Writing a will

Question 1
Fred and Wilma, who are domiciled in Massachusetts were married and are the parents of one child, Pebbles. Fred died without a Will on May 1, 2013. He is survived only by his wife and his daughter. How will his probate estate be distributed upon his death?

a. All to his surviving spouse, Wilma.

b. All to his child, Pebbles.

c. One-half to his surviving spouse, Wilma and one-half to his daughter Pebbles.

d. Two-thirds to his surviving spouse and one-third to his surviving child.
Question 2
Harold who is domiciled in Massachusetts wrote and signed his own Will. The Will was signed as being witnessed by one person. Both Harold’s signature and the witness’s signature were notarized. Upon the death of Harold the Will is …

a. acceptable by the Probate and Family Court because it was a holographic Will made by Harold personally.

b. invalid because it was not properly witnessed.

c. acceptable by the Probate and Family Court because it was signed by one witness and notarized.

d. invalid because it was written by Harold who is not a lawyer.
Question 3
John has a revocable living trust under the terms of which, John is the donor of the trust, the trustee of the trust and the lifetime beneficiary of the trust. John funds the trust during his lifetime with all of his assets. Which of these statements is correct?

a. The trust assets are not subject to probate at the death of John.

b. The trust assets are not subject to estate taxes at the death of John even if the assets exceed the minimum amount for state or federal estate taxes.

c. Creditors of John may not reach the assets in the trust to satisfy a judgment against John.

d. While John is alive, he must file a separate income tax return for the trust.
Question 4
John made a gift of $13,000 in cash on December 31, 2012 to his son Fred and another gift of $14,000 to his son Fred on January 1, 2013. He made no other gifts directly to Fred during either of those years. He did, however, pay Fred’s college tuition of $42,000 directly to Fred’s college in 2012. Which of these statements is true?

a. The gift to Fred in 2013 is not covered by the annual exclusion from gift tax because less than a year has gone by since receipt by Fred of his previous gift from his father.

b. The gift to Fred of the $13,000 in 2012 is subject to gift tax because John exceeded his annual exemption amount by paying for Fred’s tuition in 2012.

c. John’s gift in 2012 is not subject to a gift tax, but John is required to file a gift tax return.

d. None of the gifts are subject to gift tax.
Question 5
John pays for cosmetic surgery for his friend Dolly that is done solely for cosmetic purposes. John pays the surgeon directly for the entire bill. Which of these statements is correct?

a. The gift of the cost of the cosmetic surgery is not subject to gift tax because it was paid directly to the surgeon.

b. The gift of the cost of the cosmetic surgery is subject to gift tax if it is not under the amount of the annual exemption or any remaining amount of John’s lifetime gift tax exemption.

c. The gift is subject to gift tax because Dolly is not related to him.

d. The gift is not subject to gift tax because it was related to a medical expense.
Question 6
In regard to the lifetime $5,250,000 gift tax exemption, which of the following is true?

a. It may not be used in conjunction with gift splitting.

b. It may only be used for gifts of a present interest.

c. It is not necessary to file a gift tax return when the lifetime exemption is utilized.

d. The lifetime $5,250,000 exemption is in addition to gifts made utilizing the annual exemptions for gifts.
Question 7
Grandma and Grandpa made total gifts of $28,000 in 2013 to each of their ten grandchildren. Which of the following statements is true?

a. The gifts were not subject to gift tax, but would be subject to the generational skipping tax unless the gift amounts were under the amount of the lifetime exemption for the generational skipping tax.

b. The gifts were not subject to gift tax and were not subject to the generational skipping tax.

c. The gifts would not be subject to the generational skipping tax if their grandchildren were less than 37 1/2 years younger than both Grandma and Grandpa.

d. The gifts would not be subject to the generational skipping tax, but would be subject to the gift tax.
Question 8
Britney and Kevin were married in 2012 at the time that they made a gift to their child. They divorced later in the year. Which of the following statements is true?

a. They could declare the gift to be a split gift regardless of whether one of them remarried during 2012.

