Liquidity, Powers of Appointment, and Trusts - Sample Questions 5 - 8

5. Which of the following is/are characteristics of a "general power of appointment?"

I. Property is not included in the decedent's gross estate.
II. No conditions or restrictions.
III. Property may not be appointed to the decedent's creditors.
IV. Holder of the power can transfer property to themselves.

A) I and II only
B) I and III only
C) II and IV only
D) III and IV only

6. Ashley is the income beneficiary of a trust whereas she is entitled to the 5-and-5 powers. She died in 2013 without exercising her power for the year. The trust value was $750,000. What is included in Ashley's gross estate?

A) $0
B) $37,500
C) $87,500
D) $750,000

7. All of the following are acceptable reasons for trust funds to be paid for the benefit of the trust beneficiary under the "ascertainable standard" EXCEPT:

A) Payment to the University of Miami for college tuition of the beneficiary.
B) Payment of asthma medication.
C) Cost of a drug addiction program.
D) Payment of credit card debt used to buy an engagement ring.

8. Harold Harrington gave his son (Bruce) a general power of appointment over his trust assets. Which of the following are true statements regarding Bruce and his power?

I. Bruce can only appoint funds using an ascertainable standard.
II. Bruce can use the funds to buy a car for his father.
III. Bruce can use the funds to pay his father's creditors.
IV. If Bruce dies before his father, the assets would be included in the gross estate of his father.

A) I only
B) I and IV only
C) II and III only
D) II, III and IV only

Sample Questions 9 - 14


Related Articles
  1. Professionals

    Practice Questions 10 - 13

    Practice Questions 10 - 13
  2. Professionals

    Sample Questions 1 - 3

    Sample Questions 1 - 3
  3. Professionals

    Sample Questions 1 - 5

    Sample Questions 1 - 5
  4. Professionals

    Sample Questions 9 - 14

    Sample Questions 9 - 14
  5. Professionals

    Sample Questions 27 - 31

    Sample Questions 27 - 31
  6. Professionals

    Summary And Review

    Summary And Review
  7. Professionals

    Summary And Review

    Summary And Review
  8. Professionals

    Sample Questions 1 - 4

    Sample Questions 1 - 4
  9. Professionals

    Sample Questions 6 - 9

    6. Which of the following would be considered a taxable gift that requires a Form 709 filing if made by Tom and Lily Jones, a married couple: I. Gift of $30,000 in XYZ stock to their grandson ...
  10. Professionals

    Sample Questions 1 - 4

    Sample Questions 1 - 4
RELATED TERMS
  1. 5 By 5 Power In Trust

    A common clause included in many trusts allowing for beneficiary ...
  2. Irrevocable Income-Only Trust - ...

    A type of living trust often used for Medicaid planning. It protects ...
  3. Beneficiary Of Trust

    A beneficiary of trust is a person for whom a trust was created, ...
  4. A-B Trust

    A trust created by a married couple with the objective of minimizing ...
  5. Credit Shelter Trust - CST

    A type of trust that allows a married investor to avoid estate ...
  6. Charitable Lead Trust

    A trust designed to reduce beneficiaries' taxable income by first ...
RELATED FAQS
  1. Which of the following are not types of open-end management investment companies ...

    The correct answer is d) Hedge funds are extremely aggressive entities that engage in margin and short-selling.  They are ... Read Answer >>
  2. Which of the following signatures are required on a client’s new account form ... ...

    The correct answer is B. While local practices of a broker-dealer might require the client to sign the form, even when opening ... Read Answer >>
  3. Which of the following are tools that are employed by the Federal Reserve in its ...

    I. Moral suasionII. Changing the discount rateIII. Changing the reserve requirementIV. Changing the prime interest rate A. ... Read Answer >>
  4. Which statements about common shareholder rights are FALSE? I. A shareholder may ...

    The correct answer is a. I should be the the other way around: convertible bond holders can exchange their bonds for shares. ... Read Answer >>
  5. Which of the following statements is (are) true with respect to setting the proper ...

    The correct answer is: d) Choice II is incorrect because the longer the investment horizon, the less emphasis must be placed ... Read Answer >>
  6. Under the Telephone Consumer Act of 1991, a telemarketer must provide which of the ...

    The correct answer is d. All the choices except II are specific requirements of the Act. In addition, the law places time-of-day ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center