Deck 23: Estates and Trusts

Question 1

Under the amended Uniform Probate Code,if the decedent dies intestate,and if there are descendants from a prior marriage or relationship,the surviving spouse receives what?

A)$25,000 and 2/3 of the remaining intestate estate
B)$200,000 and 1/3 of the remaining intestate estate
C)$50,000 and 1/2 of the remaining intestate estate
D)$100,000 and 1/2 of the remaining intestate estate

Answer 1

D

Question 2

Which of the following are entitled to the remainder of the estate after all other rightful claims on the estate have been satisfied?

A)Remainder beneficiaries
B)Residual beneficiaries
C)Alternate beneficiaries
D)Secondary beneficiaries

Answer 2

B

Question 3

The executor or administrator of a will is required to prepare and file an inventory of property owned by the deceased within what time period?

A)One month of appointment
B)Two months of appointment
C)Three months of appointment
D)45 days of appointment

Answer 3

C

Question 4

In reference to accounting for trusts or estates,which of the following statements is correct?

A)Estates are subject to taxation,but trusts are not.
B)Estates are subject to probate laws that vary widely across the fifty states.
C)Estates are subject to income taxes at the federal level,but not at the state level.
D)Estates and trusts are taxed regardless of size.

Question 5

Under the Uniform Probate Code,the personal representative must inform the heirs and devisees of his or her appointment and provide other selected information within how many days of the appointment?

A)10 days
B)20 days
C)30 days
D)60 days

Question 6

In reference to the Uniform Probate Code,which of the following statements is correct?

A)The Code entitles the surviving spouse to a homestead allowance that is exempt from,and has priority over,all claims against the estate.
B)The Code provides a homestead allowance to the surviving spouse of $100,000.
C)The Code provides an allowance for dependents,after other claims have been settled.
D)The Code entitles the surviving spouse to claim 100% of the estate after claims to third-parties are settled.

Question 7

In reference to estates,which of the following statements is correct?

A)An estate comes into existence at the death of an individual.
B)If the deceased person had a valid will at the time of death,he or she is said to have died intestate.
C)The heir receiving the largest portion of the estate is typically appointed the executor.
D)Claims may be made for up to seven years against an estate.

Question 8

Avery died testate early in 2014.The following transactions occurred relating to Avery's estate.
1.Avery's estate included bonds with a fair (market)value of $120,000.On the date of Avery's death,there was $2,000 of accrued but unpaid interest.Two months after Avery's death,a check arrived in the amount of $3,000,representing the normal semiannual interest payment.
2.Avery's will stated a specific transfer to the Bird Sanctuary in the amount of $10,000.Avery's estate should be adequate to cover all obligations and devises,and the amount is paid.
3.Funeral expenses amounted to $12,500.
4.A bank statement is received from the First National Bank indicating a cash balance of $8,600.This bank account was not known or included on the estate inventory.
5.Probate fees are paid to the court amounting to $900.
Required:
Prepare the journal entries for the listed transactions.Disregard the impact of estate and income taxes.

Question 9

In reference to the probate process,which of the following statements is correct?

A)The personal representative of the deceased can file a petition with the appropriate probate court requesting that an existing will be probated.
B)The Uniform Probate Code varies from state to state.
C)The Uniform Probate Code is applied to all wills found to be valid,and to wills found to be invalid in probate court.
D)The Uniform Probate Code is applied to all wills found to be valid,but not to wills found to be invalid in probate court.

Question 10

Under the Uniform Probate Code,the personal representative must publish for what time period a notice in a newspaper of general circulation in the county in which the decedent resided?

A)For one week
B)For two weeks
C)For three weeks
D)For five weeks

Question 11

What is the current annual gift amount that can be left to an individual donee,without being subject to a federal gift tax?

A)$6,500
B)$14,000
C)$19,500
D)$26,000

Question 12

Which of the following is a gift of an object to a devisee?

A)A general devise
B)A specific devise
C)A testamentary allocation
D)An administrative devise

Question 13

Under the Uniform Probate Code,the term "personal representative" refers to which of the following?

A)An executor,but not an administrator
B)An administrator,but not an executor
C)Neither an executor nor an administrator
D)Either an executor or an administrator

Question 14

Which type of trust is created pursuant to a will?

A)A testamentary trust
B)A Crummey trust
C)A generation-skipping trust
D)A life estate trust

Question 15

What is the document prepared by the executor or administrator to show accountability for estate property received and maintained or disbursed in accordance with the will?