b. They could not declare the gift a split gift regardless of whether one of them remarried during 2012.

c. They could declare the gift to be a split gift even if both of them remarried during 2012.

d. They could declare the gift to be a split gift so long as neither of them remarried during 2012.
Question 9
Fred transfers money to John and John executes a promissory note as evidence that the transfer is a loan. John also executes a mortgage to secure the loan. Fred and John orally agree that the transferred money does not have to be repaid. Which of these statements is true?

a. The transfer will be considered by the IRS as a loan because both a promissory note and a mortgage were executed.

b. The IRS will consider the transfer a gift because of their oral side agreement to forgive repayment of the money transferred.

c. The IRS will consider the transfer a loan because the promissory note and mortgage are in writing and the side agreement is only oral.

d. The IRS will consider the amount transferred a loan unless the individuals are related.
Question 10
Fred makes a gift to his daughter Pebbles of $14,000 using the Uniform Transfers to Minors Act naming himself as the custodian of the account. Fred dies before the funds in the account are fully distributed to Pebbles. Which of the following statements is true?

a. Any amounts in the account at the time of Fred’s death are includable in the gross estate of Fred for estate tax purposes.

b. Any amounts in the account at the time of Fred’s death are not includable in the gross estate of Fred for estate tax purposes because they represent a completed gift.

c. Any amounts in the account at the time of Fred’s death are not includable in the gross estate of Fred for estate tax purposes because his wife, Wilma becomes the new custodian.

d. Any amounts in the account at the time of Fred’s death are not includable in the gross estate of Fred for estate tax purposes because they are not a part of Fred’s probate estate.
Question 11
Fred dies owning a traditional IRA, a Roth IRA and a life insurance policy with his wife Wilma named as the sole beneficiary. Which of these assets are included in his gross estate for estate tax purposes?

a. The traditional IRA and the Roth IRA only.

b. The life insurance policy proceeds only.

c. The life insurance policy and the traditional IRA only.

d. The traditional IRA, Roth IRA and life insurance policy proceeds.
Question 12
Fred has established a 2503(c) trust for his daughter Pebbles, a QPRT for his daughter Pebbles and an irrevocable life insurance trust for the benefit of his daughter, Pebbles. When funding these trusts, he can utilize the annual exemption in which trusts?

a. The 2503(c) trust, QPRT and the irrevocable life insurance trust.

b. The 2503(c) trust and the irrevocable life insurance trust only.

c. The QPRT and the irrevocable life insurance trust only.

d. The 2503(c) trust and the QPRT only.
Question 13
Fred establishes an irrevocable trust for the benefit of his three nephews. Fred names himself as trustee and provides himself with the power to determine at his sole discretion the distributions of the trust to his three nephews. In regard to estate taxes, upon Fred’s death, which of the following statements is true?

a. The entire value of the trust is included in Fred’s gross estate for estate tax purposes.

b. None of the value of the trust is included in Fred’s gross estate for estate tax purposes because his ability to distribute in accordance with his sole discretion qualifies as an ascertainable standard.

c. None of the value of the trust is included in Fred’s gross estate for estate tax purposes because the gift into the trust was complete and Fred is not a beneficiary of the trust.

d. None of the value of the trust is included in Fred’s gross estate for estate tax purposes because the trust was made an irrevocable trust for the sole benefit of Fred’s nephews.
Question 14
Fred establishes a Grantor Retained Annuity Trust (GRAT) with a term of seven years. The trust provides for Fred to receive annual payments for seven years. Fred dies during the sixth year of the trust. Which of the following statements is true?

a. One-seventh of the value of the trust at the time of Fred’s death is included in his gross estate for estate tax purposes.

b. None of the value of the trust at the time of Fred’s death is included in his gross estate for estate tax purposes.

c. Six-sevenths of the value of the trust at the time of Fred’s death is included in his gross estate for estate tax purposes.

