CAP Estate Planning & Wealth Transfer Flashcards
6 cards from real CAP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CAP Estate Planning & Wealth Transfer flashcards as text
A Charitable Lead Annuity Trust (CLAT) is best described as a trust that:
Answer: Pays a fixed annuity to charity for a term, then passes assets to heirs
A CLAT pays a fixed annuity to one or more charities for a specified term, after which the remaining assets pass to the donor's heirs.
Under IRC Section 2522, charitable deductions for estate and gift tax purposes are available for transfers to which type of organization?
Answer: Qualifying charities including religious, charitable, scientific, and educational organizations
IRC Section 2522 allows gift tax charitable deductions for transfers to qualifying organizations including those organized for religious, charitable, scientific, literary, or educational purposes.
A donor establishes a dynasty trust to benefit both family and charity across multiple generations. What key federal tax is designed to prevent wealth transfer to skip generations without taxation?
Answer: Generation-Skipping Transfer (GST) Tax
The Generation-Skipping Transfer tax applies to transfers to beneficiaries who are two or more generations younger than the donor, preventing tax-free wealth leapfrogging.
Which beneficiary designation technique allows a donor to leave IRA assets to multiple beneficiaries including a charity while minimizing income tax for individual heirs?
Answer: Splitting the IRA into separate accounts with charity on one and individuals on others
Splitting the IRA into separate accounts allows the charity to receive its share income-tax-free while individual heirs can use the stretch IRA rules for their separate accounts.
In estate planning, what is the 'unified credit' and how does it affect charitable planning?
Answer: A credit that offsets estate taxes dollar-for-dollar up to the exemption amount, making large charitable bequests less necessary for tax reduction in smaller estates
The unified credit offsets estate and gift taxes up to the exemption amount, meaning smaller estates may not need charitable bequests for tax reduction but larger estates can benefit from them.
A philanthropic advisor reviews a client's estate plan. Which document typically controls the disposition of retirement accounts, life insurance, and annuities regardless of what the will states?
Answer: Beneficiary designation forms on file with the financial institution
Beneficiary designation forms on file with financial institutions are legally controlling for retirement accounts, life insurance, and annuities, superseding any conflicting will provisions.