Estate Planning: Practice Exam
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1. Which of the following is not a transfer cost associated with estate plan-
ning?
A) Document preparation
B) Attorney's fees
C) CPA's fees
D) Insurance premiums: D) Insurance premiums
Insurance premiums are not a transfer cost associated with estate planning. All of
the other answers are costs associated with estate planning.
2. You are opening a new financial planning practice and you would like to put
together a team of experts to help your clients with estate planning. Which of
the following groups represents the best team to help your clients?
A) Financial planner, CPA, and attorney.
B) CPA, psychiatrist, and insurance salesman.
C) Financial planner, attorney, and real estate agent.
D) Attorney, insurance salesman, and IRS agent.: A) Financial planner, CPA, and
attorney.
The best team for your client would include a financial planner, CPA, and attorney.
A licensed insurance specialist and real estate agent are also good additions to
an estate planning team, but the team described in statement (A) covers all of the
required aspects of an estate planning team: financial planning, tax planning, and
legal representation.
3. Although he has a vast fortune, Ricky has decided not to prepare an estate
plan because he believes that his surviving family members will divide up his
assets appropriately. Which of the following is not a risk associated with failing
to plan an estate?
A) Ricky's estate could incur excessive transfer taxes.
B) Ricky's favorite Corvette may not be transferred to his ex-wife, Carla.
C) Ricky's insurance policy on his own life may not be paid out to the named
beneficiary.
D) Ricky's current wife, Lucille, may not provide for Ricky's children from a
previous marriage.: C) Ricky's insurance policy on his own life may not be paid out
to the named beneficiary.
, Estate Planning: Practice Exam
Study online at https://quizlet.com/_b5vsl6
The proceeds of insurance policies with named beneficiaries pass outside of probate
via state contract law. Ricky's failure to plan his estate will not affect the payment of
his insurance policy.
4. Tracey is a financial planner who recently received his CFP® designation.
Tracey does not have any other designations or licenses. Although Tracey's
expertise is investment planning, he is anxious to expand his client base and
is willing to assist clients with any area of financial planning. Over the last
month, Tracey engaged in the following activities with Troy, a new client.
I. During the initial meeting, Tracey collected personal data about Troy, includ-
ing the estate planning documents Troy had previously executed.
II. During the second meeting, Tracey recommended the use of a trust to fulfill
some of Troy's estate planning goals.
III. Troy called Tracey one afternoon and asked if Tracey could explain the
probate process to him, which Tracey promptly did.
IV. Tracey downloaded a copy of a generic will from the internet, filled in Troy's
information and gave the document to Troy to be executed.
Of the activities above, which would be considered the unauthorized practice
of law?
A) IV only
B) II and III
C) III and IV
D) II, III, and IV
E) I, II, III, and IV: A) IV only
Only statement four would be considered the unauthorized practice of law.
The drafting of legal documents is reserved for attorneys.
Inquiring about estate planning documents should be completed by all practitioners.
Recommending appropriate estate planning devices, such as trusts, can be done
by financial planners.
, Estate Planning: Practice Exam
Study online at https://quizlet.com/_b5vsl6
Explaining the probate process to a client would not be the unauthorized practice
of law; the line would be crossed if Tracey gave legal advice regarding the probate
process.
5. Which of the following is not a common estate planning goal?
A) Maximizing transfer costs.
B) Minimizing transfer taxes.
C) Providing for liquidity at death.
D) Fulfilling client's healthcare decisions.: A) Maximizing transfer costs.
Maximizing transfer costs is not an estate planning goal. Transfer costs should be
minimized to the greatest extent possible, while also fulfilling the client's goals.
All of the other answers are common estate planning goals.
6. Of the following, who should generally be a member of the estate planning
team?
I. Investment Advisor
II. Trustee
III. Insurance agent
IV. Attorney
A) I and II
B) I, III, and IV
C) I, II, and III
D) I, II, III, and IV: B) I, III, and IV
A trustee is not a member of the estate planning team, because the trustee's
responsibility is not to advise the client about forming the estate plan but to carry
out the terms of the trust document.
