Cannon Trust School II Exam Questions and Answers Already Passed
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. - 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. - 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.
- 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. - 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.
H's will creates a QTIP marital trust for the benefit of 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 made. - Answers D. will be
included in W's estate because a QTIP election was made.
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 - Answers B. A life or the lives of one or more persons
,Husband is not a U.S. citizen but is a resident alien. Wife is a naturalized citizen. Husband dies
leaving everything to his wife outright. How much of a marital deduction will his estate have?
A. 100%
B. 0% because the property must be in qualified domestic trust.
C. 0% because non-U.S. not entitled to marital deductions.
D. 0% because the property must be in a qualified terminable interest property (QTIP) trust. -
Answers A. 100%
H has a $17,000,000 estate. He has children by his first wife. His second wife has two children
by a previous marriage. H wants to provide exclusively for W2 during her life, pay no federal
estate taxes at his death, minimize federal estate taxes at W2's death, and ensure that when W2
dies, his estate will go to his children, not hers. You suggest H ask his lawyer about establishing
a credit shelter bypass trust to be funded with the full exemption equivalent amount, with W2 as
income beneficiary and his children as remainder beneficiaries. He could then put the balance
of his estate in a trust that would qualify for the marital deduction and pass to his children at
W2's death. To accomplish this, you should recommend a(n):
A. Grantor Retained Income Trust (GRIT).
B. estate trust.
C. Qualified Terminable Interest Property (QTIP) trust.
D. testamentary general power of appointment marital trust. - Answers C. Qualified Terminable
Interest Property (QTIP) trust.
Which of the following would not qualify for the federal estate tax marital deduction?
A. A qualified terminable interest property (QTIP) trust.
B. Royalty rights from the publication of a book.
C. A bequest of tangible personal property.
D. A life estate conditioned on no remarriage. - Answers D. A life estate conditioned on no
remarriage.
Which of the following is typical of a marital deduction trust?
, A. Income is distributed at the trustee's discretion.
B. The grantor's children can exercise a power of appointment over principal.
C. The surviving spouse has the unrestricted right to receive income.
D. The surviving spouse is not entitled to any income. - Answers C. The surviving spouse has the
unrestricted right to receive income.
What kind of funding formula is the following?
"If my spouse, ____________, survives me, my Executor shall set aside the fractional
share of my residuary estate that is hereinafter described. The numerator of the fraction shall
be... The denominator of the fraction shall be..."
A. Pecuniary
B. Pre-residuary
C. Residuary
D. Fractional - Answers D. Fractional
What is the following language called?
"I give all the rest of my property, hereinafter referred to as "my residuary estate", to the
Trustee(s) under the trust agreement dated ____________, between myself as grantor and
____________ as Trustee(s), to be added to the corpus of such trust and held, administered, and
distributed by said Trustee(s) in accordance with the terms of such trust agreement."
A. A power of appointment
B. A "pour over" provision
C. A pecuniary bequest
D. A specific bequest - Answers B. A "pour over" provision
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. - 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. - 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.
- 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. - 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.
H's will creates a QTIP marital trust for the benefit of 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 made. - Answers D. will be
included in W's estate because a QTIP election was made.
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 - Answers B. A life or the lives of one or more persons
,Husband is not a U.S. citizen but is a resident alien. Wife is a naturalized citizen. Husband dies
leaving everything to his wife outright. How much of a marital deduction will his estate have?
A. 100%
B. 0% because the property must be in qualified domestic trust.
C. 0% because non-U.S. not entitled to marital deductions.
D. 0% because the property must be in a qualified terminable interest property (QTIP) trust. -
Answers A. 100%
H has a $17,000,000 estate. He has children by his first wife. His second wife has two children
by a previous marriage. H wants to provide exclusively for W2 during her life, pay no federal
estate taxes at his death, minimize federal estate taxes at W2's death, and ensure that when W2
dies, his estate will go to his children, not hers. You suggest H ask his lawyer about establishing
a credit shelter bypass trust to be funded with the full exemption equivalent amount, with W2 as
income beneficiary and his children as remainder beneficiaries. He could then put the balance
of his estate in a trust that would qualify for the marital deduction and pass to his children at
W2's death. To accomplish this, you should recommend a(n):
A. Grantor Retained Income Trust (GRIT).
B. estate trust.
C. Qualified Terminable Interest Property (QTIP) trust.
D. testamentary general power of appointment marital trust. - Answers C. Qualified Terminable
Interest Property (QTIP) trust.
Which of the following would not qualify for the federal estate tax marital deduction?
A. A qualified terminable interest property (QTIP) trust.
B. Royalty rights from the publication of a book.
C. A bequest of tangible personal property.
D. A life estate conditioned on no remarriage. - Answers D. A life estate conditioned on no
remarriage.
Which of the following is typical of a marital deduction trust?
, A. Income is distributed at the trustee's discretion.
B. The grantor's children can exercise a power of appointment over principal.
C. The surviving spouse has the unrestricted right to receive income.
D. The surviving spouse is not entitled to any income. - Answers C. The surviving spouse has the
unrestricted right to receive income.
What kind of funding formula is the following?
"If my spouse, ____________, survives me, my Executor shall set aside the fractional
share of my residuary estate that is hereinafter described. The numerator of the fraction shall
be... The denominator of the fraction shall be..."
A. Pecuniary
B. Pre-residuary
C. Residuary
D. Fractional - Answers D. Fractional
What is the following language called?
"I give all the rest of my property, hereinafter referred to as "my residuary estate", to the
Trustee(s) under the trust agreement dated ____________, between myself as grantor and
____________ as Trustee(s), to be added to the corpus of such trust and held, administered, and
distributed by said Trustee(s) in accordance with the terms of such trust agreement."
A. A power of appointment
B. A "pour over" provision
C. A pecuniary bequest
D. A specific bequest - Answers B. A "pour over" provision
