9. Tom and Lisa Johnson have been married for 20 years and they have two children together. Tom was divorced before meeting Lisa and he had three children with his first wife. Tom and Lisa have a sizeable estate valued at over $5 million, mostly created from the sale of Tom's business before he met Lisa. Tom would like for his three children (from his previous marriage) to get $1 million from their estate after both of their deaths. Which trust would be the most suitable to accomplish this?
A) Crummy Trust
B) Bypass Trust
C) QTIP Trust
10. Which of the following are characteristics of the Section 2503(c) Trust?
I. The income must always be paid out to the beneficiary.
II. The principal payout is discretionary until age 21.
III. The trust pays income tax for undistributed income.
IV. If the minor dies before the age of 21, the property goes to the child's estate.
A) I and III only
B) II, III and IV only
C) III and IV only
D) I, II, III and IV
11. All of the following would be considered complex trusts, EXCEPT:
A) QTIP trust
B) Marital trust
C) Sprinkle trust
D) Section 2503(c) trust
12. Which of the following would be considered advantages of setting up a revocable living trust?
I. Probate avoidance
II. Privacy of assets
III. Speedy disposal of property
IV. Creditor protection
A) I and II only
B) I, II and III only
C) II, III and IV only
D) I, II, III and IV
13. All of the following are effective ways to avoid the probate process EXCEPT:
A) Use of payable-on-death (POD) accounts
B) Revocable Trusts
C) Rollover pension funds to individual brokerage accounts
D) Naming primary beneficiaries on your IRA accounts
14. Jim Jones, an unmarried taxpayer, died unexpectedly in 2011 at the age of 59 in his apartment that he rented. As his full estate, he left $2 million in a revocable trust, $500,000 in a savings account, $1 million in life insurance proceeds (policy owned by Jim, payable to Matt) and a $100,000 certificate of deposit. Jim updated his will eight months before his death leaving everything to his younger brother (Matt). Jim died before he was able to amend his revocable trust to remove his older brother (Dave) as a 50% beneficiary of the trust income and corpus. Which of the following are TRUE statements?
I. At least $1.6 million of the estate needs to be probated.
II. Jim's heirs will have to pay estate tax at 35% on everything above $1 million.
III. Dave is entitled to his share of the revocable trust.
IV. The insurance proceeds will pass federal income tax-free to Matt.
V. Matt gets everything in accordance with the updated will.
A) I and II only
B) I and IV only
C) II and III only
D) III and IV only
E) III, IV and V only
Financial AdvisorUnsure of how your assets will be dispersed once you're gone? Here's how setting up a revocable trust while you're here can be a big benefit.
RetirementA revocable trust is a legal arrangement whereby a grantor transfers property to a trustee who holds the property in trust for the grantor’s benefit.
Financial AdvisorRevocable 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.
Financial AdvisorA look at wills versus living trusts and when to choose one over the other.
RetirementEverything you always wanted to know about setting up trusts, in handy glossary form.
Financial AdvisorEvery advisor and saver needs to know these three estate planning secrets.
Managing WealthThis article explains the difference between the two estate transfer methods -- a will and a trust, and the circumstances under which each can be used.
Financial AdvisorPeter Mackey, head of exam development for the CFA Institute, shares his tips for passing the CFA level I, II and III exams.
ProfessionalsPeter Mackey, head of exam development for the CFA Institute, shares his tips for taking the CFA level I, II and III exams.
Financial AdvisorA quick estate planning guide for high-net-worth individuals to help minimize taxes and costs, protect assets and plan for care.