d. The entire amount of the trust at the time of Fred’s death is included in Fred’s gross estate for estate tax purposes.
Question 15
Fred established a five year GRAT with the transfer of $260,000 of assets into the GRAT for his benefit for five years. At the termination of the trust after five years, the trust property which at the termination of the trust was valued at $400,000 was distributed to his daughter Pebbles . How much of the initial transfer used to fund the trust was subject to gift tax?

a. Only so much of the value of the transfer as exceeds his annual exemption.

b. Only so much of the value of the transfer as exceeds his $5,250,000 lifetime gift exemption.

c. None because he is able to use his annual exemption amount for the transfer as a split gift with his wife Wilma.

d. None because no gift tax is assessed upon the establishing of a GRAT because Fred is a lifetime beneficiary.
Question 16
Fred establishes an intentionally defective trust for the benefit of his daughter, Pebbles. Which of the following statements is true?

a. Upon the death of Fred, none of the value of the trust is included in Fred’s gross estate for estate tax purposes.

b. Pebbles is responsible for the payment of income taxes on income of the trust distributed to her.

c. The transfer of assets into the trust by Fred is not a completed gift for gift tax purposes.

d. So long as Fred is not a trustee of the trust, the income of the trust will not be attributed to him for income tax purposes.
Question 17
Which of the following may be a general partner in a Family Limited Partnership?

a. An individual only.

b. A trust only.

c. A corporation only.

d. An individual, trust or corporation.
Question 18
Fred gives his daughter Pebbles a 20% limited partnership interest in his Family Limited Partnership. The terms of the limited partnership do not permit the holders of limited partnership interests to sell their interests to others outside of the partnership. For gift tax purposes, the value of the gift of the limited partnership interest is which of the following?

a. 20% of the value of the assets of the limited partnership assets.

b. 20% of the value of the limited partnership assets reduced by a factor for lack of control and lack of marketability.

c. 20% of the value of the limited partnership assets reduced by a factor for lack of control only.

d. 20% of the value of the limited partnership assets reduced by a factor for lack of marketability only.
Question 19
Fred creates a Family Limited Partnership and designates himself as the sole General Partner with the sole ability to determine the time and amounts of any and all distributions from the partnership to himself and his daughter Pebbles who is a limited partner. Which of the following is true?

a. Fred is personally responsible for the debts of the partnership

b. Fred is not personally responsible for the debts of the partnership.

c. Fred’s personal creditors in regard to debts unrelated to the operation of the partnership may directly claim and take Fred’s share of partnership income.

d. Through a charging order, Fred’s personal creditors can compel a distribution from the partnership.
Question 20
Which of the following assets is not a good asset for inclusion in a Family Limited Partnership?

a. A stock portfolio.

b. An apartment building.

c. An operating business.

d. The family home of the General Partner used by the General Partner without rental payments.
Question 21
Which of these is not characteristic of a Charitable Remainder Trust?

a. Revocable Trust.

b. Irrevocable Trust

c. Trust property passes to a charity upon the termination of the trust.

d. Income tax deduction to the Grantor of the trust for a charitable contribution at the time of the establishment and funding of the trust.
Question 22
Which of these trusts is often coupled with a Charitable Remainder Trust?

a. A Qualified Personal Residence Trust

b. An Irrevocable Life Insurance Trust often referred to in this situation as a Wealth Replacement Trust

c. A living revocable trust

d. A 2503(c) trust
Question 23
When securities that make up the corpus of a Charitable Remainder Trust are sold by the trust during the existence of the trust, which of the following is true?

a. Income tax is owed by the trust which is determined using a carryover basis.

b. Income tax is owed by the trust which is determined using a stepped up basis.

c. No income tax is owed by the trust upon the sale of the securities.

d. Income tax is owed by the grantor of the trust based upon the grantor’s carryover basis.
Question 24
Donald buys a policy of life insurance and makes his nephews Huey, Dewey and Marvin the beneficiaries of the policy. During his lifetime Donald pays the premiums on the policy and is designated as the owner. At his death in 2011, the proceeds are paid to Huey, Dewey and Marvin. None of the proceeds are payable to Donald’s estate. Which of the following statements is true?

