Sample Questions and Answers
Topic: Power of Attorney and Healthcare Directives
A general power of attorney grants the agent authority to:
A. Make medical decisions only
B. Manage the principal’s financial affairs
C. Modify the principal’s will
D. Act as a trustee for the principal’s trust
Answer: B
A healthcare directive is commonly used to:
A. Make medical preferences legally binding
B. Eliminate the need for probate
C. Transfer financial assets to beneficiaries
D. Pay for long-term care insurance
Answer: A
Which of the following statements is true about a durable power of attorney?
A. It ends upon the principal’s incapacity
B. It allows the agent to act only after the principal’s death
C. It remains effective even if the principal becomes incapacitated
D. It requires court approval to take effect
Answer: C
What is one limitation of a springing power of attorney?
A. It is valid only for healthcare decisions
B. It is not effective until specific conditions are met
C. It expires automatically after one year
D. It eliminates the need for a living trust
Answer: B
A living will typically addresses:
A. Financial management during incapacity
B. Distribution of assets upon death
C. Medical treatment preferences in end-of-life situations
D. The appointment of an executor
Answer: C
General Knowledge
What happens to jointly owned property with right of survivorship when one owner dies?
A. It passes directly to the surviving owner(s) without probate
B. It is distributed equally among all heirs
C. It becomes part of the deceased’s probate estate
D. It is sold, and the proceeds are divided among beneficiaries
Answer: A
Which of the following is NOT a benefit of estate planning?
A. Avoiding family disputes
B. Reducing or eliminating estate taxes
C. Creating a clear plan for end-of-life medical decisions
D. Guaranteeing equal asset distribution among heirs
Answer: D
What is the main purpose of a trust protector?
A. To oversee the trustee and ensure they follow the trust’s terms
B. To replace the executor in the probate process
C. To distribute assets directly to beneficiaries
D. To manage healthcare directives
Answer: A
The process of updating a will is called:
A. Revocation
B. Amendment
C. Codicil creation
D. Reinstatement
Answer: C
Which document is typically used to guide family members on funeral preferences?
A. A healthcare directive
B. A letter of instruction
C. A revocable trust
D. A living will
Answer: B
Topic: Wills, Trusts, and Power of Attorney
Which of the following is true about a pour-over will?
A. It transfers assets directly to beneficiaries without probate
B. It ensures any remaining assets are transferred into a trust
C. It eliminates the need for a power of attorney
D. It names a healthcare agent for medical decisions
Answer: B
What is the role of an executor in estate planning?
A. To distribute assets as per the terms of the will
B. To manage healthcare decisions for the deceased
C. To minimize the estate’s tax liability
D. To oversee the creation of trusts for minors
Answer: A
Which type of trust allows the grantor to retain control over the assets during their lifetime?
A. Testamentary trust
B. Irrevocable trust
C. Revocable living trust
D. Charitable remainder trust
Answer: C
A power of attorney terminates:
A. When the principal dies
B. When the agent resigns
C. When the principal becomes incapacitated
D. After one year from the date it is signed
Answer: A
A trust that is created to take effect upon the grantor’s death is called:
A. A living trust
B. A testamentary trust
C. A revocable trust
D. A family trust
Answer: B
Topic: Estate Taxes and Inheritance Planning
Which of the following assets are generally subject to estate tax?
A. Assets held in an irrevocable trust
B. Assets left to a surviving spouse
C. Retirement accounts with named beneficiaries
D. Cash assets over the federal exemption limit
Answer: D
What is the purpose of a gift tax exclusion?
A. To limit the value of annual gifts without taxation
B. To eliminate estate taxes for beneficiaries
C. To increase the taxable estate of the donor
D. To transfer assets tax-free only upon death
Answer: A
When planning for estate taxes, which of the following is a common strategy?
A. Transferring all assets to children before death
B. Using irrevocable life insurance trusts (ILITs)
C. Consolidating all assets into a single account
D. Avoiding the use of beneficiary designations
Answer: B
Estate taxes are generally based on:
A. The size of the probate estate only
B. The fair market value of the decedent’s total assets
C. The income generated by the estate’s assets
D. The age of the deceased at the time of death
Answer: B
What is the estate tax portability provision?
