Under what circumstances will a trustee be deemed to have been granted a discretionary power? - ANSWERSIf the terms of the trust or state law grant the power
If all beneficiaries consent to the exercise of the power
If a court order grants the power
Which parties are necessary to create a trus...
CTFA Domain Review Questions
Questions & Answers
Under what circumstances will a trustee be deemed to have been granted a
discretionary power? - ANSWERSIf the terms of the trust or state law grant the power
If all beneficiaries consent to the exercise of the power
If a court order grants the power
Which parties are necessary to create a trust? - ANSWERSThe settlor, the trustee, and
the beneficiaries
Which situation is least likely to result in a court action due to a trustee's exercise of
fiduciary powers?
When a trustee has acted in bad faith
When a trustee makes an investment that generates a loss
When a trustee is also a beneficiary
When a trustee has refused to make a distribution to a beneficiary - ANSWERSWhen a
trustee makes an investment that generates a loss
True or False. Generally, the estate tax return is due on April 15th following the year of
death. - ANSWERSFalse. Estate Tax returns are due nine months after the date of
death. A six-month extension is available if requested prior to the due date and with
estimated tax paid before the due date.
Jane is a client of Jill. Jane recently sold her business and now wants to focus on the
next phase of her life - giving back to her community. This will involve both Jane's time
and money. Jane knows exactly how she is going to spend her time volunteering;
however, she is not sure how best to structure and optimize her financial giving. From
the options below, which one is not a viable charitable strategy for Jane?
Donor Advised Fund
Charitable Lead Trust
Grantor Retained Annuity Trust
Giving appreciated securities - ANSWERSGrantor Retained Annuity Trust; A Grantor
Retained Annuity Trust is not a charitable strategy; all the other options involve a
charitable purpose.
John is an employee working for a publicly-traded company. His yearly salary and
annual bonus reported to him on his W-2 at the end of the year is what type of income?
- ANSWERSEarned income
Social Security is a government sponsored retirement benefit program designed to
replace some income during retirement. These individuals are eligible for Social
Security except:
, Survivors
Retired workers
Siblings
Spouses - ANSWERSSiblings are not an eligible designation for Social Security
benefits per se; the sibling would have to qualify for Social Security based upon their
own work history and what they paid in terms of taxes on their income during that work
history.
True or false. Tenancy-by the entirety is a form of co-ownership recognized by many
states as a variation of joint ownership, which applies only to married couples. This
tenancy generally has the same legal characteristics of a joint ownership with a few
additional features. Normally, protection against the claims of creditors that applies to
joint tenancies at the death of a joint tenant is also available against the lifetime
creditors of the tenant. - ANSWERSTrue.
What type of trust is described: the trust must distribute all its income currently.
Generally, it cannot accumulate income, distribute out of corpus, or pay money for
charitable purposes. - ANSWERSThis description is of a simple trust.
True or false.
A split-interest trust:
Is tax-exempt
Has some unexpired interests that are devoted to purposes other than religious,
charitable, or similar purposes described in IRC Section 170(c)(2)(B)
Holds an allocation for which a charitable contribution deduction has been allowed -
ANSWERSFalse.
A split interest trust is not exempt from tax.
The cost of a long-term care insurance policy is based on: - ANSWERSAge of the
individual when he or she buys the policy
The maximum amount that a policy will pay out per day
The maximum number of days (years) that a policy will pay benefits
The maximum amount per day, multiplied by the number of coverage days, determines
the lifetime maximum amount the policy will pay
Additional or optional benefits the individual chooses
The taxation of a generation skipping transfer depends on whether the transfer is a
direct or an indirect skip. A direct skip is a property transfer subject to an estate or gift
tax. An example of a direct skip would be a grandmother gifting property to a grandchild.
An indirect skip involves a transfer that has intermediate steps before reaching a skip
person. There are two types of indirect skips. What are they? - ANSWERSA taxable
termination and taxable distribution.
Distributions from retirement accounts and IRAs prior to age 59½ are subject to a 10%
penalty, in addition to applicable federal and state taxes. Under which circumstances
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