a. The entire insurance proceeds are included in the gross estate of Donald for estate tax purposes.

b. None of the insurance proceeds are included in the gross estate of Donald for estate tax purposes.

c. The insurance proceeds are included in Donald’s probate estate.

d. Under no circumstances are Huey, Dewey and Marvin held responsible for any estate taxes due relative to the value of the insurance proceeds.
Question 25
A Crummey Power in an Irrevocable Life Insurance Trust refers to which of the following?

a. An ascertainable standard by which the trustee is to determine who is to receive benefits from the trust.

b. A limited power of appointment by which the trustee may designate who is to receive benefits from the trust.

c. The power of the trustee to change the beneficiaries.

d. The ability of a beneficiary to choose to receive his or her share of money paid to the trust intended to be used to pay for the insurance premium payments rather than have the payments used to pay for the insurance policy premiums.
Question 26
If Fred purchased a life insurance policy in 2012, gave it to an Irrevocable Life Insurance Trust in 2013 and also died in 2013 what amount if any of the value of the policy would be included in his gross taxable estate for estate tax purposes?

a. None of the value of the insurance proceeds.

b. All of the value of the insurance proceeds.

c. Two-thirds of the value of the insurance proceeds.

d. One-half of the value of the insurance proceeds.
Question 27
Fred creates an Irrevocable Life Insurance Trust in 2012 and gives money to the trust at that time to purchase a life insurance policy on Fred’s life. Fred dies in 2013. What amount, if any, of the value of the policy is included in Fred’s gross taxable estate for estate tax purposes?

a. None

b. The entire proceeds.

c. One-half of the proceeds.

d. Two-thirds of the proceeds.
Question 28
Fred and Wilma are married. They have one child, Pebbles. Fred and Wilma each create a Marital Deduction Credit Shelter Trust which provides for a Marital Trust portion for the benefit of each other and ultimately, Pebbles along with a Credit Shelter portion that benefits each other and Pebbles . Fred dies in 2010 and Wilma dies in 2013 Which of these statements is true?

a. Upon the death of Fred, there will be a greater estate tax savings to Wilma than there would be than if Fred had died without such a trust.

b. There will be an estate tax savings during the lifetimes of both Fred and Wilma.

c. Estate tax savings will occur upon the death of Wilma, thereby benefiting Pebbles.

d. No estate tax savings will be achieved by the trusts.
Question 29
Homer and Marge are married. Marge has three children from a previous marriage for whom she wishes to provide upon her death. Marge also wants to provide for Homer at her death. She therefore utilizes a QTIP trust. Which of the following is false about her QTIP trust?

a. The QTIP trust is a form of a marital trust.

b. The QTIP trust will provide income to Homer during his lifetime.

c. The QTIP trust will not permit Homer to have the power to personally access the principal of the trust.

d. Because a QTIP trust does not provide complete control to Homer upon Marge’s death, the QTIP trust is not eligible for the marital deduction to avoid estate taxes.
Question 30
Brad has established a Marital Deduction Credit Shelter Trust for the benefit of his wife, Angelina during her lifetime and then to his children upon her death. At the time of Brad’s death in 2013, he owned all of his assets jointly with Angelina. Brad’s Will directs that all of his assets be poured over into his Marital Deduction Credit Shelter Trust. Which of the following statements is true?

a. At Brad’s death his half of his joint property will automatically pass into his trust.

b. At Brad’s death, his half of the joint property will automatically pass to Angelina unless Angelina effectively disclaims her ownership of Brad’s share of the joint property.

c. At Brad’s death, if Angelina disclaimed her ownership of Brad’s share of the joint property ten months after Brad’s death, the property would pass to Brad’s probate estate.