A)The Administrator/Executor's Fiduciary Report
B)The charge-discharge statement
C)The Administrator/Executor's Testamentary Report
D)The Administrator/Executor's Principal/Income Report

Question 16

Under the Revised Uniform Principal and Income Act,gains or losses incurred on investments that occur after the death of the decedent

A)are considered to be income of the estate.
B)are included in the inventory fair value at the time of death.
C)are taxed separately from other estate income.
D)are adjustments to the principal of the estate.

Question 17

In reference to estate principal and income,which of the following statements is correct?

A)A primary reason for dividing estate principal and estate income is that the beneficiaries are often different.
B)In accounting for the decedent's estate,the receipts earned but not yet received at the date of death are considered estate income.
C)After death,earnings from income-producing property owned at the time of death are considered estate principal.
D)Expenses incurred after death to administer the estate are first charged against income earned after death.

Question 18

Which of the following phrases is frequently used to refer to estate or trust accounting?

A)Non-profit accounting
B)Testamentary accounting
C)Fiduciary accounting
D)All of the above phrases are used to refer to estate or trust accounting.

Question 19

In reference to the potential taxation of an estate,which of the following statements is correct?

A)An estate may be subject to taxation at both the state and federal level.
B)The taxable amount of an estate is based on the book values of all estate assets at the date of death.
C)The estate value is not reduced by such expenses as funeral expenses,bequests to qualified charities,or state-level taxes.
D)Taxable estate assets do not include proceeds from life insurance policies.

Question 20

If estate assets are insufficient to pay all claims in full,under the Uniform Probate Code which of the following would be paid first?

A)Reasonable funeral expenses
B)Necessary medical and hospital expenses of the last illness of the decedent
C)Unsecured debts
D)The costs and expenses of administration of the estate

Question 21

You are serving as the executor for the estate of Dr.Mary Carlson.The following transactions occur during August 2014.Dr.Carlson died on July 30,2014.
1.On August 6,you received interest of $3,000 on State of Colorado general revenue bonds.Interest of $1,600 was earned after the date of death.The balance was earned prior to death,and had been accrued.The bonds were included in the estate's initial inventory.The maturity value and fair market values of the bond are $100,000.
2.On August 11,you issued a check to pay a probate court fee of $1,120.
3.The estate included 10,000 shares of Dasher International's common stock,valued at $40 per share,which were properly included in the estate's initial inventory.On the date of her death,there were no outstanding dividends receivable.On August 14,you read that a dividend of $1 per share was declared.
4.In Mary's will,she wanted $100,000 given to the National Zoo.After examining the assets,you determined that the estate's assets will adequately cover all expenses and specific devises,so on August 23,you issued a check to the Zoo for $100,000.
5.On August 25,you issued a check to pay Mary's final medical expenses of $16,700.
6.On August 28,you received a check for $10,000 for the common stock dividends paid by Dash International.
Required:
Prepare the necessary journal entries for the above transactions.You may ignore any estate or income taxes.

Question 22

Silvia Peacock has been appointed to serve as the executor of the estate of Mr.Mickey Babay,who passed away at the age of 104 on April 5,2011.On April 5,2011,Mr.Babay's assets consisted of the following:

The probate court has ruled that any other personal effects may be excluded from Mr.Babay's estate inventory.
Required:
Prepare an inventory of estate assets on April 5,2011.

Question 23

Mason Dixon dies on November 30,2014,leaving a valid will.The will reads as follows:
"I leave my boat to my son,George.I leave my automobile to my daughter,Georgia.I leave the income on my estate to be divided equally between George and Georgia.Estate expenses are to be paid from principal,not estate income.All other property,I leave to a trust to care for my wife,Gladys.Any remaining property at the time of her death is to be transferred into a trust to pay college education expenses of my grandchildren until such time as it is used up.I name my wife,Gladys,as executrix of my estate."
Gladys prepares an estate inventory for all assets discovered and files the appropriate notice to potential creditors on December 15.
A check for interest is received of $5,000,and estate liabilities (such as funeral expenses,administrative costs,and taxes)are settled for $20,000.The will is administered.
Required:
Prepare a charge-discharge statement for the estate of Mason Dixon on December 31,2014.Assume the life insurance proceeds have not been paid out.

Question 24

John Doe's will states that all assets he had should be transferred to a trust to cover living expenses for his spouse,who he feels will not be able to handle her own financial affairs without advice and supervision.Upon his spouse's passing,the trust will be converted to cash and distributed to their only daughter,Jane.The probate court already ruled on which assets could be excluded from the estate,and all tax issues were addressed,leaving the following inventory of assets from the estate:

Required:
Prepare the journal entry for the creation of the trust.

