Estate Planning Objectives Flashcards
7 cards from real CRPC 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 Objectives flashcards as text
Which of the following best describes the role of a trustee in an estate plan?
Answer: To manage trust assets and administer the trust according to its terms for the benefit of beneficiaries
A trustee has a fiduciary duty to manage and distribute trust assets in accordance with the trust document and in the best interests of the beneficiaries.
Which strategy is most effective for transferring a family business to the next generation while minimizing gift and estate taxes?
Answer: Using a family limited partnership (FLP) with valuation discounts
A family limited partnership can achieve valuation discounts for lack of control and lack of marketability, reducing the taxable value of the transferred interests.
What is the '3-year rule' related to estate planning and life insurance?
Answer: If the insured transfers a life insurance policy and dies within 3 years, the death benefit is included in the taxable estate
Under IRC Section 2035, if an insured transfers a life insurance policy to an ILIT and dies within three years of the transfer, the death benefit is pulled back into the taxable estate.
A charitable lead trust (CLT) is designed to:
Answer: Provide income payments to charity for a period, then pass remaining assets to heirs
In a CLT, the charity receives income (annuity or unitrust payments) for a specified term, and the remaining assets pass to the donor's heirs at reduced transfer tax cost.
Under the Uniform Transfers to Minors Act (UTMA), at what point does the custodian lose control of the assets?
Answer: When the minor reaches the age of majority specified by state law (typically 18-25)
UTMA accounts must be distributed to the beneficiary when they reach the age of majority under state law, which varies but is typically between 18 and 25.
What is the primary purpose of a spendthrift provision in a trust?
Answer: To protect trust assets from the beneficiary's creditors and from the beneficiary's own financial mismanagement
A spendthrift provision prevents the beneficiary from assigning their interest and prevents creditors from reaching trust assets before distribution.
Which estate planning document names a guardian for minor children?
Answer: Last will and testament
A last will and testament is the appropriate legal document for nominating a guardian to care for minor children if both parents die.