d. At Brad’s death, if Angelina effectively disclaimed her interest in Brad’s share of their joint property, the property would pass directly to their children.
Question 31
Fred establishes a Living Revocable Trust in which he is the grantor, initial trustee and initial beneficiary. Upon his death, the trust provides for the distribution of the trust assets to his daughter, Pebbles. Fred has a pourover Will that pours into his trust at his death any assets in his estate that are not titled in the name of the trust at the time of his death. Which of the following statements is true?

a. During his lifetime, the trust is not subject to the claims of Fred’s creditors.

b. At Fred’s death, the assets in the trust are a part of his probate estate.

c. At Fred’s death, the assets that were not titled in the name of the trust, but which will pourover into the trust at the time of his death are a part of Fred’s probate estate.

d. None of the assets contained in Fred’s trust at the time of his death are a part of his gross estate for estate tax purposes.
Question 32
Fred has a severely mentally handicapped child for whom he wishes to provide for at the time of his death. Which of the following trusts will best accomplish that goal?

a. Supplemental Needs Trust.

b. 2503(c) trust

c. 2503(b) trust

d. GRAT
Question 33
William and Jack are a gay couple who are married in Massachusetts. Which of the following trusts are they eligible for in regard to avoiding federal estate taxes?

a. Marital Deduction Credit Shelter Trust

b. QTIP trust

c. QDOT trust

d. GRIT
Question 34
Fred and Wilma are married. Fred is a United States citizen and Wilma is a Canadian citizen. For which of the following trusts is Wilma eligible?

a. QDOT

b. Marital Deduction Credit Shelter Trust

c. QTIP

d. Marital Deduction Trust
Question 35
Fred has a Roth IRA with a beneficiary designation indicating that his wife, Wilma is his primary beneficiary and his daughter Pebbles is his secondary beneficiary. Which of these statements is false in regard to the inheritance of Fred’s Roth IRA following his death?

a. The Roth IRA will not be subject to inclusion in the gross estate of Fred for estate tax purposes.

b. Wilma will be able to roll over the Roth IRA into her own Roth IRA.

c. If Wilma disclaims her interest in the Roth IRA, it will pass to Pebbles who may not roll it over into her own presently existing Roth IRA.

d. If Wilma rolls Fred’s Roth IRA into her own Roth IRA, she may choose not to take distributions from her Roth IRA.
Question 36
Using the same fact pattern as in question 35, if Wilma disclaims half of the Roth IRA which of these statements is true?

a. The estate tax marital deduction will apply to the entire amount of the IRA.

b. The estate tax marital deduction will apply to such amount of the IRA as is claimed by Wilma

c. Pebbles will not be required to take distributions from the inherited Roth IRA.

d. Pebbles must pay income taxes on any distributions she takes from the inherited Roth IRA.
Question 37
Donald has a traditional IRA, but does not have a valid beneficiary designation. Under the terms of his IRA contract, in the event of a failure of the beneficiary designation, the IRA is payable to the estate of Donald. Donald’s Will leaves his estate equally to his three nephews who are ages 7, 11 and 18. Upon Donald’s death which of these statements is true?

a. The IRA will be paid directly by the IRA custodian to Donald’s nephews as indicated in his Will.

b. The IRA will be divided into three equal amounts and distributed by the IRA custodian to Donald’s nephews in such amounts as determined by their respective ages.

c. The IRA will not be subject to probate.

d. Upon Donald’s death, the IRA will pass to his estate where it must be fully distributed in no longer than five years.
Question 38
What is the maximum number of people who may be named a primary health care agent under a Massachusetts Health Care Proxy?

a. One

b. Two

c. Three

d. Four
Question 39
What is the maximum number of people who may be named as Attorneys-in-fact under a Massachusetts Durable Power of Attorney?

a. One

b. Two

c. Three

d. Unlimited.
Question 40
Which of the following is not an acceptable ascertainable standard?

a. Comfort, welfare and happiness

b. Maintenance in health and reasonable comfort

c. Support in reasonable comfort.

d. Support in his accustomed manner of living.
Question 41
Which of these statements is false about the annual gift tax exclusion.?

a. It presently is $14,000.

