CES Beneficiary Rights & Distribution Planning Flashcards
6 cards from real CES practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CES Beneficiary Rights & Distribution Planning flashcards as text
Under the '5 and 5' power in a trust, what is the maximum amount a beneficiary can withdraw annually without adverse estate tax consequences?
Answer: The greater of $5,000 or 5% of the trust corpus
The '5 and 5' power allows a beneficiary to withdraw the greater of $5,000 or 5% of the trust corpus annually without including the lapsed power in their gross estate.
What is a Crummey power, and what tax benefit does it provide?
Answer: A power allowing annual exclusion gifts to trusts by giving beneficiaries a temporary withdrawal right
A Crummey power gives beneficiaries a temporary right to withdraw contributions, qualifying the transfer for the annual gift tax exclusion.
Which distribution standard requires a trustee to consider the beneficiary's other resources before making a distribution?
Answer: Support standard
A support standard typically requires the trustee to consider the beneficiary's other income and assets before distributing trust funds for support needs.
A trust has both income and remainder beneficiaries with conflicting interests. What principle guides the trustee in managing assets for both?
Answer: Impartiality principle
The impartiality principle requires a trustee to act fairly among all beneficiaries, balancing the income beneficiary's desire for current distributions against the remainder beneficiary's interest in preserving principal.
What is an 'ascertainable standard' in a trust, and why is it important for estate tax planning?
Answer: A defined standard tied to health, education, maintenance, or support that avoids estate tax inclusion
An ascertainable standard limits the power holder's right to distributions in a measurable way (HEMS), ensuring the power is not included in the power holder's gross estate under IRC §2041.
Which document allows a beneficiary to formally request a change in trustee when dissatisfied with administration?
Answer: Petition for removal
A beneficiary can file a petition for removal of a trustee with the appropriate court when there is cause, such as breach of fiduciary duty or failure to communicate.