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
Which estate planning strategy involves creating a trust where the charity receives an annuity first and the remainder passes to family heirs?
Answer: Charitable lead annuity trust
A charitable lead annuity trust (CLAT) pays a fixed annuity to a charity for a specified term, after which the remaining assets pass to non-charitable beneficiaries such as children.
A spendthrift clause in a trust protects a beneficiary's interest from which type of claim?
Answer: Beneficiary's own creditors
A spendthrift provision prevents a beneficiary from pledging trust income or principal to creditors, and bars creditors from reaching trust assets before they are distributed.
The unlimited marital deduction allows an unlimited amount of assets to pass free of estate or gift tax to a surviving spouse who must be which nationality?
Answer: A US citizen
The unlimited marital deduction only applies to transfers to a surviving spouse who is a US citizen; transfers to non-citizen spouses require a qualified domestic trust (QDOT) to access similar benefits.
Which trust allows a grantor to transfer a personal residence out of the estate while retaining the right to live there for a specified term?
Answer: QPRT
A qualified personal residence trust (QPRT) allows a grantor to transfer a home to heirs at a reduced gift-tax value while retaining the right to use the property for a set number of years.
Which estate planning concept ensures that a fiduciary manages trust assets with the care and prudence of a reasonable, knowledgeable person?
Answer: Prudent investor rule
The Uniform Prudent Investor Act requires trustees to invest trust assets as a prudent investor would, considering risk and return in the context of the trust's overall portfolio and purpose.
Generation-skipping trusts are often called dynasty trusts because they are designed to benefit how many generations of a family?
Answer: Multiple generations across extended periods
Dynasty trusts are structured to hold assets and distribute benefits across multiple generations for as long as applicable state law permits, preserving wealth from repeated estate taxation at each generation's death.