Cannon CTFA Prep Exam
Jean and John Simmons are married and own their own home as tenants by
entirety. When John dies the home is valued at $350,000. How much will be
counted in his gross taxable estate?
A. None, as it passes directly to his spouse, Jean.
B. $175,000 - or one-half of the value
C. $225,000 - or the full amount minus the $125,000 one-time exclusion for capital
gains on a person residence.
D. $350,000 - the full amount is includable.
- CORRECT ANSWER - B. $175,000 - or one-half the value
Once a will is properly drafted it is valid:
A. in all states.
B. for the state for which it was prepared.
C. in all states for a period of 5 years.
D. for the state for which it was prepared for a period of 5 years.
- CORRECT ANSWER - B. for the state for which it was prepared.
In managing personal trust assets, a trustee should seek which of the following?
A. maximum income
B. preservation of capital
C. reasonable income and preservation of capital, including purchasing power
,D. maximum income and reasonable preservation of capital
- CORRECT ANSWER - C. reasonable income and preservation of capital including
purchasing power
A decedent's estate being settled by your bank contains an antique automobile.
One of the directors of your bank indicates that he would like to buy it. You should
do which of the following?
A. Sell it to him at a bargain price and befriend him.
B. Have a qualified appraisal done and offer it to him at that value.
C. Explain that he may not purchase the car from the estate.
D. Arrange for a public auction at which he may buy it if he is the highest bidder.
- CORRECT ANSWER - C. Explain that he may not purchase the car from the estate.
If you hold a rental property in an irrevocable trust, when is it all right to rent to
an employee of your trust department?
A. Never
B. When the employee pays fair rent.
C. When the employee has been with you at least 5 years and can be trusted.
D. When the employee has no connection with the account or beneficiaries.
- CORRECT ANSWER - A. Never
Which of the following generally may NOT hold real property?
,A. Revocable Living Trusts trusteed by a corporate fiduciary.
B. Uniform Gift to Minors Account
C. 2503(c) Minors Trust
D. Uniform Transfer to Minors Account
- CORRECT ANSWER - B. Uniform Gifts to Minors Account
H's will provides that upon his death, $1 million will be held in a trust for the
benefit of his wife, W. This trust provides that W will receive all of the trust
income and will receive distributions of principal in the form of an annuity for her
lifetime. At W's death, the remaining trust assets will be distributed to a
designated charity. H's executor intends to make a "QTIP" election for this trust.
Will the legacy to the trust, or any part thereof, be deductible by H's estate, or if
so, why?
A. Yes, the entire $1 million will qualify for the estate tax marital and charitable
deductions.
B. No, none of the $1 million will qualify for the estate tax marital and charitable
deductions.
C. Yes, the entire $1 million will qualify for the estate tax marital deduction.
D. Yes, the value of W's income interest will qualify for the marital deduction; the
remainder will not qualify for any deduction.
- CORRECT ANSWER - C. Yes, the entire $1 million will qualify for the estate tax
marital deduction.
, H makes a gift of property to a trust for the benefit of his children. If H serves as a
trustee, what limitations, if any, should be placed on his distribution powers in
order to avoid adverse gift and estate tax consequences?
A. H's power to make distributions should be limited by ascertainable standards
such as health, support and education.
B. No limitations are required.
C. H should be prohibited from participating in making any distributions.
D. H's power to make distributions should be limited to those required to
discharge his legal obligation to support his children.
- CORRECT ANSWER - A. H's power to make distributions should be limited by
ascertainable standards such as health, support and education.
Which of the following statements about a QTIP trust is false?
A. An executor has the ability to elect, partially elect, or not elect to qualify for
QTIP treatment any part of the marital trust property.
B. The spouse-beneficiary need not have the ability to control the ultimate
disposition of the trust property.
C. The grantor-spouse's GST exemption cannot be allocated to trust property.
D. To have a valid QTIP interest, the spouse must be entitled to all of the net
income from the trust property.
- CORRECT ANSWER - C. The grantor-spouse's GST exemption cannot be allocated
to trust property.
Which of the following is an advantage of a QTIP trust over the life estate/general
power of appointment trust?
