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. Retirement

    How To Set Up A Trust Fund In The U.K.

    A guide to the whys and wherefores of setting up this most versatile of estate-planning instruments in the United Kingdom.
  2. Financial Advisors

    Passing an IRA to a Trust: The Good and Bad

    Creating a trust is a common estate planning tactic, but naming a beneficiary to an IRA to a trust may have unintended consequences.
  3. Retirement

    Surprising Ways a Trust Could Help Your Family

    Everything you always wanted to know about setting up trusts, in handy glossary form.
  4. Retirement

    How to Set Up a Trust Fund in Canada

    You don't have to be rich to make use of a trust fund. Rules can be complex; here's what you'll need to discuss with your lawyer.
  5. Retirement

    How To Set Up A Trust Fund In Australia

    No, they're not just for the super-rich. But you need to know the rules.
  6. Personal Finance

    Surprising Uses for Trust Funds

    Here are five common situations where a trust fund makes financial sense.
  7. Estate Planning

    What's a Trust?

    A trust is a fiduciary relationship in which one party gives another party the right to hold property or assets on behalf of a beneficiary.
  8. Investing

    How Trust Funds Can Safeguard Your Children

    Certain types of trust funds can help to protect your assets from bankruptcies and civil actions, and can be established to safeguard your children and designated beneficiaries.
  9. Insurance

    Encouraging Good Habits With An Incentive Trust

    Money can be a powerful motivator - why not use it to teach your heirs positive lessons?
  10. Your Clients

    Advisors: Tips for When to Employ Living Trusts

    Revocable living trusts accomplish estate planning objectives that aren't possible with a will. Here are some of the cases that show when to use a trust.
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. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  2. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  3. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  4. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  5. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  6. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
Trading Center