CANNON TRUST SCHOOL II EXAM
QUESTIONS WITH CORRECT ANSWERS
H's will creates a QTIP marital trust for the benefit of his wife, W. The trust provides that
W will receive all of the trust income, and will receive trust principal for her health and
support. W has a limited power of appointment over the trust. Bank X is designated to
serve as the sole trustee. At W's death, any income or principal she received from the
trust will be included in her gross estate. H's executor will make a QTIP election for this
trust on H's federal estate tax return. The marital trust:
A. will be included in W's gross estate at her death because W had a limited power of
appointment over the trust.
B. will be included in W's gross estate at her death because she was entitled to receive
distributions from trust principal for her health and support.
C. will not be included in W's gross estate at her death because a QTIP election was
made.
D. will be included in W's estate because a QTIP election was - Correct Answers -D. will
be included in W's estate because a QTIP election was made.
Which of the following is NOT a requirement of a QTIP trust?
A. All net accounting income to be paid to the surviving spouse at least annually.
B. Principal to be distributed at the trustee's discretion for the surviving spouse's health
education support or maintenance.
C. The surviving spouse has the ability to require the trustee to convert non-income
producing assets to income productive assets.
D. The surviving spouse may be the only permissible distributee during their lifetime. -
Correct Answers -B. Principal to be distributed at the trustee's discretion for the
surviving spouse's health education support or maintenance.
In a pro rata fractional formula, which trust is frozen during administration prior to
funding?
A. The marital trust
B. The residual trust
C. Neither, they must share the appreciation/depreciation.
D. Both the marital and residual trusts. - Correct Answers -C. Neither, they must share
the appreciation/depreciation.
, Which of the following is MANDATORY to qualify the general power of appointment
(GPA) marital deduction trust?
A. Right to encroach upon corpus of the marital deduction share by surviving spouse
during lifetime.
B. Ultimate distribution to decedent's heirs.
C. All net accounting income paid at least annually to the surviving spouse and
surviving spouse is given either lifetime GPA or testamentary GPA.
D. Surviving spouse has the right to make gifts from the marital deduction share during
lifetime. - Correct Answers -C. All net accounting income paid at least annually to the
surviving spouse and surviving spouse is given either lifetime GPA or testamentary
GPA.
Which of the following is NOT a characteristic of a qualified domestic trust (QDT)?
A. At least one trustee must be a U.S. citizen or domestic corporation.
B. The executor of the donor's estate must irrevocably elect to have the trust treated at
a QDT.
C. The U.S. trustee must have the right to withhold federal estate taxes from any
principal distribution.
D. Upon termination of the trust, the U.S. trustee must file a final accounting with the
IRS and a tax at the maximum estate tax rate of the current fair market value of the trust
assets shall be assessed - Correct Answers -D. Upon termination of the trust, the U.S.
trustee must file a final accounting with the IRS and a tax at the maximum estate tax
rate of the current fair market value of the trust assets shall be assessed
The duration of a life estate is BEST described as which of the following?
A. A fixed term
B. A life or the lives of one or more persons
C. Potentially infinite
D. Not to exceed 99 years - Correct Answers -B. A life or the lives of one or more
persons
Disadvantages to investing in exchange-traded funds (ETFs) include:
A. Higher expense ratios than mutual funds
B. Commissions
C. Less diversification than mutual fund in same index
D. Less liquidity than mutual fund - Correct Answers -B. Commissions
ETFs differ from open ended mutual funds on all of the following EXCEPT:
A. May trade intraday at current prices.
B. Trade through a broker.
C. May not charge early withdrawal fees.
D. Less tax efficient. - Correct Answers -D. Less tax efficient.
QUESTIONS WITH CORRECT ANSWERS
H's will creates a QTIP marital trust for the benefit of his wife, W. The trust provides that
W will receive all of the trust income, and will receive trust principal for her health and
support. W has a limited power of appointment over the trust. Bank X is designated to
serve as the sole trustee. At W's death, any income or principal she received from the
trust will be included in her gross estate. H's executor will make a QTIP election for this
trust on H's federal estate tax return. The marital trust:
A. will be included in W's gross estate at her death because W had a limited power of
appointment over the trust.
B. will be included in W's gross estate at her death because she was entitled to receive
distributions from trust principal for her health and support.
C. will not be included in W's gross estate at her death because a QTIP election was
made.
D. will be included in W's estate because a QTIP election was - Correct Answers -D. will
be included in W's estate because a QTIP election was made.
Which of the following is NOT a requirement of a QTIP trust?
A. All net accounting income to be paid to the surviving spouse at least annually.
B. Principal to be distributed at the trustee's discretion for the surviving spouse's health
education support or maintenance.
C. The surviving spouse has the ability to require the trustee to convert non-income
producing assets to income productive assets.
D. The surviving spouse may be the only permissible distributee during their lifetime. -
Correct Answers -B. Principal to be distributed at the trustee's discretion for the
surviving spouse's health education support or maintenance.
In a pro rata fractional formula, which trust is frozen during administration prior to
funding?
A. The marital trust
B. The residual trust
C. Neither, they must share the appreciation/depreciation.
D. Both the marital and residual trusts. - Correct Answers -C. Neither, they must share
the appreciation/depreciation.
, Which of the following is MANDATORY to qualify the general power of appointment
(GPA) marital deduction trust?
A. Right to encroach upon corpus of the marital deduction share by surviving spouse
during lifetime.
B. Ultimate distribution to decedent's heirs.
C. All net accounting income paid at least annually to the surviving spouse and
surviving spouse is given either lifetime GPA or testamentary GPA.
D. Surviving spouse has the right to make gifts from the marital deduction share during
lifetime. - Correct Answers -C. All net accounting income paid at least annually to the
surviving spouse and surviving spouse is given either lifetime GPA or testamentary
GPA.
Which of the following is NOT a characteristic of a qualified domestic trust (QDT)?
A. At least one trustee must be a U.S. citizen or domestic corporation.
B. The executor of the donor's estate must irrevocably elect to have the trust treated at
a QDT.
C. The U.S. trustee must have the right to withhold federal estate taxes from any
principal distribution.
D. Upon termination of the trust, the U.S. trustee must file a final accounting with the
IRS and a tax at the maximum estate tax rate of the current fair market value of the trust
assets shall be assessed - Correct Answers -D. Upon termination of the trust, the U.S.
trustee must file a final accounting with the IRS and a tax at the maximum estate tax
rate of the current fair market value of the trust assets shall be assessed
The duration of a life estate is BEST described as which of the following?
A. A fixed term
B. A life or the lives of one or more persons
C. Potentially infinite
D. Not to exceed 99 years - Correct Answers -B. A life or the lives of one or more
persons
Disadvantages to investing in exchange-traded funds (ETFs) include:
A. Higher expense ratios than mutual funds
B. Commissions
C. Less diversification than mutual fund in same index
D. Less liquidity than mutual fund - Correct Answers -B. Commissions
ETFs differ from open ended mutual funds on all of the following EXCEPT:
A. May trade intraday at current prices.
B. Trade through a broker.
C. May not charge early withdrawal fees.
D. Less tax efficient. - Correct Answers -D. Less tax efficient.
