Estate Planning & Wealth Transfer Flashcards
7 cards from real CFSP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Estate Planning & Wealth Transfer flashcards as text
What is the primary purpose of a last will and testament?
Answer: To designate the distribution of assets and name an executor upon death
A last will and testament primarily directs how a deceased person's assets should be distributed and designates an executor to manage the estate administration.
Which of the following best describes the probate process?
Answer: The court-supervised legal process of validating a will and distributing a deceased person's estate
Probate is the court-supervised legal process through which a will is validated, debts are paid, and remaining assets are distributed to beneficiaries.
Which characteristic most distinguishes a revocable living trust from an irrevocable trust?
Answer: A revocable trust can be modified or terminated by the grantor during their lifetime
A revocable living trust allows the grantor to retain control and make changes or revoke the trust at any time during their lifetime, unlike an irrevocable trust.
What is the primary advantage of designating beneficiaries on retirement accounts and life insurance policies?
Answer: Assets transfer directly to beneficiaries outside of probate
Beneficiary designations allow assets to pass directly to named individuals without going through the probate process, enabling faster and private asset transfers.
What is a 'step-up in basis' as it applies to inherited assets?
Answer: The adjustment of an inherited asset's cost basis to its fair market value at the decedent's date of death
A step-up in basis resets the inherited asset's tax cost basis to its fair market value at the date of death, which can significantly reduce capital gains taxes when the asset is later sold.
What is the role of an executor (personal representative) in estate administration?
Answer: To manage and distribute the estate's assets according to the will and applicable laws
An executor is responsible for collecting and inventorying assets, paying valid debts and taxes, and distributing the remaining estate to beneficiaries as directed by the will.
Which form of property ownership allows assets to pass directly to a surviving co-owner upon death without going through probate?
Answer: Joint tenancy with right of survivorship
Joint tenancy with right of survivorship automatically transfers the deceased co-owner's full interest to the surviving co-owner(s) by operation of law, bypassing probate.