CFP Estate Planning questions with
complete solutions
3 objectives of Estate Planning - correct answer ✔✔ 1) Preserve & protect wealth
2) Use wealth as desired
3) Pass greatest amount possible to beneficiaries
Bargain Sale - correct answer ✔✔ Asset is sold for less than its value.
Difference b/t sale price & value is considered gift by seller to purchaser
Person who dies with a valid will is called... - correct answer ✔✔ Testator (male) or Testatrix
(female)
Said to die Testate
Person who dies with no valid will is said to die in.... - correct answer ✔✔ Total Intestacy
Person who dies with valid will that does not dispose of all assets is said to die in.... - correct
answer ✔✔ Partial Intestacy
Will substitutes - correct answer ✔✔ 1) Designation of recipient prevails over contrary
designation in a will
2) 2 methods of transfer:
-- Right of survivorship
-- Beneficiary designation
,Legal Interest definition - correct answer ✔✔ Right to manage & transfer property
Beneficial or Equitable Interest definition - correct answer ✔✔ Right to use, consume, or enjoy
property
2 subclasses of Beneficial/Equitable Interest - correct answer ✔✔ 1) Present Interest
-- includes income bene of trust that is required to pay out annually
-- includes income bene of trust if they can demand TTEE to pay certain amt to them
2) Future Interest
A Life Estate - correct answer ✔✔ An interest that terminates upon someone's death
(Normally used when life estate holder does not have right to direct where property goes at
death)
Interest For Years / Interest For Term Certain - correct answer ✔✔ An interest that will
terminate after precise period of time
Power of attorney - correct answer ✔✔ Gives someone (attorney-in-fact) power to perform
designated act as the principal directs
Power of appointment - correct answer ✔✔ Clause in will or trust where granting party/donor
gives authority to donee/holder transfer title of donor's property to a recipient/appointee AT
THE DONEE'S DISCRETION
Types of Powers of Appointment - correct answer ✔✔ 1) General
,-- Holder can name as appointee any of:
1. the holder
2. creditors of the holder
3. holder's estate
4. creditor's of holder's estate
2) Special
-- Holder is required to get written consent of the donor or adverse party, or power can be
exercised only by ascertainable standard (such as HEMS)
Good & Bad of General Power of Appointment - correct answer ✔✔ GOOD - can benefit
himself/herself by exercise of power
BAD - can be subject to gift tax
Ways a Power of Appointment can be used - correct answer ✔✔ 1) Exercise it
2) Release it
3) Let it Lapse
Noncumulative vs Cumulative Power of Appointment - correct answer ✔✔ Noncumulative =
Unused amount in certain time period is forfeited (use it or lose it)
Cumulative = Unused amount stacks up over time
, Legal term for sole ownership of property - correct answer ✔✔ Fee Simple or Fee Simple
Absolute
Community Property - correct answer ✔✔ 1) Title available in only 10 states
2) Available to only husband & wife in most states (some allow for registered domestic partners)
3) Possible for both parties to own property without his/her name on the title
4) testamentary control of half-interest is unlimited (unless survivorship feature)
Separate property status notes - correct answer ✔✔ 1) Property acquired before marriage & its
appreciation as long as it's kept in one spouse's name
2) Property given as a gift or inherited for one spouse & left in that spouse's name only
3) If commingled assets can be traced to ownership, assets may be considered separate
property
2 Rules for status of common-law property brought into community property state - correct
answer ✔✔ 1) Common-law state determines character of assets
2) Community state determines disposition of property at death or divorce
Nonfinancial Goals of Estate Planning client - correct answer ✔✔ 1) Meeting the needs of
dependents
2) Proper distribution of assets
3) Transfers by trusts
4) Efficient transfer of assets at death
5) Asset protection
6) Control of assets
Financial Goals of Estate Planning client - correct answer ✔✔ 1) Preserving business value
complete solutions
3 objectives of Estate Planning - correct answer ✔✔ 1) Preserve & protect wealth
2) Use wealth as desired
3) Pass greatest amount possible to beneficiaries
Bargain Sale - correct answer ✔✔ Asset is sold for less than its value.
Difference b/t sale price & value is considered gift by seller to purchaser
Person who dies with a valid will is called... - correct answer ✔✔ Testator (male) or Testatrix
(female)
Said to die Testate
Person who dies with no valid will is said to die in.... - correct answer ✔✔ Total Intestacy
Person who dies with valid will that does not dispose of all assets is said to die in.... - correct
answer ✔✔ Partial Intestacy
Will substitutes - correct answer ✔✔ 1) Designation of recipient prevails over contrary
designation in a will
2) 2 methods of transfer:
-- Right of survivorship
-- Beneficiary designation
,Legal Interest definition - correct answer ✔✔ Right to manage & transfer property
Beneficial or Equitable Interest definition - correct answer ✔✔ Right to use, consume, or enjoy
property
2 subclasses of Beneficial/Equitable Interest - correct answer ✔✔ 1) Present Interest
-- includes income bene of trust that is required to pay out annually
-- includes income bene of trust if they can demand TTEE to pay certain amt to them
2) Future Interest
A Life Estate - correct answer ✔✔ An interest that terminates upon someone's death
(Normally used when life estate holder does not have right to direct where property goes at
death)
Interest For Years / Interest For Term Certain - correct answer ✔✔ An interest that will
terminate after precise period of time
Power of attorney - correct answer ✔✔ Gives someone (attorney-in-fact) power to perform
designated act as the principal directs
Power of appointment - correct answer ✔✔ Clause in will or trust where granting party/donor
gives authority to donee/holder transfer title of donor's property to a recipient/appointee AT
THE DONEE'S DISCRETION
Types of Powers of Appointment - correct answer ✔✔ 1) General
,-- Holder can name as appointee any of:
1. the holder
2. creditors of the holder
3. holder's estate
4. creditor's of holder's estate
2) Special
-- Holder is required to get written consent of the donor or adverse party, or power can be
exercised only by ascertainable standard (such as HEMS)
Good & Bad of General Power of Appointment - correct answer ✔✔ GOOD - can benefit
himself/herself by exercise of power
BAD - can be subject to gift tax
Ways a Power of Appointment can be used - correct answer ✔✔ 1) Exercise it
2) Release it
3) Let it Lapse
Noncumulative vs Cumulative Power of Appointment - correct answer ✔✔ Noncumulative =
Unused amount in certain time period is forfeited (use it or lose it)
Cumulative = Unused amount stacks up over time
, Legal term for sole ownership of property - correct answer ✔✔ Fee Simple or Fee Simple
Absolute
Community Property - correct answer ✔✔ 1) Title available in only 10 states
2) Available to only husband & wife in most states (some allow for registered domestic partners)
3) Possible for both parties to own property without his/her name on the title
4) testamentary control of half-interest is unlimited (unless survivorship feature)
Separate property status notes - correct answer ✔✔ 1) Property acquired before marriage & its
appreciation as long as it's kept in one spouse's name
2) Property given as a gift or inherited for one spouse & left in that spouse's name only
3) If commingled assets can be traced to ownership, assets may be considered separate
property
2 Rules for status of common-law property brought into community property state - correct
answer ✔✔ 1) Common-law state determines character of assets
2) Community state determines disposition of property at death or divorce
Nonfinancial Goals of Estate Planning client - correct answer ✔✔ 1) Meeting the needs of
dependents
2) Proper distribution of assets
3) Transfers by trusts
4) Efficient transfer of assets at death
5) Asset protection
6) Control of assets
Financial Goals of Estate Planning client - correct answer ✔✔ 1) Preserving business value
