CANNON CTFA EXAM
Jean and John Simmons are married and own their own home as tenants by entirety. When John dies
the home is valued at $350,000. How much will be counted in his gross taxable estate?
A. None, as it passes directly to his spouse, Jean.
B. $175,000 – or one-half of the value
C. $225,000 – or the full amount minus the $125,000 one-time exclusion for capital gains on a person
residence.
D. $350,000 – the full amount is includable. – ANSWER ☑☑B. $175,000 – or one-half the value
Once a will is properly drafted it is valid:
A. in all states.
B. for the state for which it was prepared.
C. in all states for a period of 5 years.
D. for the state for which it was prepared for a period of 5 years. – ANSWER ☑☑B. for the state for
which it was prepared.
In managing personal trust assets, a trustee should seek which of the following?
A. maximum income
B. preservation of capital
C. reasonable income and preservation of capital, including purchasing power
D. maximum income and reasonable preservation of capital – ANSWER ☑☑C. reasonable income and
preservation of capital including purchasing power
A decedent’s estate being settled by your bank contains an antique automobile. One of the directors of
your bank indicates that he would like to buy it. You should do which of the following?
A. Sell it to him at a bargain price and befriend him.
B. Have a qualified appraisal done and offer it to him at that value.
C. Explain that he may not purchase the car from the estate.
D. Arrange for a public auction at which he may buy it if he is the highest bidder. – ANSWER ☑☑C.
Explain that he may not purchase the car from the estate.
If you hold a rental property in an irrevocable trust, when is it all right to rent to an employee of your
trust department?
A. Never
B. When the employee pays fair rent.
C. When the employee has been with you at least 5 years and can be trusted.
D. When the employee has no connection with the account or beneficiaries. – ANSWER ☑☑A. Never
Which of the following generally may NOT hold real property?
A. Revocable Living Trusts trusteed by a corporate fiduciary.
B. Uniform Gift to Minors Account
C. 2503(c) Minors Trust
D. Uniform Transfer to Minors Account – ANSWER ☑☑B. Uniform Gifts to Minors Account
H’s will provides that upon his death, $1 million will be held in a trust for the benefit of his wife, W. This
trust provides that W will receive all of the trust income and will receive distributions of principal int he
form of an annuity for her lifetime. At W’s death, the remaining trust assets will be distributed to a
designated charity. H’s executor intends to make a “QTIP” election for this trust. Will the legacy to the
trust, or any part thereof, be deductible by H’s estate, or if so, why?
A. Yes, the entire $1 million will qualify for the estate tax marital and charitable deductions.
B. No, none of the $1 million will qualify for the estate tax marital and charitable deductions.
C. Yes, the entire $1 million will qualify for the estate tax marital deduction.
D. Yes, the value of W’s income interest will qualify for the marital deduction; the remainder will not
qualify for any deduction. – ANSWER ☑☑C. Yes, the entire $1 million will qualify for the estate tax
marital deduction.
H makes a gift of property to a trust for the benefit of his children. If H serves as a trustee, what
limitations, if any, should be placed on his distribution powers in order to avoid adverse gift and estate
tax consequences?
A. H’s power to make distributions should be limited by ascertainable standards such as health, support
and education.
B. No limitations are required.
C. H should be prohibited from participating in making any distributions.
D. H’s power to make distributions should be limited to those required to discharge his legal obligation
to support his children. – ANSWER ☑☑A. H’s power to make distributions should be limited by
ascertainable standards such as health, support and education.
Which of the following statements about a QTIP trust is false?
A. An executor has the ability to elect, partially elect, or not elect to qualify for QTIP treatment any part
of the marital trust property.
B. The spouse-beneficiary need not have the ability to control the ultimate disposition of the trust
property.
C. The grantor-spouse’s GST exemption cannot be allocated to trust property.
D. To have a valid QTIP interest, the spouse must be entitled to all of the net income from the trust
property. – ANSWER ☑☑C. The grantor-spouse’s GST exemption cannot be allocated to trust property.
Which of the following is an advantage of a QTIP trust over the life estate/general power of
appointment trust?
A. The surviving spouse will not be entitled to all of the income from the trust.
B. The decedent spouse can control the ultimate disposition of the trust property
C. The decedent’s estate will receive a marital deduction for the property transferred to the trust.
D. The surviving spouse can withdraw trust property during her life to make gifts to descendants. –
ANSWER ☑☑B. The decent spouse can control the ultimate disposition of the trust property.
Payments made directly to an educational institution for tuition on behalf of grandchildren are:
A. subject to gift tax to the extent they exceed the annual exclusion.
B. subject to generation-skipping tax.
C. not subject to gift tax.
D. not taxable gifts and are not subject to generation-skipping tax. – ANSWER ☑☑D. not taxable gifts
and are not subject to generation-skipping tax.
If you own a 7% Bond maturing in twenty years, and long term rates go to 10%:
A. your bond will sell at a premium.
B. your bond will be called.
C. the annual interest payments on your bond will decline.
D. your bond will sell at a discount. – ANSWER ☑☑D. your bond will sell at a discount.
A customer, who is terminally ill, wishes to make several gifts by check to friends before she dies. Since
these individuals are not beneficiaries under her will, she is anxious to have the gifts completed before
her death. Which of the following should represent your advice to her?
A. If the checks are dated before she dies, they will constitute completed gifts
B. If the gifts are not made before her death, they can be made by her executor based on her verbally
expressed intent
C. If the checks are delivered to the recipients before her death, they are considered to be completed
gifts
D. The checks must be deposited for cashing at the bank before her death in order to qualify as
completed gifts – ANSWER ☑☑D. The checks must be deposited for cashing at the bank before her
death in order to qualify as completed gifts
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