Finance Chapter 15 Successful estate planning requires knowledge of wills

Chapter 15—Preserving Your Estate

1. The main objective of estate planning is to save attorney’s fees.

a.

True

b.

False

Easy

2. Successful estate planning requires knowledge of wills, trusts, and taxes.

a.

True

b.

False

True

Easy

3. A potential estate planning problem is improper distribution of assets.

a.

True

b.

False

True

Easy

4. People planning means providing sustenance and resources for family members.

a.

True

b.

False

Easy

Chapter 15—Preserving Your Estate

5. Insufficient capital can cause problems paying estate taxes.

a.

True

b.

False

True

Easy

6. More damage is done to estates by doing nothing than by doing the wrong thing.

a.

True

b.

False

True

Easy

7. Custodial accounts are used to protect the property of minor children.

a.

True

b.

False

True

Moderate

Chapter 15—Preserving Your Estate

8. Funeral expenses are examples of second-level death-related costs.

a.

True

b.

False

Moderate

9. Minors can handle large sums of money and property.

a.

True

b.

False

Easy

10. Property held in different states does not complicate the estate planning process.

a.

True

b.

False

Easy

11. Estate planning usually occurs during the last ten years of a person’s life.

a.

True

b.

False

Easy

Chapter 15—Preserving Your Estate

12. If there is no estate plan in place, state and federal laws control the disposition of assets.

a.

True

b.

False

True

Easy

13. Disability is a common reason for estates to break up.

a.

True

b.

False

True

Easy

14. Inflation is a common reason for estates to break up.

a.

True

b.

False

True

Easy

Chapter 15—Preserving Your Estate

15. Estate planning is one of the key elements of personal financial planning.

a.

True

b.

False

True

Easy

16. Liquidity is important in an estate to pay for death costs and possible taxes.

a.

True

b.

False

True

Moderate

17. Probate property includes only real property.

a.

True

b.

False

Moderate

18. Your gross estate is all property subject to federal tax at your death.

a.

True

b.

False

Moderate

Chapter 15—Preserving Your Estate

19. Your gross estate is composed only of nonprobate property.

a.

True

b.

False

Moderate

20. The two main areas of estate planning are asset planning and probate planning.

a.

True

b.

False

Moderate

21. Updating an estate plan is a critical part of the estate planning process.

a.

True

b.

False

True

Easy

Chapter 15—Preserving Your Estate

22. If there is no will, a judge will decide who gets your children.

a.

True

b.

False

True

Moderate

23. Dying intestate means dying with a valid will.

a.

True

b.

False

Easy

24. An estate plan is good only as long as it fits the needs, desires, and circumstances of the parties involved.

a.

True

b.

False

True

Easy

25. A will is required by state law.

a.

True

b.

False

Easy

Chapter 15—Preserving Your Estate

26. Intestacy results from dying without a valid will.

a.

True

b.

False

True

Easy

27. If you die intestate, federal law dictates the disposition of your estate.

a.

True

b.

False

Moderate

28. Only the wealthy need an attorney to prepare their wills.

a.

True

b.

False

Easy

Chapter 15—Preserving Your Estate

29. The intestate process is federally mandated, and is similar from state to state.

a.

True

b.

False

Moderate

30. The prolonged and expensive disability of a family wage earner is often called a working death.

a.

True

b.

False

Moderate

31. Gathering data on all aspects of the family is an important estate planning function.

a.

True

b.

False

True

Easy

32. The testator of a will always receives property from the will.

a.

True

b.

False

Challenging

Chapter 15—Preserving Your Estate

33. The appointment clause affirms that the will in question was really made out by the deceased.

a.

True

b.

False

Challenging

34. A will may be invalid if the testator was under undue influence of another person.

a.

True

b.

False

True

Easy

35. Typically, a will must be signed by two witnesses to be valid.

a.

True

b.

False

True

Moderate

Chapter 15—Preserving Your Estate

36. A codicil is a simple and convenient legal means of modifying a will.

a.

True

b.

False

True

Moderate

37. The majority of Americans have valid wills.

a.

True

b.

False

Easy

38. In most states, divorce creates an automatic revocation or modification of a will.

a.

True

b.

False

True

Moderate

39. If a person without relatives dies with a valid will, his or her property will go to the state.

a.

