to him at a bargain price and befriend him. B. Have a qualified appraisal done and offer it to him at that value. C. Explain that he may not purchase the car from the estate. D. Arrange for a public auction at which he may buy it if he is the highest bidder. C. Explain that he may not purchase the car from the estate. If you hold a rental property in an irrevocable trust, when is it all right to rent to an employee of your trust department? A. Never B. When the employee pays fair rent. C. When the employee has been with you at least 5 years and can be trusted. D. When the employee has no connection with the account or beneficiaries. A. Never Which of the following generally may NOT hold real property? A. Revocable Living Trusts trusteed by a corporate fiduciary. B. Uniform Gift to Minors Account C. 2503(c) Minors Trust D. Uniform Transfer to Minors Account B. Uniform Gifts to Minors Account H's will provides that upon his death, $1 million will be held in a trust for the benefit of his wife, W. This trust provides that W will receive all of the trust income and will receive distributions of principal int he form of an annuity for her lifetime. At W's death, the remaining trust assets will be distributed to a designated charity. H's executor intends to make a "QTIP" election for this trust. Will the legacy to the trust, or any part thereof, be deductible by H's estate, or if so, why? A. Yes, the entire $1 million will qualify for the estate tax marital and charitable deductions. B. No, none of the $1 million will qualify for the estate tax marital and charitable deductions. C. Yes, the entire $1 million will qualify for the estate tax marital deduction. D. Yes, the value of W's income interest will qualify for the marital deduction; the remainder will not qualify for any deduction. C. Yes, the entire $1 million will qualify for the estate tax marital deduction. H makes a gift of property to a trust for the benefit of his children. If H serves as a trustee, what limitations, if any, should be placed on his distribution powers in order to avoid adverse gift and estate tax consequences? A. H's power to make distributions should be limited by ascertainable standards such as health, support and education. B. No limitations are required. C. H should be prohibited from participating in making any distributions. D. H's power to make distributions should be limited to those required to discharge his legal obligation to support his children. A. H's power to make distributions should be limited by ascertainable standards such as health, support and education. Which of the following statements about a QTIP trust is false? A. An executor has the ability to elect, partially elect, or not elect to qualify for QTIP treatment any part of the marital trust property. B. The spouse-beneficiary need not have the ability to control the ultimate disposition of the trust property. C. The grantor-spouse's GST exemption cannot be allocated to trust property. D. To have a valid QTIP interest, the spouse must be entitled to all of the net income from the trust property. C. The grantor-spouse's GST exemption cannot be allocated to trust property. Which of the following is an advantage of a QTIP trust over the life estate/general power of appointment trust? A. The surviving spouse will not be entitled to all of the income from the trust. B. The decedent spouse can control the ultimate disposition of the trust property. C. The decedent's estate will receive a marital deduction for the property transferred to the trust. D. The surviving spouse can withdraw trust property during her life to make gifts to descendants. B. The decent spouse can control the ultimate disposition of the trust property. Payments made directly to an educational institution for tuition on behalf of grandchildren are: A. subject to gift tax to the extent they exceed the annual exclusion. B. subject to generation-skipping tax. C. not subject to gift tax. D. not taxable gifts and are not subject to generation-skipping tax. D. not taxable gifts and are not subject to generation-skipping tax. If you own a 7% Bond maturing in twenty years, and long term rates go to 10%: A. your bond will sell at a premium. B. your bond will be called. C. the annual interest payments on your bond will decline. D. your bond will sell at a discount. D. your bond will sell at a discount. A customer, who is terminally ill, wishes to make several gifts by check to friends before she dies. Since these individuals are not beneficiaries under her will, she is anxious to have the gifts completed before her death. Which of the following should represent your advice to her? A. If the checks are dated before she dies, they will constitute completed gifts B. If the gifts are not made before her death, they can be made by her executor based on her verbally expressed intent C. If the checks are delivered to the recipients before her death, they are considered to be completed