Question 25

Warren Peace passed away,with his will leaving the bulk of all his worldly possessions to his friend Leo.The following transactions occurred with respect to Warren's estate.
1.Warren's estate inventory included 10,000 shares of Newberry Industries,selling at the time of Warren's death at $56 per share.There were no outstanding dividends at the time Warren died,but two weeks later,a $1.00 per share dividend was declared.
2.Warren only designated one item that was not to be left to Leo.Warren's family had a signed,first-edition copy of a classic novel that was valued and included in the estate inventory at $67,000,which Warren left to the local library.The book is located and delivered.
3.Funeral expenses are paid in the amount of $7,880.
4.A statement comes from the insurance company indicating there are multiple charges from Warren's final hospital stay that will not be covered and are the responsibility of the estate.These fees amount to $39,000 and were not known at the time the estate inventory was prepared.The charges are confirmed and will be paid when the separate bills arrive from the hospital and professionals who billed them to the insurance company.
5.A check is received from Newberry Industries for the dividends declared in the first transaction,above.
Required:
Prepare the journal entries for the listed transactions.Disregard the impact of estate and income taxes.

Question 26

You are serving as the executor for the estate of Scott Michaels,who passed away on June 28,2014.The following transactions occur during the balance of June and July,2014.
1.On July 11,you issued a check to pay Scott's final medical expenses of $28,000.
2.In Scott's will,he wanted $90,000 given to the American Society for the Prevention of Cruelty to Animals (ASPCA).After examining the assets,you determined that the estate's assets will adequately cover all expenses and specific devises,so on July 13,you issued a check to the ASPCA for $90,000.
3.On July 15,you received a check in the amount of $27,900 from First State Bank of Greenville.It is the maturity value and interest from a certificate of deposit in the amount of $25,000 that was not included in the estate's initial inventory.The CD matured on June 30,2014.
4.On July 26,you received interest of $2,000 on Greenville City bonds.Interest of $180 was earned after the date of death.The balance was earned prior to death,and had been accrued.The bonds were included in the initial inventory.
5.On July 28,you issued a check to pay Scott's funeral expenses of $7,600.
Required:
Prepare the necessary journal entries for the above transactions.You may ignore any estate or income taxes.

Question 27

Oscar Lloyd is serving as the executor for the estate of Dixie Cooper,who passed away on January 28,2011,at the age of 98.Dixie's estate consisted of Treasury bonds with a maturity value and fair market value of $1,400,000,$4,000 in her checking account,and $50,000 in a Certificate of Deposit with First State Bank of Springfield.Total accrued interest at the time of death was $44,000,made up of $2,000 from the CD and $42,000 from the bonds.
Dixie left a valid will,which provided that most of her estate would be inherited by her two nephews,Jimmy Johns and Joey Johns.In addition,Dixie provided that $200,000 be transferred to a trust account for her faithful cats,Petra and Hobbes.Income from the trust would be used to care for Hobbes and Petra.Upon their passing,the remaining funds would then transfer to Operation Kindness,an organization that cares for cats and dogs.
Mr.Lloyd will also serve as the fiduciary for the trust.He has determined that no state or federal inheritance taxes are due.The limited estate income is also free from any federal or state income tax.The following transactions occurred during February.
1.On February 3,Oscar sold the treasury bonds for $1,460,000.$1,400,000 was for the fair market value of the bonds,$42,000 was for interest accrued to the time of Dixie's death,and the remaining $18,000 was for accrued interest since Dixie's death.Estate income will be used to pay final medical expenses,and if anything is left,funeral expenses.
2.On February 11,Oscar issued a check to pay Dixie's final medical expenses of $11,900.
3.On February 15,Oscar received a check in the amount of $52,000 from First State Bank of Springfield.It is the maturity value and interest from a certificate of deposit in the amount of $50,000.The CD matured on January 22,2011.
4.In Dixie's will,she wanted to give $150,000 to the American Humane Society.After examining the assets,Oscar determined that the estate's assets will adequately cover all expenses and specific devises,so on February 3,he issued a check to the organization for $150,000.
5.On February 18,Oscar transferred $200,000 to a trust account at First State Bank to fund the trust,to care for the cats.
6.On February 25,Oscar issued a check to pay Dixie's funeral expenses of $9,800.
7.On February 26,Oscar paid himself the $4,000 executor's fee specified in Dixie's will.
8.On February 28,Oscar finalized the estate and transferred the balance of the estate's assets equally between Dixie's nephews,Jimmy Johns and Joey Johns.
Required:
1.Prepare an inventory of estate assets at the time of Dixie's death and record the necessary journal entries to create the estate.
2.Prepare journal entries to record the estate's transactions during February.