7. You are a CFP® professional and although you never went to law school,
you consider yourself to be very good at reviewing wills. Your client, Catherine,
asks you to prepare a will for her. Should you prepare a will for Catherine?
A) Yes, Catherine is your best client and you might lose her if you do not
prepare the will.
B) Yes, it is permissible for a CFP® professional to prepare a legal document.
C) No, preparing Catherine's will would be considered the unauthorized prac-
tice of law.
, Estate Planning: Practice Exam
Study online at https://quizlet.com/_b5vsl6
D) No, you should only prepare Catherine's will if you are going to be a
beneficiary under the will.: C) No, preparing Catherine's will would be considered
the unauthorized practice of law.
Drafting legal documents, such as wills, is an activity reserved for licensed attorneys.
If you are not a licensed attorney and you prepare a legal document, you have
engaged in the unauthorized practice of law.
8. Which of the following statements is not true regarding the need for an
estate plan?
A) A wealthy, successful business owner who wants to pass his business to
hischildren would have complex estate planning needs.
B) The sole breadwinner in a family would need an estate plan with significant
life and disability insurance coverage.
C) A single individual with no family who does not own any assets and lives
paycheck to paycheck would not need an estate plan.
D) An 80-year old with 5 adult children and 4 grandchildren who just married
his third wife would require estate planning for blended families.: C) A single
individual with no family who does not own any assets and lives paycheck to
paycheck would not need an estate plan.
Even individuals without significant assets need an estate plan.
The individual in Statement (C) would still need healthcare planning and an executor
to oversee his or her final burial wishes.
Statement (A) would need an estate plan to determine how to transfer his business
in the most cost-efficient manner and minimize estate taxes.
Statement (B) would need an estate plan to ensure the individual has sufficient life,
long-term care, and disability insurance.
Statement (D) would need an estate plan because issues with protection of inheri-
tance often arise in blended families.
9. Which of the following is correct regarding a power of attorney?
A) The principal is the individual that is granted decision-making power.
B) A guardian ad litem is an agent of the principal.
C) The agent is the person granting the power.
Study online at https://quizlet.com/_b5vsl6
1. Which of the following is not a transfer cost associated with estate plan-
ning?
A) Document preparation
B) Attorney's fees
C) CPA's fees
D) Insurance premiums: D) Insurance premiums
Insurance premiums are not a transfer cost associated with estate planning. All of
the other answers are costs associated with estate planning.
2. You are opening a new financial planning practice and you would like to put
together a team of experts to help your clients with estate planning. Which of
the following groups represents the best team to help your clients?
A) Financial planner, CPA, and attorney.
B) CPA, psychiatrist, and insurance salesman.
C) Financial planner, attorney, and real estate agent.
D) Attorney, insurance salesman, and IRS agent.: A) Financial planner, CPA, and
attorney.
The best team for your client would include a financial planner, CPA, and attorney.
A licensed insurance specialist and real estate agent are also good additions to
an estate planning team, but the team described in statement (A) covers all of the
required aspects of an estate planning team: financial planning, tax planning, and
legal representation.
3. Although he has a vast fortune, Ricky has decided not to prepare an estate
plan because he believes that his surviving family members will divide up his
assets appropriately. Which of the following is not a risk associated with failing
to plan an estate?
A) Ricky's estate could incur excessive transfer taxes.
B) Ricky's favorite Corvette may not be transferred to his ex-wife, Carla.
C) Ricky's insurance policy on his own life may not be paid out to the named
beneficiary.
D) Ricky's current wife, Lucille, may not provide for Ricky's children from a
previous marriage.: C) Ricky's insurance policy on his own life may not be paid out
to the named beneficiary.
, Estate Planning: Practice Exam
Study online at https://quizlet.com/_b5vsl6
The proceeds of insurance policies with named beneficiaries pass outside of probate
via state contract law. Ricky's failure to plan his estate will not affect the payment of
his insurance policy.
4. Tracey is a financial planner who recently received his CFP® designation.
Tracey does not have any other designations or licenses. Although Tracey's
expertise is investment planning, he is anxious to expand his client base and
is willing to assist clients with any area of financial planning. Over the last
month, Tracey engaged in the following activities with Troy, a new client.
