Risk Management & Estate Planning Flashcards
7 cards from real RMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Management & Estate Planning flashcards as text
A qualified personal residence trust (QPRT) is used to transfer a home to heirs at a reduced gift tax value. What happens if the grantor dies before the QPRT term expires?
Answer: The house is included back in the grantor's gross estate as if no QPRT existed
If the grantor dies during the QPRT term, the IRS treats the transfer as incomplete and includes the home's full value in the gross estate, negating the estate planning benefit.
Which insurance product provides a death benefit while also allowing the policyholder to access a portion of the benefit early due to a qualifying terminal or chronic illness?
Answer: Life insurance with an accelerated death benefit rider
An accelerated death benefit (ADB) rider allows the insured to receive a portion of the life insurance death benefit early upon diagnosis of a qualifying terminal, chronic, or critical illness.
In estate planning, a spendthrift provision in a trust is designed to:
Answer: Protect trust assets from a beneficiary's creditors and impulsive spending
A spendthrift provision restricts a beneficiary's ability to assign or transfer their interest, shielding trust assets from both the beneficiary's creditors and their own financial decisions.
When evaluating long-term care insurance, what does the 'elimination period' refer to?
Answer: The waiting period before benefits begin, similar to a deductible measured in days
The elimination period is a self-insured waiting period (commonly 30, 60, or 90 days) during which the insured pays for care before insurance benefits begin.
A generation-skipping transfer (GST) tax is imposed when assets pass to:
Answer: A beneficiary who is two or more generations below the transferor
The GST tax applies to transfers to 'skip persons,' generally individuals who are at least two generations younger than the transferor (e.g., grandchildren), in addition to any gift or estate tax.
Which withdrawal sequencing strategy in retirement is designed to minimize taxes over time by depleting accounts in a specific order?
Answer: Tax-efficient withdrawal ordering (taxable → tax-deferred → tax-free)
The conventional tax-efficient sequence—taxable accounts first, then traditional IRAs/401(k)s, then Roth accounts last—allows tax-deferred and tax-free growth to compound as long as possible.
What is the primary advantage of a Charitable Remainder Trust (CRT) for a retiree with a highly appreciated, low-basis asset?
Answer: It allows tax-free sale of the asset inside the trust while providing an income stream and a charitable deduction
A CRT can sell appreciated assets without immediate capital gains tax, reinvest the full proceeds for diversified income to the donor, and generate a partial charitable income tax deduction.