gifts D. The checks must be deposited for cashing at the bank before her death in order to qualify as completed gifts D. The checks must be deposited for cashing at the bank before her death in order to qualify as completed gifts Shareholders must receive financial statements from investment companies: A. monthly B. quarterly C. semi-annually D. annually C. semi-annually The "conduit theory" for a regulated investment company says which of the following? A. the flow of revenues should be unimpeded by redemptions. B. investment income flows to the investor after taxes. C. the investor and the fund are taxed as a single entity. D. the investment income is taxable to the investor only. D. the investment income is taxable to the investor only. If interest rates are expected to decline, which of the following bonds would offer the greatest potential for price appreciation? A. Treasury bond with duration of 15 years B. Treasury bond with duration of 12 years C. Treasury bond maturing in 10 years D. Treasury bond maturing in 15 years A. Treasury bond with duration of 15 years Absent any relevant language in the instrument, under common law a trust is considered to be which of the following? A. irrevocable and not amendable B. irrevocable but amendable C. revocable but not amendable D. revocable and amendable A. irrevocable and not amendable In a Qualified Terminable Interest Property (QTIP) marital trust, the surviving spouse may be given various powers of appointment. Which of the following may be included for the surviving spouse to have maximum control available as a beneficiary of a QTIP while retaining election options for the executor? A. only limited powers of appointment B. limited powers and the 5x5 power C. only general powers of appointment, except the 5x5 power D. general powers including the 5x5 power B. limited powers and the 5x5 power At the death of a decendent, the decedent's will creates a trust paying all income to the surviving spouse and permits principal encroachment, at the trustee's discretion, for benefit of the surviving spouse and/or children during the surviving spouse's lifetime. Which of the following is true of this arrangement? A. The trust can qualify for the QTIP election. B. The trust can not qualify for the QTIP election. C. The trust will not be included in the gross estate of the decendent. D. The trust is invalid since a will cannot creat a trust. B. The trust can not qualify for the QTIP election. A will provides as follows: "If the settlor's spouse survives the settlor, then at the settlor's death the trustee shall retain and administer as the FAMILY TRUST an amount equal to the maximum dollar amount which, without considering the federal estate tax marital deduction in effect at the time of settlor's death, can pass from the settlor's gross estate free of federal estate taxation, taking into consideration the value of all available credits against estate tax and all taxable transfers which pass outside of this article." This is an example of which kind of funding clause? A. marital pecuniary B. reverse pecuniary C. pro rata fractional D. "pick & choose" fractional B. reverse pecuniary Which of the following powers of appointment best describes the right granted to a beneficiary under a Crummey trust provision? A. Limited B. Ascertainable standard C. General D. Testamentary C. General Which of the following is TRUE with respect to general powers of appointment? I. All general powers of appointment are similar to outright ownership of property. II. All general powers of appointment allow the power holder to appoint the assets to his creditors. III. All general powers of appointment have transfer tax consequences. A. I and III B. II only C. II and III D. III only D. III only An "easing" of money and credit in the economy would probably be the result of: I. Increasing reserve requirements II. Increasing the discount rate III. Decreasing the discount rate IV. Decreasing reserve requirements A. I and II B. I and III C. II and IV D. III and IV D. III and IV A value manager's portfolio would be expected to: A. have a PE ratio higher then the market. B. sell at a premium to the S&P. C. have a Beta equal to the market or less. D. have a yield lower than the market. C. have a Beta equal to the market or less. Dr. Jones purchases a $5,000,000 life insurance policy. On the advice of her attorney, she transfers all incidents of ownership in the policy to a n irrevocable trust for the benefit of her children the following year. Dr. Jones dies two years later, and the insurance proceeds are paid to the trust. What are the estate tax consequences to Dr. Jones' estate? A. Insurance proceeds are included in her estate. B. Insurance proceeds are not included in her estate. C. Amount of insurance premiums paid is included in her estate. D. Cash value of the policy immediately prior to death is included in her estate. A. Insurance proceeds are included in her