CFP Practice Questions - Estate
Planning BEST STUDY GUIDE RATED
A+
Suzanne York has a personal residence that she wants to pass to her children upon
her death. Rather than waiting, she gives the children the home with the
stipulation that she can continue to live in the home for the rest of her life. What
best describes the transaction to her children?
A. A reversionary interest.
B. A life interest.
✅
C. A term interest.
D. A remainder interest. - correct answer D
She has made a gift with a remainder interest. Reversionary interest would have
the home ownership returning to her. A life interest would be a controlling
interest for life, and term interest would be a limited time.
Which of the following trusts can permit the trustee to invade the principal for
health, education, maintenance, and support (HEMS) for all beneficiaries
presuming each trust is structured the same way with the grantor the decedent,
the spouse of the grantor the income beneficiary, and the children of the grantor
the remainder beneficiaries?
1. An ILIT.
2. A bypass Trust.
3. A GPOA (general power of appointment) Trust.
3 only.
,CFP Practice Questions - Estate
Planning BEST STUDY GUIDE RATED
A+
1 and 2.
✅
1 and 3.
1, 2 and 3. - correct answer 1 and 2
Statements 1 and 2 are the nonmarital trusts and therefore the trustee can have
the power to invade for all beneficiaries. The GPOA trust is a marital trust and the
trustee would be redirected to invade for the spouse only or the trust would not
qualify for the marital deduction.
Which of the following accurately describes a life estate?
A. An interest in property for a specified number of years.
B. An interest in property that ceases upon the death of the owner of the life
estate.
C. An undivided interest in property held by two or more related or unrelated
persons.
ownership. - correct answer ✅
D. A complete interest in property with all the rights associated with outright
B
Answer "B" is the definition of a life estate. Answer "A" is the definition of an
interest for a term. Answer "C" is the definition of tenancy in common. Answer
"D" is the definition of a fee simple.
Which of the following statements is correct?
,CFP Practice Questions - Estate
Planning BEST STUDY GUIDE RATED
A+
1. Unpaid medical expenses of a decedent can be deducted on the final 1040 or
form 1041 but not on both.
2. Any executor fees may be deducted on form 706 or the 1041 return.
1 only.
2 only.
✅
Both 1 and 2.
Neither 1 nor 2. - correct answer 2 only
Unpaid medical expenses can be deducted on the 1040 or the 706 but not the
1041.
Which of the following is considered a complex trust?
I. A 2503(c) trust.
II. A trust which allows the trustee discretion to distribute or accumulate current
income.
III. A trust which allows a beneficiary a limited noncumulative right to demand.
IV. A Section 2503(b) mandatory income trust that has only individual
beneficiaries.
I and IV only.
, CFP Practice Questions - Estate
Planning BEST STUDY GUIDE RATED
A+
I, III and IV only.
✅
II and IV only.
I, II and III only. - correct answer D
The Section 2503(b) is a simple trust. A complex trust is a non-grantor trust which
in a given year accumulates fiduciary income or distributes trust corpus, whereas
a simple trust distributes no corpus. A 2503(c) trust allows for accumulation.
Which of the various types of trusts permits income sharing?
A. QTIP Trusts
B. By-pass Trusts
✅
C. General Power of Appointment Trusts
D. Estate Trusts - correct answer B
The A Trust, the Q-Tip Trust and the Estate Trust do not allow for splitting or
sharing of income streams. Only the By-pass Trust allows for this income splitting
or sharing. The bypass trust is the only non-marital trust of the list given.
Which of the following are characteristics of a private annuity?
I. Title to the property is conveyed to the individual responsible for making
annuity payments at the time of the transaction.
Planning BEST STUDY GUIDE RATED
A+
Suzanne York has a personal residence that she wants to pass to her children upon
her death. Rather than waiting, she gives the children the home with the
stipulation that she can continue to live in the home for the rest of her life. What
best describes the transaction to her children?
A. A reversionary interest.
B. A life interest.
✅
C. A term interest.
D. A remainder interest. - correct answer D
She has made a gift with a remainder interest. Reversionary interest would have
the home ownership returning to her. A life interest would be a controlling
interest for life, and term interest would be a limited time.
Which of the following trusts can permit the trustee to invade the principal for
health, education, maintenance, and support (HEMS) for all beneficiaries
presuming each trust is structured the same way with the grantor the decedent,
the spouse of the grantor the income beneficiary, and the children of the grantor
the remainder beneficiaries?
1. An ILIT.
2. A bypass Trust.
3. A GPOA (general power of appointment) Trust.
3 only.
,CFP Practice Questions - Estate
Planning BEST STUDY GUIDE RATED
A+
1 and 2.
✅
1 and 3.
1, 2 and 3. - correct answer 1 and 2
Statements 1 and 2 are the nonmarital trusts and therefore the trustee can have
the power to invade for all beneficiaries. The GPOA trust is a marital trust and the
trustee would be redirected to invade for the spouse only or the trust would not
qualify for the marital deduction.
Which of the following accurately describes a life estate?
A. An interest in property for a specified number of years.
B. An interest in property that ceases upon the death of the owner of the life
estate.
C. An undivided interest in property held by two or more related or unrelated
persons.
ownership. - correct answer ✅
D. A complete interest in property with all the rights associated with outright
B
Answer "B" is the definition of a life estate. Answer "A" is the definition of an
interest for a term. Answer "C" is the definition of tenancy in common. Answer
"D" is the definition of a fee simple.
Which of the following statements is correct?
,CFP Practice Questions - Estate
Planning BEST STUDY GUIDE RATED
A+
1. Unpaid medical expenses of a decedent can be deducted on the final 1040 or
form 1041 but not on both.
2. Any executor fees may be deducted on form 706 or the 1041 return.
1 only.
2 only.
✅
Both 1 and 2.
Neither 1 nor 2. - correct answer 2 only
Unpaid medical expenses can be deducted on the 1040 or the 706 but not the
1041.
Which of the following is considered a complex trust?
I. A 2503(c) trust.
II. A trust which allows the trustee discretion to distribute or accumulate current
income.
III. A trust which allows a beneficiary a limited noncumulative right to demand.
IV. A Section 2503(b) mandatory income trust that has only individual
beneficiaries.
I and IV only.
, CFP Practice Questions - Estate
Planning BEST STUDY GUIDE RATED
A+
I, III and IV only.
✅
II and IV only.
I, II and III only. - correct answer D
The Section 2503(b) is a simple trust. A complex trust is a non-grantor trust which
in a given year accumulates fiduciary income or distributes trust corpus, whereas
a simple trust distributes no corpus. A 2503(c) trust allows for accumulation.
Which of the various types of trusts permits income sharing?
A. QTIP Trusts
B. By-pass Trusts
✅
C. General Power of Appointment Trusts
D. Estate Trusts - correct answer B
The A Trust, the Q-Tip Trust and the Estate Trust do not allow for splitting or
sharing of income streams. Only the By-pass Trust allows for this income splitting
or sharing. The bypass trust is the only non-marital trust of the list given.
Which of the following are characteristics of a private annuity?
I. Title to the property is conveyed to the individual responsible for making
annuity payments at the time of the transaction.