Jean and John Simmons are married and own their own home as tenants by
entirety. When John dies the home is valued at $350,000. How much will be
counted in his gross taxable estate?
A. None, as it passes directly to his spouse, Jean.
B. $175,000 - or one-half of the value
C. $225,000 - or the full amount minus the $125,000 one-time exclusion for capital
gains on a person residence.
D. $350,000 - the full amount is includable.
- CORRECT ANSWER - B. $175,000 - or one-half the value
Once a will is properly drafted it is valid:
A. in all states.
B. for the state for which it was prepared.
C. in all states for a period of 5 years.
D. for the state for which it was prepared for a period of 5 years.
- CORRECT ANSWER - B. for the state for which it was prepared.
In managing personal trust assets, a trustee should seek which of the following?
A. maximum income
B. preservation of capital
C. reasonable income and preservation of capital, including purchasing power
,D. maximum income and reasonable preservation of capital
- CORRECT ANSWER - C. reasonable income and preservation of capital including
purchasing power
A decedent's estate being settled by your bank contains an antique automobile.
One of the directors of your bank indicates that he would like to buy it. You should
do which of the following?
A. Sell it to him at a bargain price and befriend him.
B. Have a qualified appraisal done and offer it to him at that value.
C. Explain that he may not purchase the car from the estate.
D. Arrange for a public auction at which he may buy it if he is the highest bidder.
- CORRECT ANSWER - C. Explain that he may not purchase the car from the estate.
If you hold a rental property in an irrevocable trust, when is it all right to rent to
an employee of your trust department?
A. Never
B. When the employee pays fair rent.
C. When the employee has been with you at least 5 years and can be trusted.
D. When the employee has no connection with the account or beneficiaries.
- CORRECT ANSWER - A. Never
Which of the following generally may NOT hold real property?
,A. Revocable Living Trusts trusteed by a corporate fiduciary.
B. Uniform Gift to Minors Account
C. 2503(c) Minors Trust
D. Uniform Transfer to Minors Account
- CORRECT ANSWER - B. Uniform Gifts to Minors Account
H's will provides that upon his death, $1 million will be held in a trust for the
benefit of his wife, W. This trust provides that W will receive all of the trust
income and will receive distributions of principal in the form of an annuity for her
lifetime. At W's death, the remaining trust assets will be distributed to a
designated charity. H's executor intends to make a "QTIP" election for this trust.
Will the legacy to the trust, or any part thereof, be deductible by H's estate, or if
so, why?
A. Yes, the entire $1 million will qualify for the estate tax marital and charitable
deductions.
B. No, none of the $1 million will qualify for the estate tax marital and charitable
deductions.
C. Yes, the entire $1 million will qualify for the estate tax marital deduction.
D. Yes, the value of W's income interest will qualify for the marital deduction; the
remainder will not qualify for any deduction.
- CORRECT ANSWER - C. Yes, the entire $1 million will qualify for the estate tax
marital deduction.
, H makes a gift of property to a trust for the benefit of his children. If H serves as a
trustee, what limitations, if any, should be placed on his distribution powers in
order to avoid adverse gift and estate tax consequences?
A. H's power to make distributions should be limited by ascertainable standards
such as health, support and education.
B. No limitations are required.
C. H should be prohibited from participating in making any distributions.
D. H's power to make distributions should be limited to those required to
discharge his legal obligation to support his children.
- CORRECT ANSWER - A. H's power to make distributions should be limited by
ascertainable standards such as health, support and education.
Which of the following statements about a QTIP trust is false?
A. An executor has the ability to elect, partially elect, or not elect to qualify for
QTIP treatment any part of the marital trust property.
B. The spouse-beneficiary need not have the ability to control the ultimate
disposition of the trust property.
C. The grantor-spouse's GST exemption cannot be allocated to trust property.
D. To have a valid QTIP interest, the spouse must be entitled to all of the net
income from the trust property.
- CORRECT ANSWER - C. The grantor-spouse's GST exemption cannot be allocated
to trust property.
Which of the following is an advantage of a QTIP trust over the life estate/general
power of appointment trust?
