CFP – Estate Planning (2025/2026 Latest Exam
Prep) | Complete Study Guide & Verified
Practice Q&A
3 objectives of Estate Planning - correct answer1) Preserve & protect wealth
2) Use wealth as desired
3) Pass greatest amount possible to beneficiaries
Bargain Sale - correct answerAsset 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 answerTestator (male) or Testatrix
(female)
Said to die Testate
Person who dies with no valid will is said to die in.... - correct answerTotal Intestacy
Person who dies with valid will that does not dispose of all assets is said to die in.... -
correct answerPartial Intestacy
Will substitutes - correct answer1) Designation of recipient prevails over contrary
designation in a will
2) 2 methods of transfer:
-- Right of survivorship
-- Beneficiary designation
Legal Interest definition - correct answerRight to manage & transfer property
Beneficial or Equitable Interest definition - correct answerRight to use, consume, or
enjoy property
2 subclasses of Beneficial/Equitable Interest - correct answer1) 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 answerAn 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 answerAn interest that will
terminate after precise period of time
Power of attorney - correct answerGives someone (attorney-in-fact) power to perform
designated act as the principal directs
Power of appointment - correct answerClause 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 answer1) 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 answerGOOD - can benefit
himself/herself by exercise of power
BAD - can be subject to gift tax
Ways a Power of Appointment can be used - correct answer1) Exercise it
2) Release it
3) Let it Lapse
Noncumulative vs Cumulative Power of Appointment - correct answerNoncumulative =
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 answerFee Simple or Fee Simple
Absolute
Community Property - correct answer1) 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 answer1) 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 answer1) 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 answer1) 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 answer1) Preserving business value
2) Maximizing premortem and postmortem flexibility
3) Maximizing benefits for surviving spouse
4) Minimizing nontax transfer costs
5) Maintaining satisfactory standard of living
6) Maintaining adequate premortem and postmortem liquidity
7) Tax Goals re: income tax
8) Shifting receipt of income
9) Shifting taxation of income
10) Obtaining a stepped-up basis
11) Deferring the recognition of income and gain
12) tax goals related to transfer taxes
13) Freezing or reducing value of assets subject to tax
14) Leveraging use of exclusions, exemptions, reductions, credits
15) Delaying payment of tax due
Common Estate Planning Mistakes - correct answer1) Failure to recommend necessary
changes to will
2) Improper disposition of assets
3) Improper Titling of Assets
4) Improperly Arranged Life Ins
5) Lack of Estate Liquidity
6) Failure to Avoid Ancillary Probate
7) Failure to Provide Business Planning
, 8) Failure to Minimize Taxes & Costs
9) Failure to Give Proper Advice re: Funeral Arrangements
tenancy by the entirety - correct answer• shared equally
• spouses only
• consent of both to act
Tenancy in Common - correct answer• each tenant owns undivided fractional interest
• consent if others is NOT required
•
Quasi-community property - correct answerif separately owned property would have
been community property had it been acquired in comm prop state, nontitled spouse will
be half interest.
Spousal elective share - correct answer- In common law states
- Spouse of decedent can elect; must "trade" assets bequethed to him/her in PROBATE
ASSETS
- Formula: 1/2 Probate estate - non-probate inherited assets - assets bequethed in will
Abatement - correct answerStatute specifying order in which shares of decedent's
estate is used to pay creditors.
Ademption - correct answerClarifies how beneficiary of specific bequest is treated if
property bequeathed is no longer available.
Clauses of a Will - correct answer1) Preliminary
a. Introductory/Exordium
b. Death Tax
c. Family statement
2) Dispositive (language must be commanding)
a. Devise
b. Bequest or legacy
c. Residuary
d. Distributions to trusts
e. Distributions to classes
3) Appointment
a. Fiduciary Appointment
b. Fiduciary Powers
4) Concluding
Devise clause - correct answerTransferring title to real property
Prep) | Complete Study Guide & Verified
Practice Q&A
3 objectives of Estate Planning - correct answer1) Preserve & protect wealth
2) Use wealth as desired
3) Pass greatest amount possible to beneficiaries
Bargain Sale - correct answerAsset 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 answerTestator (male) or Testatrix
(female)
Said to die Testate
Person who dies with no valid will is said to die in.... - correct answerTotal Intestacy
Person who dies with valid will that does not dispose of all assets is said to die in.... -
correct answerPartial Intestacy
Will substitutes - correct answer1) Designation of recipient prevails over contrary
designation in a will
2) 2 methods of transfer:
-- Right of survivorship
-- Beneficiary designation
Legal Interest definition - correct answerRight to manage & transfer property
Beneficial or Equitable Interest definition - correct answerRight to use, consume, or
enjoy property
2 subclasses of Beneficial/Equitable Interest - correct answer1) 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 answerAn 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 answerAn interest that will
terminate after precise period of time
Power of attorney - correct answerGives someone (attorney-in-fact) power to perform
designated act as the principal directs
Power of appointment - correct answerClause 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 answer1) 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 answerGOOD - can benefit
himself/herself by exercise of power
BAD - can be subject to gift tax
Ways a Power of Appointment can be used - correct answer1) Exercise it
2) Release it
3) Let it Lapse
Noncumulative vs Cumulative Power of Appointment - correct answerNoncumulative =
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 answerFee Simple or Fee Simple
Absolute
Community Property - correct answer1) 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 answer1) 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 answer1) 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 answer1) 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 answer1) Preserving business value
2) Maximizing premortem and postmortem flexibility
3) Maximizing benefits for surviving spouse
4) Minimizing nontax transfer costs
5) Maintaining satisfactory standard of living
6) Maintaining adequate premortem and postmortem liquidity
7) Tax Goals re: income tax
8) Shifting receipt of income
9) Shifting taxation of income
10) Obtaining a stepped-up basis
11) Deferring the recognition of income and gain
12) tax goals related to transfer taxes
13) Freezing or reducing value of assets subject to tax
14) Leveraging use of exclusions, exemptions, reductions, credits
15) Delaying payment of tax due
Common Estate Planning Mistakes - correct answer1) Failure to recommend necessary
changes to will
2) Improper disposition of assets
3) Improper Titling of Assets
4) Improperly Arranged Life Ins
5) Lack of Estate Liquidity
6) Failure to Avoid Ancillary Probate
7) Failure to Provide Business Planning
, 8) Failure to Minimize Taxes & Costs
9) Failure to Give Proper Advice re: Funeral Arrangements
tenancy by the entirety - correct answer• shared equally
• spouses only
• consent of both to act
Tenancy in Common - correct answer• each tenant owns undivided fractional interest
• consent if others is NOT required
•
Quasi-community property - correct answerif separately owned property would have
been community property had it been acquired in comm prop state, nontitled spouse will
be half interest.
Spousal elective share - correct answer- In common law states
- Spouse of decedent can elect; must "trade" assets bequethed to him/her in PROBATE
ASSETS
- Formula: 1/2 Probate estate - non-probate inherited assets - assets bequethed in will
Abatement - correct answerStatute specifying order in which shares of decedent's
estate is used to pay creditors.
Ademption - correct answerClarifies how beneficiary of specific bequest is treated if
property bequeathed is no longer available.
Clauses of a Will - correct answer1) Preliminary
a. Introductory/Exordium
b. Death Tax
c. Family statement
2) Dispositive (language must be commanding)
a. Devise
b. Bequest or legacy
c. Residuary
d. Distributions to trusts
e. Distributions to classes
3) Appointment
a. Fiduciary Appointment
b. Fiduciary Powers
4) Concluding
Devise clause - correct answerTransferring title to real property
