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Estate Planning and Trusts Flashcards

6 cards from real AAFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 6 Estate Planning and Trusts flashcards as text

  1. A durable power of attorney for finances remains effective even if the principal becomes what?

    Answer: Incapacitated

    A durable power of attorney continues in full force if the principal becomes incapacitated, allowing the named agent to manage financial affairs without court intervention.

  2. The generation-skipping transfer (GST) tax is levied on transfers to beneficiaries who are more than how many generations below the transferor?

    Answer: One generation

    The GST tax applies to transfers made to skip persons—typically grandchildren or more remote descendants—who are at least one full generation below the transferor.

  3. Which estate planning document allows a principal to designate an agent to make healthcare decisions if the principal becomes incapacitated?

    Answer: Healthcare proxy

    A healthcare proxy (or healthcare power of attorney) designates a trusted individual to make medical decisions on behalf of the principal when they cannot do so themselves.

  4. In a charitable remainder trust (CRT), the grantor or beneficiaries receive income payments for a period, after which the remainder passes to which entity?

    Answer: A qualified charity

    In a CRT, the non-charitable income beneficiary receives payments for a term of years or life, and the remaining trust assets pass irrevocably to a designated charity at the end.

  5. The annual gift tax exclusion allows tax-free gifts up to a specified per-recipient limit without filing a gift tax return, indexed for inflation. What is the 2024 exclusion amount?

    Answer: $18,000

    The 2024 annual gift tax exclusion is $18,000 per recipient, allowing donors to give this amount to any number of individuals each year without reducing their lifetime exemption.

  6. Which trust type is funded with community property and allows a surviving spouse to benefit from trust assets without including them in the survivor's taxable estate?

    Answer: QTIP trust

    A qualified terminable interest property (QTIP) trust provides income to a surviving spouse while allowing the first spouse to designate the ultimate remainder beneficiaries, and qualifies for the marital deduction.