Cannon CTFA Prep Study Guide with
Questions and Correct Answers
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.
Questions and Correct Answers
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.
