Estate Planning Final Exam questions
with accurate solution
Ben is interested in using a Qualified Personal Residence Trust (QPRT) as part of his estate plan.
Which of the following is false regarding QPRTs? - correct answer ✔✔ At the end of the trust
term, the house will revert back to the grantor.
At the end of the trust term, ownership of the house is transferred to the beneficiaries of the
QPRT. All of the other statements are true
Kristi transferred $10,000,000 to the Kristi Family Trust. The trust is designed as an irrevocable
grantor trust. Kristi retained a 5% annuity payout from the trust for the lesser of five years after
the establishment of the trust or until her date of death, and she has named her only nephew,
Alex, as the remainder beneficiary of the trust. Of the following statements regarding Kristi's
transfer to this trust, which is true? - correct answer ✔✔ Because Kristi retained the annuity
interest from the trust, if she dies during the five years after the establishment of the trust, the
full fair market value of the trust assets will be included in her gross estate.
The fact pattern describes a Grantor Retained Annuity Trust (GRAT) established by Kristi. If Kristi
dies during the term of her annuity interest, the full fair market value of the trust assets will be
included in her gross estate. The irrevocable transfer of the remainder interest in the trust is a
completed transfer and therefore a gift. The income of a grantor trust is taxable to the grantor.
The trust is an inter vivos trust (created during the grantor's life), not a testamentary trust
(created in a decedent's will).
Gene contributed $500,000 to an irrevocable trust and did not retain any right to the trust's
assets. The income beneficiary of the irrevocable trust was Gene's sister, and the remainder
beneficiary of the irrevocable trust was Gene's niece. At the time of the transfer, Gene paid gift
tax of $35,000. Gene died four years later, when the value of the irrevocable trust was
$1,200,000. With regard to the irrevocable trust, how much is included in Gene's gross estate? -
correct answer ✔✔ $0
,The transfer was irrevocable and more than three years have passed.
Robert transferred $100,000 to an irrevocable trust for the benefit of his minor child, Dominic.
The transfer was eligible for the annual exclusion. The trust permits the trustee to accumulate
trust income within the trust, and only make distributions to Dominic based upon an
ascertainable standard until Dominic is 21 years old. When Dominic attains the age of 21, the
trust must terminate and the trust assets must be distributed to Dominic. Which type of trust
has Robert created? - correct answer ✔✔ 2503(c) trust
Robert has created a 2503(c) trust. A 2503(c) trust allows income to be accumulated within the
trust until the minor beneficiary attains the age of majority and the transfer of property to the
trust qualifies for the annual exclusion. A 2503(b) trust requires the trustee to make annual
income distributions to the minor beneficiary. A Totten Trust is a bank account which includes a
payable on death clause. An IDGT is a grantor trust which requires the grantor to pay the
income tax on the income of the trust.
Which of the following is true regarding a Grantor Retained Annuity Trust (GRAT)? - correct
answer ✔✔ Interest and dividends earned by assets in a GRAT are taxed to the grantor.
A taxable gift occurs when the GRAT is established, not when the GRAT term ends. If the grantor
dies during the trust term, all of the trust assets are included in his gross estate. If the grantor
survives the trust term, none of the trust assets are included in his estate.
During the year, Edward created a trust for the benefit of his five children. The terms of the trust
declare that his children can only access the trust's assets after the trust has been in existence
for 20 years and the trust does not include a Crummey provision. If Edward transfers $100,000
to the trust during the year, what is his total taxable gift for the year? - correct answer ✔✔
$100,000
, Because the trust does not include a Crummey provision, the transfer to the trust is a gift of a
future interest and is not qualified to be offset by the annual exclusion. Therefore, the entire
transfer to the trust is subject to gift tax.
In 2000, Price funded a bypass trust with $675,000, the applicable estate tax credit equivalency
amount at that time. At Price's death in 2018, his will included a testamentary bypass trust and
a residual bequest to his U.S. citizen wife. If Price's taxable estate before prior gifts at his death
was $11,180,000, how much will be transferred to the bypass trust to maximize its benefits? -
correct answer ✔✔ $10,505,000
Price's executor would fund the testamentary bypass trust with the difference between the
applicable estate tax credit equivalency at Price's death (2018 - $11,180,000) and the funding
amount of the inter vivos bypass trust ($675,000). In this case, the amount would be
$10,505,000 ($11,180,000 - $675,000).
Mary's husband, Patrick, died two years ago. Patrick's will included the following three
testamentary trusts: a trust for the benefit of Mary's children, but giving Mary a general power
of appointment over the trust assets for the remainder of her life (GPOA Trust), a bypass trust
for the benefit of Mary's children, but giving Mary a power to invade the trust assets for an
ascertainable standard for the remainder of her life (Bypass Trust), and a charitable trust for the
benefit of Mary's alma mater (Charitable Trust). At Mary's death, which of the trusts assets will
be included in her gross estate?
1. GPOA Trust.
2. Bypass Trust.
3. Charitable Trust. - correct answer ✔✔ 1 only
Only the GPOA Trust would be included in Mary's gross estate. Because the withdrawal right of
the Bypass trust was limited to an ascertainable standard, its assets are not included in Mary's
gross estate. Mary does not have an interest in the assets of the charitable trust so those assets
are also not included in her gross estate.
with accurate solution
Ben is interested in using a Qualified Personal Residence Trust (QPRT) as part of his estate plan.
