Deck 26: Estates and Trusts

Question 1

The person who creates a trust is known as the beneficiary.

Answer 1

False
Explanation: The person who creates a trust is known as the settlor or trustor.

Question 2

A personal representative to an estate is also known as an executor.

Answer 2

True
Explanation: Personal representative is also known as an executor of an estate.

Question 3

A durable power of attorney terminates when the principal becomes incapacitated.

Answer 3

False
Explanation: A power of attorney terminates upon the principal's incapacity,but a durable power of attorney will not affected by the principal being incapacitated.

Question 4

The probate process involves collecting the decedent's property,paying off debts,and distributing the remaining property to others.

Question 5

A testator can revoke a will before his death.

Question 6

In some states the birth of a child will cause a will to be revoked.

Question 7

If an individual dies without a will,then they are said to have died intestate.

Question 8

The term codicil refers to an amendment to will.

Question 9

The residuary is the remaining property of a person's estate after bequests and devises have been made.

Question 10

Property held in joint tenancy or tenancy by the entirety is not controlled by a will.

Question 11

An interested party in a will can be a witness to the will.

Question 12

A bequest in a will is a gift of personal property or money.

Question 13

A living will is a will under which bequests and devises to beneficiaries take place while the testator is still alive.

Question 14

In order to be valid,a holographic will must be typed.

Question 15

A person can have multiple domiciles at a time.

Question 16

A testator's children would be called his issue.

Question 17

A will confers no present interest in the testator's property.

Question 18

At the time of interpreting the will,the judge gives preference to the statements of the beneficiaries rather than the intention of the testator.

Question 19

A will that is not executed with the formalities required by state law is void.

Question 20

An estate is all of the property that an individual owns.

Question 21

What is the term for planning the transfer of an individual's assets during later life and at death?

A) Estate Planning
B) Probate
C) Corporate Giving
D) Intestate

Question 22

Incorporation by reference refers to:

A) the specification of heirs in a will without naming them,e.g. ,to my children.
B) the necessity that witnesses to a will do not benefit from it in any way.
C) the inclusion of extrinsic documents in a will.
D) the requirement that a will is executed according to state law.

Question 23

What is an amendment of a will called?

A) Bequest
B) Residuary
C) Advance directive
D) Codicil

Question 24

Which of the following debts in an estate is liable for if owed by the decedent at the time of death?

A) All of the decedent's debts
B) Only debts secured by the decedent's property
C) Only debts covered by the statute of frauds
D) Only consumer debts

Question 25

Which of the following is true of testamentary capacity?

A) A person must be in perfect mental health in order to have testamentary capacity.
B) A person must be 18 years of age (in most states)in order to have testamentary capacity.
C) A person must have personal property in order to have testamentary capacity.
D) A person must have real property in order to have testamentary capacity.

Question 26

What is a gift of real property called?

A) Residuary
B) Estate
C) Bequest
D) Devise

Question 27

Which of the types of wills is completely written and signed in the testator's handwriting?

A) Nuncupative wills
B) Holographic wills
C) Notarial wills
D) Self-proved wills

Question 28

A Totten trust is created to avoid fraud.

Question 29

A _____ is oral in nature.

A) nuncupative will
B) holographic will
C) notarial will
D) self-proved will

Question 30

A gift is given to the testator's issue or descendants,with each surviving descendant dividing the share that his or her parent would have taken if the parent had survived.This is known as division _____.

A) per stirpes
B) per capita
C) inter vivos
D) causa mortis

Question 31

A(n)_____ is a gift of personal property or money.

A) estate
B) bequest
C) will
D) deed

Question 32

Under the doctrine of cy pres,the trust will not fail if the settlor indicated a general intention to devote the property to charitable purposes.

Question 33

A joint will:

A) can only have a single beneficiary.
B) is only valid if the testators are a married couple.
C) is a single instrument that constitutes the will of both or all of the testators.
D) cannot be changed once it is created.

Question 34

Sarah is 75 years old.She has a serious illness,but she does not want to be kept alive by extraordinary medical technology.Specifically,she does not want to be kept alive by a respirator.Which of the following should Sarah use in order to make sure that her wishes are followed?

A) A living will
B) A codicil
C) A joint will
D) A nuncupative will

Question 35

If an ambiguity or conflict arises when people read and/or interpret a will,courts will:

A) look for evidence of the intent of the testator within the will.
B) ask the family members or beneficiaries for their preference(s).
C) appoint a probate referee to decide the future of the will.
D) declare it void or invalidate the will due to ambiguity in the will.

Question 36

Lineal descendants-the children and grandchildren of a person-are known as:

A) devises.
B) issues.
C) residuary.
D) obligees.

Question 37

Jim created a valid will in 2003.Three years later,he wanted to make some minor changes to the will.Jim wants to modify the provisions of his will without making an entirely new will.He can amend his will by adding a(n)_____.