Question 28

Oscar Lloyd is serving as the executor for the estate of Dixie Cooper,who passed away on January 28,2014,at the age of 98.Dixie's estate consisted of Treasury bonds with a maturity value and fair market value of $1,400,000,$4,000 in her checking account,and $50,000 in a Certificate of Deposit with First State Bank of Springfield.Total accrued interest at the time of death was $44,000,made up of $2,000 from the CD and $42,000 from the bonds.
Dixie left a valid will,which provided that most of her estate would be inherited by her two nephews,Jimmy Johns and Joey Johns.In addition,Dixie provided that $200,000 be transferred to a trust account for her faithful cats,Petra and Hobbes.Income from the trust would be used to care for Hobbes and Petra.Upon their passing,the remaining funds would then transfer to Operation Kindness,an organization that cares for cats and dogs.
Mr.Lloyd will also serve as the fiduciary for the trust.He has determined that no state or federal inheritance taxes are due.The limited estate income is also free from any federal or state income tax.The following transactions occurred during February.
1.On February 3,Oscar sold the treasury bonds for $1,460,000.$1,400,000 was for the fair market value of the bonds,$42,000 was for interest accrued to the time of Dixie's death,and the remaining $18,000 was for accrued interest since Dixie's death.Estate income will be used to pay final medical expenses,and if anything is left,funeral expenses.
2.On February 11,Oscar issued a check to pay Dixie's final medical expenses of $11,900.
3.On February 15,Oscar received a check in the amount of $52,000 from First State Bank of Springfield.It is the maturity value and interest from a certificate of deposit in the amount of $50,000.The CD matured on January 22,2014.
4.In Dixie's will,she wanted to give $150,000 to the American Humane Society.After examining the assets,Oscar determined that the estate's assets will adequately cover all expenses and specific devises,so on February 3,he issued a check to the organization for $150,000.
5.On February 18,Oscar transferred $200,000 to a trust account at First State Bank to fund the trust,to care for the cats.
6.On February 25,Oscar issued a check to pay Dixie's funeral expenses of $9,800.
7.On February 26,Oscar paid himself the $4,000 executor's fee specified in Dixie's will.
Assume that on February 28,2014,Oscar finalized the estate and transferred the balance of the estate assets to Dixie's nephews,Jimmy Johns and Joey Johns.Each received one-half of the residual estate.
Required:
1.Prepare the closing entry on February 28,2014.
2.Prepare the charge-discharge statement for the estate of Dixie Cooper for the period January 28 through February 28,2014.

Question 29

Cindy Lou's parents passed away while she was still dependent on them,and their will designated that a trust should be established with their estate proceeds to care for her.The following transactions occurred in the first two months following their deaths.
1.The trust account was opened with the $2,000,000 in funds received from the estate.The funds were deposited into a non-interest bearing checking account to be used for expenses.
2.$1,500,000 was put into a multi-year certificate of deposit which earned 3% annually,with interest paid monthly back to the checking account.
3.One month's interest from the certificates of deposit was received.
4.The bank's trust administration fee was paid for $65.
5.Tuition was paid for the boarding school where Cindy Lou was living for $6,500.
Required:
Prepare the journal entries for the listed transactions.Disregard the impact of estate and income taxes.

Question 30

Philiam Benedict dies on October 1,2014,leaving his entire estate to his sole surviving niece,Muriel Finster.After all devise distributions and payments for estate expenses and liabilities,the fair value of Philiam's estate is $6,350,000.
Required:
Calculate the federal estate tax on Philiam's estate,assuming that federal estate taxes are paid at the 45% rate.

Question 31

Mary Contrary is the executor for the estate of Belle Silver.Belle owned a home with a fair value of $200,000.The home has a remaining mortgage amount of $80,000.Mary also has personal effects worth $8,000,an investment portfolio with a fair value of $150,000 on the date of death,and approximately $7,500 in cash in various accounts.The home was left to her daughter in the valid will that Belle had executed prior to her death.
Belle did not have a surviving spouse,but her daughter is a minor,who is independently wealthy after inventing a cutting-edge software program.The state in which Belle resided,allows a $15,000 homestead allowance,and a $10,000 personal effects entitlement.
After taking an inventory,and converting all of the assets,except for the home and the personal effects,into cash,there is $159,000 for Mary to distribute to the appropriate devises,beneficiaries,and creditors.
Mary has identified the following expenses and devises:
1.Belle's unpaid final medical expenses were $24,000.
2.Belle left a devise of $100,000 to her church.
3.The costs and expenses of administering the estate were $21,000.
4.Real estate taxes of $3,600 are past due.
5.The unpaid funeral expenses were $8,700.
Required:
Prepare a schedule that will list the disbursements of assets.Assume that the state in which Belle resided has adopted the Uniform Probate Code.

