Deck 2: Estate Planning

Question 1

The tools available to the estate planner are limited to wills, trusts, gifts, insurance, and powers of appointment.

Answer 1

False

Question 2

Under the split-gift provision of the Internal Revenue Code, two parents of three children can give to the children tax free each year as much as

A) $13,000.
B) $26,000.
C) $39,000.
D) $78,000.

Answer 2

D

Question 3

Living trusts may be

A) charitable.
B) revocable.
C) irrevocable.
D) All of the answers are correct.

Answer 3

D

Question 4

An estate planning questionnaire should be completed by the client and returned to the lawyer before any discussion of specific family estate planning proposals.

Question 5

An inter vivos gift is a gift made after one's death.

Question 6

Estate planning is sometimes called a science rather than an art.

Question 7

The estate planner must establish and make clear the client's residence.

Question 8

A donor can give to each of any number of donees, without any tax consequences, the sum of

A) $1,000.
B) $5,000.
C) $13,000.
D) $60,000.

Question 9

Parents who give their child an interest-free loan are required to declare interest income at the applicable federal rate if the loan is more than

A) $10,000.
B) $15,000.
C) $20,000.
D) $25,000.

Question 10

Term insurance is used for a particular time period, such as 1, 5, or 10 years.

Question 11

Sometimes estate taxes can be saved by disclaiming an inheritance.

Question 12

Limited payment life insurance has a cash surrender value.

Question 13

A special power of appointment limits the appointment of property to a specified class of persons named by the donor.

Question 14

Estate planning after a person dies is much too late and has no advantages.

Question 15

The main purpose of all family estate planning is to obtain the maximum benefits of principal and income for the family and to pass on the family property intact.

Question 16

Trusts may be used by estate planning specialists to reduce problems created by joint ownership.

Question 17

Trusts may be created so that they come into effect when one is alive or after one passes away.

Question 18

To save file space, it is recommended that any handwritten notes taken by the attorney and the legal assistant during the client interview be discarded after the instruments are executed.

Question 19

A donee is a person making a gift to another or giving another person power to do something.

Question 20

The single most important estate planning instrument is

A) a trust.
B) a will.
C) life insurance.
D) a power of appointment.

Question 21

A right created in a will, trust, or other instrument that allows the holder to direct the disposition of property is

A) a power of appointment.
B) a split-gift provision.
C) a testamentary provision.
D) None of the answers is correct.

Question 22

A completed gift is a donation

A) that is placed beyond the dominion and control of the donor.
B) given under a revocable trust by a settlor who is still alive.
C) made to a charity in a will by a testator who is still alive.
D) None of the answers are correct.

Question 23

Under federal tax law, a qualified disclaimer must be

A) in writing.
B) received within a specified period.
C) received prior to the acceptance of any benefits.
D) All of the answers are correct.

Question 24

Members of a partnership who partly or fully finance a business, take no part in running it, and have no liability for partnership debts beyond the money they put in or promise to put in are known as

A) limited partners.
B) general partners.
C) a family limited partnership.
D) All of the answers are correct.

Question 25

A policy that provides both protection and a fund available during the insured's lifetime if the insured survives to the end of the policy period is a(n)

A) limited-payment life policy.
B) endowment policy.
C) whole life policy.
D) term policy.

Question 26

A company-sponsored retirement plan in which an employee agrees either to take a salary reduction or to forgo a bonus to provide money for retirement is known as a

A) traditional IRA.
B) Roth IRA.
C) Keogh plan.
D) 401(k) plan.

Question 27

Insurance that furnishes maximum protection for the period of coverage at minimum cost is

A) straight life insurance.
B) whole life insurance.
C) term insurance.
D) limited-payment life insurance.

Question 28

Insurance that provides lifetime protection, builds up a cash surrender value, and must be paid for life is

A) whole life insurance.
B) ordinary life insurance.
C) straight life insurance.
D) All of the answers are correct.

Question 29

This type of trust can be created to protect the interests of the beneficiaries who might spend trust funds unwisely.

A) A QTIP trust
B) A dynasty trust
C) A charitable trust
D) A spendthrift trust

Question 30

This estate planning tool is used by estate planners to pass assets on to a future generation, provide income for people during their lives, and prevent family assets from being mismanaged or spent unwisely.

A) A will
B) A life insurance policy
C) A trust
D) An inter vivos gift