A) bequest
B) residuary
C) advance directive
D) codicil

Question 38

When Rita Ryan died,she left a will naming her children,John and Dale,as the sole beneficiaries.In her will,Rita designated John as the executor of her estate and excused John from posting a bond as executor.At the time of Rita's death,she owned a parcel of land with her sister,Ann,as joint tenants with right of survivorship.With respect to Rita's interest in the land,it will pass to:

A) John and Dale outside Rita's estate by right of survivorship.
B) John and Dale through Rita's estate after the will is probated.
C) Ann through Rita's estate after the will is probated.
D) Ann outside Rita's estate by right of survivorship.

Question 39

Anna wants to create a will indicating that her favorite grandchild,Jesse,will inherit her house.Anna takes an ordinary sheet of paper and,in her own handwriting,states that it is her intent to leave her house to Jesse when she dies.She dates and signs the will,but there are no witnesses to it.Anna then tells her entire family about the will.Anna lives in a state where holographic wills are recognized,but nuncupative wills are not.Will Anna's will be recognized and followed?

A) Yes,because Anna's will is entirely in her handwriting.
B) No,because there were no witnesses present when Anna made her will.
C) No,because a will must always be witnessed.
D) Yes,because Anna's will has been already disclosed.

Question 40

Grandfather Summers had two children,Mary and Bill.Mary,her father's favorite,has one child,Margaret.Bill has two children,Jill and John.Mary and Bill die before Summers (in legal terms,predecease him),but all three grandchildren are living at the time of his death.Summers' estate has to be divided per capita.Who will get what?

A) The spouses of Mary and Bill will inherit the estate.
B) Mary's children will inherit the major share of the estate.
C) All three grandchildren will get an equal share.
D) The estate will go to a trust because Mary and Bill are dead.

Question 41

A personal representative of an estate would breach fiduciary duties if the personal representative:

A) combined personal funds with funds of the estate so that both could purchase treasury bills.
B) represented the estate in a lawsuit brought against it by a disgruntled relative of the decedent.
C) distributed property in satisfaction of the decedent's debts.
D) engaged a non-CPA to prepare the records for the estate's final accounting.

Question 42

A particular trust has income-producing real property as its sole asset.Which of the following trust proceeds or expenditures should be allocated to principal?

A) Annual payments on a fire insurance policy to protect trust property.
B) The cost of a long-term permanent improvement to trust property.
C) Rental income from the trust property.
D) Real estate taxes paid on trust property.

Question 43

A document that gives person A the right to act for person B,in the event,person A becomes incapacitated is known as a:

A) durable power of attorney.
B) living trust.
C) right of succession.
D) codicil.

Question 44

If the deceased had no surviving relatives,the property goes to _____.

A) the executor
B) a charity picked by an assigned trustee
C) his friends
D) the state

Question 45

A(n)_____ is a legal relationship in which a person who has legal title to property has the duty to hold it for the use or benefit of another person.

A) accession
B) lien
C) trust
D) codicil

Question 46

A trust that is established and effective during the settlor's lifetime is known as a(n)_____ trust.

A) causa mortis
B) per capita
C) per stirpes
D) inter vivos

Question 47

In the case of an intestate estate,the personal representative to it is called a(n)_____.

A) trustee
B) executor
C) administrator
D) beneficiary

Question 48

Krieg's will created a trust to take effect upon Krieg's death.The will named Krieg's spouse as both the trustee and personal representative (executor)of the estate.The will provided that all of Krieg's securities were to be transferred to the trust and named Krieg's child as the beneficiary of the trust.Which of the following is true under the circumstances?

A) Krieg has created a testamentary trust.
B) Krieg's spouse may not serve as both the trustee and personal representative.
C) Krieg has created a spendthrift trust.
D) The trust is invalid because securities cannot be transferred to a trust.

Question 49

Which of the following is not an essential element in the formation of a trust?

A) Conveyance of specific property
B) Proper purpose
C) Legal capacity
D) Appointment of trustee

Question 50

John died without leaving a will.He left a wife and two children.He lived in Boise,Idaho,and he owned a ski condo in Aspen,Colorado.How will John's ski condo be distributed upon his death?

A) The law of intestate succession of Idaho will be followed,because Idaho is the state where John was domiciled at the time of his death.
B) The law of intestate succession of Colorado will be followed,because Colorado is where John's condo is located.
C) The federal law of intestate succession will be followed,because John's property is located in more than one state.
D) The property will escheat to the State of Idaho.

Question 51

A trust that is established in a person's will and that takes effect only upon that person's death is called a(n):

A) inter vivos trust.
B) spendthrift trust.
C) Totten trust.
D) testamentary trust.

Question 52

A durable power of attorney for healthcare only becomes relevant when:

A) registered with the Secretary of State.
B) filed with the Department of Health.
C) the principal has become incompetent.
D) the hospital has received a $500 fee.

Question 53

Which of the following is most likely to breach one of the trustee's fiduciary duties?