Which of the following is false regarding QPRTs? - correct answer ✔✔ At the end of the trust
term, the house will revert back to the grantor.
At the end of the trust term, ownership of the house is transferred to the beneficiaries of the
QPRT. All of the other statements are true
Kristi transferred $10,000,000 to the Kristi Family Trust. The trust is designed as an irrevocable
grantor trust. Kristi retained a 5% annuity payout from the trust for the lesser of five years after
the establishment of the trust or until her date of death, and she has named her only nephew,
Alex, as the remainder beneficiary of the trust. Of the following statements regarding Kristi's
transfer to this trust, which is true? - correct answer ✔✔ Because Kristi retained the annuity
interest from the trust, if she dies during the five years after the establishment of the trust, the
full fair market value of the trust assets will be included in her gross estate.
The fact pattern describes a Grantor Retained Annuity Trust (GRAT) established by Kristi. If Kristi
dies during the term of her annuity interest, the full fair market value of the trust assets will be
included in her gross estate. The irrevocable transfer of the remainder interest in the trust is a
completed transfer and therefore a gift. The income of a grantor trust is taxable to the grantor.
The trust is an inter vivos trust (created during the grantor's life), not a testamentary trust
(created in a decedent's will).
Gene contributed $500,000 to an irrevocable trust and did not retain any right to the trust's
assets. The income beneficiary of the irrevocable trust was Gene's sister, and the remainder
beneficiary of the irrevocable trust was Gene's niece. At the time of the transfer, Gene paid gift
tax of $35,000. Gene died four years later, when the value of the irrevocable trust was
$1,200,000. With regard to the irrevocable trust, how much is included in Gene's gross estate? -
correct answer ✔✔ $0
,The transfer was irrevocable and more than three years have passed.
Robert transferred $100,000 to an irrevocable trust for the benefit of his minor child, Dominic.
The transfer was eligible for the annual exclusion. The trust permits the trustee to accumulate
trust income within the trust, and only make distributions to Dominic based upon an
ascertainable standard until Dominic is 21 years old. When Dominic attains the age of 21, the
trust must terminate and the trust assets must be distributed to Dominic. Which type of trust
has Robert created? - correct answer ✔✔ 2503(c) trust
Robert has created a 2503(c) trust. A 2503(c) trust allows income to be accumulated within the
trust until the minor beneficiary attains the age of majority and the transfer of property to the
trust qualifies for the annual exclusion. A 2503(b) trust requires the trustee to make annual
income distributions to the minor beneficiary. A Totten Trust is a bank account which includes a
payable on death clause. An IDGT is a grantor trust which requires the grantor to pay the
income tax on the income of the trust.
Which of the following is true regarding a Grantor Retained Annuity Trust (GRAT)? - correct
answer ✔✔ Interest and dividends earned by assets in a GRAT are taxed to the grantor.
A taxable gift occurs when the GRAT is established, not when the GRAT term ends. If the grantor
dies during the trust term, all of the trust assets are included in his gross estate. If the grantor
survives the trust term, none of the trust assets are included in his estate.
During the year, Edward created a trust for the benefit of his five children. The terms of the trust
declare that his children can only access the trust's assets after the trust has been in existence
for 20 years and the trust does not include a Crummey provision. If Edward transfers $100,000
to the trust during the year, what is his total taxable gift for the year? - correct answer ✔✔
$100,000
, Because the trust does not include a Crummey provision, the transfer to the trust is a gift of a
future interest and is not qualified to be offset by the annual exclusion. Therefore, the entire
transfer to the trust is subject to gift tax.
In 2000, Price funded a bypass trust with $675,000, the applicable estate tax credit equivalency
amount at that time. At Price's death in 2018, his will included a testamentary bypass trust and
a residual bequest to his U.S. citizen wife. If Price's taxable estate before prior gifts at his death
was $11,180,000, how much will be transferred to the bypass trust to maximize its benefits? -
correct answer ✔✔ $10,505,000
Price's executor would fund the testamentary bypass trust with the difference between the
applicable estate tax credit equivalency at Price's death (2018 - $11,180,000) and the funding
amount of the inter vivos bypass trust ($675,000). In this case, the amount would be
$10,505,000 ($11,180,000 - $675,000).
Mary's husband, Patrick, died two years ago. Patrick's will included the following three
testamentary trusts: a trust for the benefit of Mary's children, but giving Mary a general power
of appointment over the trust assets for the remainder of her life (GPOA Trust), a bypass trust
for the benefit of Mary's children, but giving Mary a power to invade the trust assets for an
ascertainable standard for the remainder of her life (Bypass Trust), and a charitable trust for the
benefit of Mary's alma mater (Charitable Trust). At Mary's death, which of the trusts assets will
be included in her gross estate?
1. GPOA Trust.
2. Bypass Trust.
3. Charitable Trust. - correct answer ✔✔ 1 only
Only the GPOA Trust would be included in Mary's gross estate. Because the withdrawal right of
the Bypass trust was limited to an ascertainable standard, its assets are not included in Mary's
gross estate. Mary does not have an interest in the assets of the charitable trust so those assets
are also not included in her gross estate.