True

b.

False

Moderate

Chapter 15—Preserving Your Estate

40. The appointment clause in a will determines the county that will have legal jurisdiction.

a.

True

b.

False

Challenging

41. One should make copies of his will and store them in different places.

a.

True

b.

False

True

Easy

42. A letter of last instructions is a legal document.

a.

True

b.

False

Moderate

Chapter 15—Preserving Your Estate

43. Mental capacity requires an individual to be at least 21.

a.

True

b.

False

Challenging

44. Proof of mental capacity lies on the person contesting a will, not on the individual writing a will.

a.

True

b.

False

True

Challenging

45. The revocation statement in a will directs the estate to make certain payments of expenses.

a.

True

b.

False

Moderate

46. A will should be destroyed after a codicil is written.

a.

True

b.

False

Challenging

Chapter 15—Preserving Your Estate

47. A will is revoked if a second legitimate will is created.

a.

True

b.

False

True

Easy

48. Death will erase any debts existing at that time.

a.

True

b.

False

Moderate

49. Bequests to close relatives who die before the testator will go to the relative’s heirs unless the will includes other

directions.

a.

True

b.

False

True

Challenging

Chapter 15—Preserving Your Estate

50. A trust is a means of transferring property.

a.

True

b.

False

True

Easy

51. The best choice for a trustee is a family member.

a.

True

b.

False

Moderate

52. All living trusts are revocable.

a.

True

b.

False

Moderate

53. A testamentary trust is established in a will.

a.

True

b.

False

True

Chapter 15—Preserving Your Estate

54. The recipient of the gift will pay any gift tax that is due.

a.

True

b.

False

Moderate

55. Any future appreciation of gifted property is excluded from the estate.

a.

True

b.

False

True

Moderate

56. Trusts facilitate the transfer of property and the income from that property to another party.

a.

True

b.

False

True

Easy

Moderate

Chapter 15—Preserving Your Estate

57. Trustees receive the benefits from a trust.

a.

True

b.

False

Easy

58. It is best to name an older person as the trustee.

a.

True

b.

False

Moderate

59. If a gift is so large that taxes are due, the money used to pay the taxes is removed from the estate.

a.

True

b.

False

True

Moderate

60. Gift giving can reduce estate tax liability.

a.

True

b.

False

True

Chapter 15—Preserving Your Estate

61. The taxable estate is less than the adjusted gross estate.

a.

True

b.

False

True

Moderate

62. The federal estate tax applies to certain property transfers made during a person’s lifetime.

a.

True

b.

False

True

Challenging

63. If a life insurance owner-insured gives away the policy within five years of his death, the proceeds will be included in

his estate.

a.

True

b.

False

Moderate

Easy

Chapter 15—Preserving Your Estate

64. Maxine’s estate is worth $600,000. It will not be subject to federal estate taxes.

a.

True

b.

False

True

Moderate

PFIN.BILL.17.15-5 – LO: 15-5

United States – BUSPROG: Reflective Thinking

United States – KS – DISC: Investments

Bloom’s: Applying

65. The estate exclusion amount increased to $5,340,000 in 2015.

a.

True

b.

False

True

Easy

PFIN.BILL.17.15-4 – LO: 15-4

United States – BUSPROG: Reflective Thinking

Bloom’s: Remembering

66. The taxable estate is the fair market value of all property in which the decedent had an interest and that is required to

be included in the estate.

a.

True

b.

False

Moderate

PFIN.BILL.17.15-5 – LO: 15-5

United States – BUSPROG: Reflective Thinking

Bloom’s: Remembering

67. Jill and Jack are siblings. Jill wants to gift $15,000 to Jack’s daughter. She and Jack can join in that gift to take

advantage of gift splitting.

Bloom’s: Applying

Chapter 15—Preserving Your Estate

a.

True

b.

False

Moderate

68. If a grantor transfers a life insurance policy to an irrevocable trust within three years before the grantor’s death, the

policy will not be included in the estate.

a.

True

b.

False

Moderate

69. The top federal gift and estate tax rate for 2015 is expected to be 40 percent.

a.

True

b.

False

True

Moderate

70. The gift tax law allows a person to give gifts up to $13,000 tax free.

a.

True

b.

False

Moderate