Question 32

Buddy,a dog,is cared for by a trust set up by his owner's will.The following transactions occurred for the trust.
1.The trust was established with $100,000 from his owner's estate,by deposit to a savings account.
2.A check is written to Paws and Claws Puppy Farm to cover the first month of Buddy's room and board,for $680.
3.A check is received for interest earned on the savings account amounting to $417.
4.Buddy dies.Paws and Claws sends a final room and board bill for $430,with additional charges for Buddy's burial of $270.The invoice is paid.
5.The balance of the trust is turned over to the Humane Society,as prescribed by Buddy's owner's will,and the trust is closed.
Required:
Prepare the journal entries for the listed transactions.Disregard the impact of estate and income taxes.

Question 33

Rusty Nail died in the summer of 2014.The following transactions occurred relating to Rusty's estate.
1.Rusty's estate included a $50,000 Certificate of Deposit.When Rusty died,there was $250 accrued but unpaid interest.When the check was received for the normal semiannual interest payment,it was in the amount of $1,250.
2.Rusty's will requested a specific transfer to the local playhouse in the amount of $20,000.Avery's estate should be adequate to cover all obligations and devises,and the amount is paid.
3.A fee for probate court is paid amounting to $1,400.
4.Funeral expenses are paid amounting to $13,000.
5.A bill is received from the anesthesiologist relating to Rusty's last hospital stay for $22,000.The bill is not covered by insurance,and was not included in the estate inventory.The bill is verified and paid.
Required:
Prepare the journal entries for the listed transactions.Disregard the impact of estate and income taxes.

Question 34

Richard Stands passed away at on September 2,2011.The probate court ruled that most assets could be excluded from estate inventory.Ty Republic has been appointed to serve as executor for the estate.The estate assets consisted of the following at that date:

Required:
Prepare an inventory of estate assets as of September 2,2011.

Question 35

Suzanne Quincy passed away on October 25,2014.Suzanne left behind a limited estate,so there are no tax issues to address,however,she owned a dog,Buddy,and Suzanne provided for Buddy in the will.Suzanne left $100,000 for Buddy's care,and the remainder of her estate was left to her neighbor,Agnes.Suzanne's estate had the following events and transactions in the month following her death.
1.Her assets were converted to cash at their fair value as inventoried: Mutual funds,$270,000;and Residence,$209,000.There were no other reportable assets.
2.Transferred $100,000 to a trust account at Second National Bank to provide care for Buddy,and delivered Buddy to Paws and Claws Pet Farm,his new home.
3.Wrote check to pay for funeral expenses for $9,600.
4.Wrote check to pay for executor fees as designated in the will of $1,000.
5.Wrote check to pay balance of estate to Agnes.
Required:
Prepare the journal entries for the listed transactions.Disregard the impact of estate and income taxes.

Question 36

Oscar Lloyd is the trustee for the Petra/Hobbes Trust.The following transactions occurred during 2014.Petra and Hobbes,two cats are going to reside with Oscar Lloyd,the trustee and devoted cat lover.
February 18 The Petra/Hobbes Trust was established at First State Bank by depositing $200,000 cash.
February 19 $195,000 was deposited into a three-year certificate of deposit earning 6% a year.Interest is paid semi-annually.$5,000 was deposited into a money market account paying 4% annual interest.Interest is paid on the average daily balance for the past year.
February 20 Paid $368 for cat food,cat toys,and kitty litter at Cats R Us.
February 24 Bought assorted cat DVDs for Hobbes and Petra.The DVDs were a combination of fish,bird,and squirrel movies.Paid $182 for the DVDs.
June 25 Paid $405 for cat food,toys,and kitty litter.
August 19 Deposited one-half year's interest income of $5,850 into the money market account.
December 22 Paid $722 for cat food,cat toys,kitty litter,Christmas presents for Petra and Hobbes.
Required:
Prepare the necessary journal entries for the above transactions.You may ignore any tax effects.