estate. A fiduciary can elect a fiscal year, other than a calendar year, for income tax reporting purposes for which of the following types of arrangements? I. Estates II. Charitable Remainder Trusts III. Charitable Lead Trusts IV. Fully Charitable Trusts A. I only B. I & IV only C. II & III only D. I, II & IV only B. I & IV only Which of the following BEST describes an ESTATE as an income tax reporting entity? A. It begins at the court appointment of the executor and lasts for two years. B. It begins when Letters Testamentary are issued and lasts until the majority of the assets are distributed. C. It begins at date of death and lasts for the period of administration. D. It begins when all of the assets have been gathered and lasts for the period of administration. C. It begins at date of death and lasts for the period of administration. Which of the following best describes the duty to inform remainder beneficiaries of a revocable trust while the settlor is alive and competent? A. There is duty to inform beneficiaries of significant changes in their beneficiary status. B. The duty to inform does not apply to revocable trusts while the settlor is alive and competent. C. There is a duty to inform all beneficiaries of the existence of the trust. D. There is a duty to permit beneficiaries to inspect trust documents, records and property holdings. B. The duty to inform does not apply to revocable trusts while the settlor is alive and competent. One of your bank's largest depositors tells you that he does not trust lawyers, and asks you to prepare a simple will for him, leaving everything to his wife. You should tell him that: A. you will be happy to prepare his will, but he most likely needs more that a simple will B. you cannot prepare his will because to do so constitutes the unauthorized practice of law C. it is against the policy of the bank to prepare the legal documents, but you will copy some pages from a form book that he can use as a guide D. you do not have a law degree; however, you will refer him to another trust officer who has a law degree B. you cannot prepare his will because to do so constitutes the unauthorized practice of law Which of the following BEST describes the communication responsibilities of a trustee with regard to discretionary decisions? A. None. A trustee has complete authority to act and therefore does not need to report discretionary decisions to the beneficiaries of the trust. B. Statements only. A trustee must report, o a timely basis, transactions which have occurred in the account on a statement. C. More than just statements. A trustee should communicate before the fact any transaction which will materially affect the interests of the beneficiaries in addition to the regular reporting done on statements. D. Prior approval of discretionary transactions. A trustee must seek prior approval of all discretionary decisions from the beneficiaries. C. More than just statements. A trustee should communicate before the fact any transaction which will materially affect the interests of the beneficiaries in addition to the regular reporting done on statements. With respect to its own shares, the corporate trustee does NOT violate the duty of loyalty if it does which of the following? A. Votes the proxies of shares owned by the trust B. Purchases the stock at the direction of a co-trustee C. Purchases the stock of an affiliate at the direction of a co-trustee D. Retains the stock pursuant to an authorization in the trust instrument D. Retains the stock pursuant to an authorization in the trust instrument Declared dividends are paid to stockholders registered on the books of the corporation on or before the: A. dividend date. B. record date. C. payment date. D. declaration date. B. record date. Your client creates a Grantor Retained Annuity Trust that will last until the sooner of his death or 7 years. If he survives the term, the trust property will pass outright to his children. Your client uses all of his unified credit creating the trust. He dies in year 6 of the trust. How much of the trust's current fair market value will be included in his estate? A. None of it B. 1/7 of it C. 6/7 of it D. The portion needed to yield the annuity amount using the Section 7520 rate applicable on date of death D. The portion needed to yield the annuity amount using the Section 7520 rate applicable on date of death The conveyance "O to A for life and then to B" creates which of the following sets of interests? A. Life estate for A and a remainder for B. B. Life estate for A and a reversion for B. C. Fee simple interest for A and a remainder for B. D. Fee simple interest for A and a reversion for B. A. Life estate for A and a remainder for B. The most important factor in the long-term performance of equity (stock) investments is: A. the economy B. interest rates. C. the industry of the corporation. D. the management of the corporation. D. the management of the corporation.