b. It applies to gifts of both present and future interests.

c. It applies to the total of all gifts to a particular individual in a calendar year.

d. It may be doubled if the gift is a valid split gift from a married couple regardless of which of them provided the gift.
Question 42
Homer sells his home to his son Bart. His home is appraised at $250,000. Homer sells the home to Bart for one dollar. Homer’s basis in the home was $100,000. How will the IRS consider this transaction?

a. They will consider it as a combination of a one dollar sale and a $249,999 gift.

b. They will consider it a sale for one dollar.

c. They will consider it as a gift of $250,000.

d. Bart’s basis in the property will be one dollar.
Question 43
Homer adds Bart as a joint owner to a bank account in which there is $100,000 at the time that Homer adds Bart’s name to the account. For gift tax purposes, how much of a gift has Homer made on the day that Bart’s name is added to the account?

a. $100,000

b. $50,000

c. 0

d. $25,000
Question 44
Homer has an IRA account in which his wife, Marge is his primary beneficiary and his three children are equal secondary beneficiaries. At Homer’s death there is $100,000 in the account. Two months after Homer’s death, Marge disclaims the full amount of $100,000. What is the amount of her gift to the three children?

a. 0

b. $100,000

c. $33,333 to each child.

d. $50,000
Question 45
Homer dies with his taxable estate consisting solely of a parcel of real estate that he owns in his name alone that at the time of his death is worth $5,000,000. Six months after his death the property is worth $2,500,000. At the time of the filing of his estate tax return the value of the property has dropped to $1,000,000. What is the most appropriate value of the property to be indicated on Homer’s estate tax return?

a. $5,000,000

b. $2,500,000

c. $1,000,000

d. 0
Question 46
Barney dies leaving a substantial estate. In which of these instances would the Generational Skipping Tax not apply?

a. Bequest to his great grandchild

b. Bequest to his grandchild.

c. Bequest to his wife who is more than 37 1/2 years younger than him.

d. Bequest to his girlfriend who is more than 37 1/2 years younger than him.
Question 47
Homer dies leaving a Marital Deduction Credit Shelter Trust primarily for the benefit of his wife Marge and upon her death for the benefit of their children. His trust contains $5,250,000 in the marital deduction portion of the trust and$5,250,000 in the credit shelter portion of the trust. You are retained by Marge to do estate and financial planning for her. In regard to the use of the two portions of the trust, in order to preserve more assets for her children you would suggest which of the following options?

a. Make distributions to Marge equally from the Marital Deduction portion of the trust and the Credit Shelter portion of the trust.

b. Make distributions exclusively from the Marital Deduction portion of the trust for Marge until it is exhausted before making any distributions from the Credit Shelter portion.

c. Make distributions exclusively from the Credit Shelter portion of the trust for Marge until it is exhausted before making any distributions from the Marital Deduction portion.

d. It makes no difference in regard to Marge’s estate and financial planning as to which portion of the Marital Deduction Credit Shelter Trust she takes her distributions from.
Question 48
The best type of property for inclusion in a Charitable Remainder Trust would be which of the following?

a. Property with a low income tax basis.

b. Property with a high income tax basis.

c. Stocks

d. Bonds
Question 49
A Self Cancelling Installment Note would be most appropriate for which of the following transactions?

a. Sale of a family business to a stranger.

b. Sale of a family business from an owner who intends to retire to a family member.

c. Sale of a partnership to the surviving unrelated partner.

d. Sale of corporate stock back to a corporation.
Question 50
Which of the following is not true as to a QPRT?

a. In order to obtain estate tax benefits, the donor of the trust must outlive the term of the trust.

b. At the time of the establishment of the QPRT, the value of the home for gift tax purposes is discounted from its then fair market value.

c. Once the real estate is contained in the trust, it cannot be sold during the term of the trust.

d. If a QPRT is used and the property is transferred to the beneficiaries at the termination of the trust, the appreciation in the value of the real estate is removed from the trust grantor’s estate at the time of his or her later passing.
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