I. During the initial meeting, Tracey collected personal data about Troy, includ-
ing the estate planning documents Troy had previously executed.
II. During the second meeting, Tracey recommended the use of a trust to fulfill
some of Troy's estate planning goals.
III. Troy called Tracey one afternoon and asked if Tracey could explain the
probate process to him, which Tracey promptly did.
IV. Tracey downloaded a copy of a generic will from the internet, filled in Troy's
information and gave the document to Troy to be executed.
Of the activities above, which would be considered the unauthorized practice
of law?
A) IV only
B) II and III
C) III and IV
D) II, III, and IV
E) I, II, III, and IV: A) IV only
Only statement four would be considered the unauthorized practice of law.
The drafting of legal documents is reserved for attorneys.
Inquiring about estate planning documents should be completed by all practitioners.
Recommending appropriate estate planning devices, such as trusts, can be done
by financial planners.
, Estate Planning: Practice Exam
Study online at https://quizlet.com/_b5vsl6
Explaining the probate process to a client would not be the unauthorized practice
of law; the line would be crossed if Tracey gave legal advice regarding the probate
process.
5. Which of the following is not a common estate planning goal?
A) Maximizing transfer costs.
B) Minimizing transfer taxes.
C) Providing for liquidity at death.
D) Fulfilling client's healthcare decisions.: A) Maximizing transfer costs.
Maximizing transfer costs is not an estate planning goal. Transfer costs should be
minimized to the greatest extent possible, while also fulfilling the client's goals.
All of the other answers are common estate planning goals.
6. Of the following, who should generally be a member of the estate planning
team?
I. Investment Advisor
II. Trustee
III. Insurance agent
IV. Attorney
A) I and II
B) I, III, and IV
C) I, II, and III
D) I, II, III, and IV: B) I, III, and IV
A trustee is not a member of the estate planning team, because the trustee's
responsibility is not to advise the client about forming the estate plan but to carry
out the terms of the trust document.
7. You are a CFP® professional and although you never went to law school,
you consider yourself to be very good at reviewing wills. Your client, Catherine,
asks you to prepare a will for her. Should you prepare a will for Catherine?
A) Yes, Catherine is your best client and you might lose her if you do not
prepare the will.
B) Yes, it is permissible for a CFP® professional to prepare a legal document.
C) No, preparing Catherine's will would be considered the unauthorized prac-
tice of law.
, Estate Planning: Practice Exam
Study online at https://quizlet.com/_b5vsl6
D) No, you should only prepare Catherine's will if you are going to be a
beneficiary under the will.: C) No, preparing Catherine's will would be considered
the unauthorized practice of law.
Drafting legal documents, such as wills, is an activity reserved for licensed attorneys.
If you are not a licensed attorney and you prepare a legal document, you have
engaged in the unauthorized practice of law.
8. Which of the following statements is not true regarding the need for an
estate plan?
A) A wealthy, successful business owner who wants to pass his business to
hischildren would have complex estate planning needs.
B) The sole breadwinner in a family would need an estate plan with significant
life and disability insurance coverage.
C) A single individual with no family who does not own any assets and lives
paycheck to paycheck would not need an estate plan.
D) An 80-year old with 5 adult children and 4 grandchildren who just married
his third wife would require estate planning for blended families.: C) A single
individual with no family who does not own any assets and lives paycheck to
paycheck would not need an estate plan.
Even individuals without significant assets need an estate plan.
The individual in Statement (C) would still need healthcare planning and an executor
to oversee his or her final burial wishes.
Statement (A) would need an estate plan to determine how to transfer his business
in the most cost-efficient manner and minimize estate taxes.
Statement (B) would need an estate plan to ensure the individual has sufficient life,
long-term care, and disability insurance.
Statement (D) would need an estate plan because issues with protection of inheri-
tance often arise in blended families.
9. Which of the following is correct regarding a power of attorney?
A) The principal is the individual that is granted decision-making power.
B) A guardian ad litem is an agent of the principal.
C) The agent is the person granting the power.