A) Selling stock owned by the trust to realize capital gains.
B) Selling stock owned by the trust because it has declined in value over the last three years.
C) Delegating the selection of trust investments to an investment advisor.
D) Delegating the preparation of statements of account to an accountant.

Question 54

In intestate succession what is the term for the individuals that stand to inherit the decedent's assets?

A) Probate
B) Heirs
C) Incorporation
D) Executors

Question 55

The property held in trust is called the _____.

A) attachment
B) lien
C) corpus
D) accession

Question 56

A Totten trust is created when a person:

A) deposits money in a bank for the benefit of another.
B) directs in his will that a trust be created upon that person's death.
C) executes the creation using a holographic will.
D) opens a trust only for the benefit of poor people.

Question 57

If a person dies intestate,his real property will be distributed:

A) to the state in which the property is located.
B) to the state of the person's domicile.
C) according to the law of the state in which the property is located.
D) according to the law of the state of the person's domicile.

Question 58

The rule against perpetuities does not apply to a:

A) testamentary trust.
B) spendthrift trust.
C) charitable trust.
D) Totten trust.

Question 59

A person who is appointed under a will to look after the property of the deceased person is known as a(n):

A) obligee.
B) estate agent.
C) legal heir.
D) executor.

Question 60

Thomas wants to create an inter vivos trust for the benefit of his adult children.In order to create a valid inter vivos trust,he must have a level of mental capacity that is the same as that required to:

A) make a valid contract.
B) make a valid will.
C) stand trial in a criminal case.
D) testify under oath in a criminal case.

Question 61

Which of the following is true of a spendthrift trust?

A) The settlor can make himself the beneficiary.
B) It restricts the voluntary transfer of a beneficiary's interest.
C) Assignees can claim rights to it.
D) Creditors can claim rights to it.

Question 62

Before he died,Aaron created a charitable trust for the plantation of Analytica Beni trees,nominating David as his trustee.Some years later,planting Analytica Beni trees is declared illegal by the state.What remedies does David have available to him?

Question 63

Which of the following arises when there has been an incomplete disposition of trust property and the creation of a trust is necessary to effectuate a settlor's intent or avoid unjust enrichment?

A) Express trust
B) Spendthrift trust
C) Totten trust
D) Resulting trust

Question 64

Donald is the trustee of a trust set up by Simpson,with Adams as beneficiary.The trust property consists almost entirely of income-producing real property-office buildings,apartment complexes,etc.By putting a "P" or an "I" in the appropriate space,indicate whether the following fund transactions should be allocated to principal (P)or to interest (I).
___ 1.Rental income received from tenants on trust property.
___ 2.Capital gains realized from the sale of trust real estate.
___ 3.Property tax payments on trust property.
___ 4.Building management fees for trust property.
___ 5.Costs of ordinary repairs to trust property.
___ 6.Property insurance premiums on trust property.
___ 7.The cost of long-term permanent improvements to trust property

Question 65

When a person procures the transfer of property by means of fraud or duress,he becomes a(n)_____ and is under an obligation to return the property to its original owner.

A) constructive trustee
B) implied trustee
C) executor
D) administrator

Question 66

A distinguishing feature between the making of an inter vivos gift and the creation of a trust is that:

A) a gift may be made orally whereas a trust must be in a signed writing.
B) a gift is irrevocable whereas a trust may be revoked in certain cases.
C) in order to create a valid trust,the creator must receive some form of consideration.
D) the beneficiary of a trust must be notified of the trust's creation.

Question 67

Steve and Bob own real property as joint tenants with right of survivorship.Steve decided that he wanted to own the entire property himself,so he killed Bob.Due to a technicality,Steve was acquitted of any criminal charges.Nevertheless,Bob's heirs brought a civil suit against Steve.What would be the result,if the court accepts that Steve obtained the property illegally? Explain.

Question 68

Under exceptional circumstances in which the creation of a trust is necessary to effectuate a settlor's intent or avoid unjust enrichment,the law imposes a trust even though no express trust exists.This is known as a(n)_____ trust.

A) implied
B) spendthrift
C) Totten
D) blind

Question 69

Lyle and Susie had three children: Seed,Sierra,and Shasta.All three children are adults.Although Sierra and Shasta each attend college,Seed hasn't quite found himself.Seed tours with various music bands.He plays guitar,spends most of the year hiking the Cascade Mountains,and plans to live on a commune in Big Sur,California.Lyle and Susie visited their attorney to plan their estates.They wish to leave equal shares of their estates to their children,but they are concerned that Seed will not be able to handle an inheritance.What should they do with respect to Seed's share?

Question 70

Joe Smith has just died.Three months ago,when he knew that his death was impending,Joe established a spendthrift trust for the protection of his 16-year old son Bobby.The trust property consists mainly of $500,000 in investment securities.The trustee is Jack Purdy,a CPA.The trust agreement does not discuss the trust's termination.Answer the following questions regarding the trust.Can Jack invest trust assets differently than Joe invested them? For example,can he sell trust securities and buy others? Why or why not? Must Jack hire an investment professional to make trust investments?