Estate Planning Exam questions with
accurate answers
"A" and "B" are brother and sister. In 2005 they bought corporate stock in joint names with right
of survivorship at a cost of $5,000. "A" contributed the money. "A" died in 2009, and the stock
was valued in his estate at $12,000. "B" sold the stock in 2012 for $14,000. What is "B's" taxable
gain? - correct answer ✔✔ $2,000
By the terms of his will, "K" gave his wife the right to live in their home until her death. "K's"
daughter by a former marriage was to have the property upon Mrs. "K's" death. Under these
circumstances, which of the following statements is correct if Mrs. "K" dies in 2012? - correct
answer ✔✔ Mrs. "K" has a terminable interest in the home.
Alex Fernandes created an irrevocable trust in which he placed securities valued at $1 million.
His wife, Jeanette, will receive the income from the trust for her lifetime, and at her death, the
trust assets will be divided between their sons Michael and Julien. Which of the following
statements concerning the Fernandes trust is (are) correct?
(I) Michael has a remainder interest in the trust.
(II) Julien has a reversionary interest in the trust.
(III) Jeanette has a life interest in the trust.
(IV) Alex has a reversionary interest in the trust. - correct answer ✔✔ (I) and (III) only
The Pastinos own a popular bakery in the neighborhood. Their daughter, Maria, is a divorced
mother of two children who is struggling to make ends meet. The Pastinos would like to remove
the value of their building and land from their estate while continuing to operate the bakery.
They also wish to give Maria $20,000 a year in additional support, however they are "cash poor"
since all of their wealth is tied into their business. What estate planning strategy would best
accomplish their goals? - correct answer ✔✔ Transfer their building and land into an irrevocable
,trust with Maria as beneficiary, and transfer periodic lease payments into the trust for the
bakery's use of the building and the land, to distribute to Maria.
A donor transfers $100,000 into an irrevocable trust. The income will be distributed to his
spouse for 15 years, and the remainder of the trust corpus will be distributed to his son. All of
the following statements are correct, EXCEPT: - correct answer ✔✔ The donor can elect Q-TIP
treatment on his gift tax return to obtain a marital deduction for the income interest his wife
will receive.
Mike Green recently inherited money from his uncle and made the following gifts in 2012. He
bought his non-citizen wife a flower shop worth $160,000, he paid Boston University $35,000
for his daughter's tuition, he bought his son a new car worth $40,000, and he gave his sister the
remainder interest in his Florida condo worth $100,000. What is the total amount of Mike's
taxable gifts in 2012? - correct answer ✔✔ $148,000
All of the following methods are used to handle the affairs of an incompetent person, EXCEPT: -
correct answer ✔✔ Written instructions.
Which of the following rights retained by a donor who gifts property during his or her lifetime
will result in the inclusion of such property in the gross estate of the donor-decedent?
(I) The right to the property's income for the donor's lifetime.
(II) The right to revoke the transfer in case of financial need.
(III) The right to a reversionary interest where the probability of reversion is less than 5%.
(IV) The right to trust corpus for the donor's support and well-being. - correct answer ✔✔ (I),
(II), and (IV) only
Which of the following statements concerning a property's step-up in basis for income tax
purposes are correct?
, (I) No step-up occurs for property passing to a surviving spouse who was a joint tenant WROS.
(II) A partial step-up occurs at death for the fractional interest in property held as Tenants in
Common.
(III) No step-up occurs for property transferred by deed before death.
(IV) No step-up occurs when property is obtained by inheritance. - correct answer ✔✔ (II) and
(III) only
Which of the following trusts ensures the payment of federal estate taxes upon distribution of
principal? - correct answer ✔✔ A Qualified Domestic Trust.
A QTIP trust may be used to qualify property for the marital deduction. All of the following
statements concerning the requirements that must be met for an effective QTIP trust are
correct, EXCEPT: - correct answer ✔✔ The surviving spouse must be given a general power of
appointment over the principal at the time of death.
Which of the following statements concerning revocable and irrevocable trusts are correct?
(I) An irrevocable trust may convey both a present interest and a future interest to the income
or assets placed in the trust.
(II) A revocable trust may convey only a future interest to the income or assets in the trust.
(III) A revocable trust is not a completed gift because the assets can be taken back.
