Regulatory Framework & Compliance Flashcards
7 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 7 Regulatory Framework & Compliance flashcards as text
A trustee of an irrevocable trust wishes to modify its terms because changed circumstances have frustrated the trust's purpose. Under the UTC, which doctrine authorizes a court to modify a trust in these circumstances?
Answer: Equitable deviation doctrine
The equitable deviation doctrine allows courts to modify administrative or distributive trust terms when compliance would defeat or substantially impair the trust's purposes due to unanticipated circumstances.
Under Treasury Regulation §1.671-4, a grantor trust must report its income by which method by default?
Answer: Filing Form 1041 with grantor information attached
Under the default method, a grantor trust files Form 1041 but attaches a statement showing items of income, deduction, and credit reportable by the grantor on their own return.
The Uniform Disposition of Community Property Rights Act (UDCPRA) is significant for estate planners in common law states because it:
Answer: Preserves the community property character of assets when a couple moves from a community property state to a common law state
The UDCPRA, adopted by several common law states, honors the community property character of assets acquired in community property states, preserving the double step-up in basis for both halves.
A corporate fiduciary is subject to examination for compliance with 12 CFR Part 9. Which violation would most likely result in a Matters Requiring Attention (MRA) from OCC examiners?
Answer: Failure to conduct annual account reviews as required by applicable state law
12 CFR Part 9 requires national bank trust departments to conduct regular reviews of fiduciary accounts; failure to do so is a compliance deficiency that examiners typically cite as an MRA.
Under FinCEN's Customer Due Diligence (CDD) Rule effective May 2018, covered financial institutions must identify the beneficial owners of legal entity customers. For trusts, which person must be identified?
Answer: The trustee(s) and any individual who owns 25% or more of the trust's equity interests
FinCEN's CDD Rule requires financial institutions to identify the trustee (as the control prong) and any person who owns 25% or more of the trust as a beneficial owner.
Which IRC provision allows a surviving spouse to use the deceased spouse's unused estate tax exemption?
Answer: Portability election under IRC §2010(c)
IRC §2010(c) provides the portability election, allowing the executor of a deceased spouse's estate to transfer the unused exemption to the surviving spouse via a timely filed estate tax return.
A trustee receives a notice of a beneficiary's bankruptcy filing. Which automatic stay provision under the Bankruptcy Code most directly affects the trustee's ability to distribute trust assets?
Answer: 11 U.S.C. §362, which stays all acts to collect or control property of the bankruptcy estate
The automatic stay under §362 prohibits acts to obtain possession of or exercise control over property of the debtor's estate, which may include trust distributions the debtor is entitled to receive.