(IV) An irrevocable trust can be either a testamentary trust or a living trust. - correct answer ✔✔
(I), (III) and (IV) only
Liz Thomas has a gross estate of $10.5 million. Her second husband Kyle has a gross estate of $2
million. Liz is planning her estate and would like Kyle to receive the right to a lifetime income
from a trust that will qualify for the marital deduction in her estate. After Kyle's death, the trust
is to be distributed to Liz's son from her first marriage. She would like to exclude a portion of the
trust assets from Kyle's estate, while maximizing the use of her unified credit amount. Which
trusts will accomplish Liz's objectives? - correct answer ✔✔ A By-pass trust and a Q-TIP trust.
accurate answers
"A" and "B" are brother and sister. In 2005 they bought corporate stock in joint names with right
of survivorship at a cost of $5,000. "A" contributed the money. "A" died in 2009, and the stock
was valued in his estate at $12,000. "B" sold the stock in 2012 for $14,000. What is "B's" taxable
gain? - correct answer ✔✔ $2,000
By the terms of his will, "K" gave his wife the right to live in their home until her death. "K's"
daughter by a former marriage was to have the property upon Mrs. "K's" death. Under these
circumstances, which of the following statements is correct if Mrs. "K" dies in 2012? - correct
answer ✔✔ Mrs. "K" has a terminable interest in the home.
Alex Fernandes created an irrevocable trust in which he placed securities valued at $1 million.
His wife, Jeanette, will receive the income from the trust for her lifetime, and at her death, the
trust assets will be divided between their sons Michael and Julien. Which of the following
statements concerning the Fernandes trust is (are) correct?
(I) Michael has a remainder interest in the trust.
(II) Julien has a reversionary interest in the trust.
(III) Jeanette has a life interest in the trust.
(IV) Alex has a reversionary interest in the trust. - correct answer ✔✔ (I) and (III) only
The Pastinos own a popular bakery in the neighborhood. Their daughter, Maria, is a divorced
mother of two children who is struggling to make ends meet. The Pastinos would like to remove
the value of their building and land from their estate while continuing to operate the bakery.
They also wish to give Maria $20,000 a year in additional support, however they are "cash poor"
since all of their wealth is tied into their business. What estate planning strategy would best
accomplish their goals? - correct answer ✔✔ Transfer their building and land into an irrevocable
,trust with Maria as beneficiary, and transfer periodic lease payments into the trust for the
bakery's use of the building and the land, to distribute to Maria.
A donor transfers $100,000 into an irrevocable trust. The income will be distributed to his
spouse for 15 years, and the remainder of the trust corpus will be distributed to his son. All of
the following statements are correct, EXCEPT: - correct answer ✔✔ The donor can elect Q-TIP
treatment on his gift tax return to obtain a marital deduction for the income interest his wife
will receive.
Mike Green recently inherited money from his uncle and made the following gifts in 2012. He
bought his non-citizen wife a flower shop worth $160,000, he paid Boston University $35,000
for his daughter's tuition, he bought his son a new car worth $40,000, and he gave his sister the
remainder interest in his Florida condo worth $100,000. What is the total amount of Mike's
taxable gifts in 2012? - correct answer ✔✔ $148,000
All of the following methods are used to handle the affairs of an incompetent person, EXCEPT: -
correct answer ✔✔ Written instructions.
Which of the following rights retained by a donor who gifts property during his or her lifetime
will result in the inclusion of such property in the gross estate of the donor-decedent?
(I) The right to the property's income for the donor's lifetime.
(II) The right to revoke the transfer in case of financial need.
(III) The right to a reversionary interest where the probability of reversion is less than 5%.
(IV) The right to trust corpus for the donor's support and well-being. - correct answer ✔✔ (I),
(II), and (IV) only
Which of the following statements concerning a property's step-up in basis for income tax
purposes are correct?
, (I) No step-up occurs for property passing to a surviving spouse who was a joint tenant WROS.
(II) A partial step-up occurs at death for the fractional interest in property held as Tenants in
Common.
(III) No step-up occurs for property transferred by deed before death.
(IV) No step-up occurs when property is obtained by inheritance. - correct answer ✔✔ (II) and
(III) only
Which of the following trusts ensures the payment of federal estate taxes upon distribution of
principal? - correct answer ✔✔ A Qualified Domestic Trust.
A QTIP trust may be used to qualify property for the marital deduction. All of the following
statements concerning the requirements that must be met for an effective QTIP trust are
correct, EXCEPT: - correct answer ✔✔ The surviving spouse must be given a general power of
appointment over the principal at the time of death.
Which of the following statements concerning revocable and irrevocable trusts are correct?
(I) An irrevocable trust may convey both a present interest and a future interest to the income
or assets placed in the trust.
(II) A revocable trust may convey only a future interest to the income or assets in the trust.
(III) A revocable trust is not a completed gift because the assets can be taken back.
(IV) An irrevocable trust can be either a testamentary trust or a living trust. - correct answer ✔✔
(I), (III) and (IV) only
Liz Thomas has a gross estate of $10.5 million. Her second husband Kyle has a gross estate of $2
million. Liz is planning her estate and would like Kyle to receive the right to a lifetime income
from a trust that will qualify for the marital deduction in her estate. After Kyle's death, the trust
is to be distributed to Liz's son from her first marriage. She would like to exclude a portion of the
trust assets from Kyle's estate, while maximizing the use of her unified credit amount. Which
trusts will accomplish Liz's objectives? - correct answer ✔✔ A By-pass trust and a Q-TIP trust.