A. It allows the transfer of unused estate tax exemption to the surviving spouse
B. It permits the transfer of assets without probate
C. It increases the lifetime gift tax exemption
D. It eliminates estate taxes for non-U.S. citizens
Answer: A
Topic: Beneficiaries and Probate Process
Which of the following cannot be named as a beneficiary?
A. A minor child
B. A charitable organization
C. A trust
D. A creditor
Answer: D
Probate is required when:
A. The deceased had no will
B. Assets are held jointly with right of survivorship
C. The deceased owned real property in their sole name
D. All assets have designated beneficiaries
Answer: C
Which of the following simplifies the probate process?
A. Designating payable-on-death (POD) accounts
B. Using handwritten wills without witnesses
C. Distributing assets through the probate court
D. Naming multiple executors for the same will
Answer: A
If an estate is insolvent, what is the priority of payment?
A. Beneficiaries are paid first
B. Debts and taxes are settled before distributing assets
C. Assets are distributed equally among creditors and heirs
D. The executor decides the payment order
Answer: B
A contingent beneficiary:
A. Inherits assets only if the primary beneficiary cannot
B. Has the same rights as a primary beneficiary
C. Can contest the will at any time
D. Is responsible for paying the estate’s debts
Answer: A
Topic: Power of Attorney and Healthcare Directives
A healthcare proxy is used to:
A. Manage a person’s financial affairs
B. Make healthcare decisions on behalf of the principal
C. Oversee the execution of a will
D. Create an irrevocable trust for the principal
Answer: B
Which type of power of attorney is specifically designed to manage financial affairs?
A. General power of attorney
B. Healthcare power of attorney
C. Springing power of attorney
D. Limited power of attorney
Answer: A
In most states, a living will becomes effective when:
A. The individual is declared terminally ill or incapacitated
B. The individual requests life-sustaining treatment
C. The executor of the estate takes control
D. A trust is created in the individual’s name
Answer: A
Which document is required to appoint someone to make financial decisions during incapacity?
A. General power of attorney
B. Healthcare directive
C. Testamentary will
D. Revocable living trust
Answer: A
What is one limitation of a limited power of attorney?
A. It is valid only for specific transactions or time periods
B. It cannot be used to make healthcare decisions
C. It expires when the agent dies
D. It allows the agent to create a trust for the principal
Answer: A
General Knowledge
A letter of instruction is:
A. A non-binding document providing guidance on personal matters
B. A legally binding document that replaces a will
C. Required by law in estate planning
D. Used to authorize power of attorney
Answer: A
What happens to a power of attorney after the principal’s death?
A. It continues until the executor is appointed
B. It automatically becomes invalid
C. It is transferred to the executor
D. It remains valid for 90 days
Answer: B
Which of the following is typically NOT included in estate planning?
A. Tax planning strategies
B. Asset protection trusts
C. Retirement account contributions
D. Healthcare directives
Answer: C
Which of the following can reduce family conflicts during estate distribution?
A. Updating the will regularly
B. Using clear beneficiary designations
C. Holding family discussions about the estate plan
D. All of the above
Answer: D
A residuary clause in a will:
A. Distributes any remaining assets not specifically mentioned
B. Names the executor of the estate
C. Allocates debts and liabilities to beneficiaries
D. Avoids probate entirely
Answer: A
Topic: Wills, Trusts, and Power of Attorney
What is the main difference between a living will and a last will and testament?
A. A living will outlines healthcare wishes, while a last will distributes assets after death
B. A living will is legally binding, while a last will is not
C. A living will appoints an executor, while a last will does not
D. A living will avoids probate, while a last will does not
Answer: A
Which of the following is NOT a requirement for a valid will?
A. The testator must be of sound mind
B. The will must be signed by the testator
C. The will must be notarized
D. The will must name at least one beneficiary
Answer: C
A testamentary trust is created:
A. While the grantor is alive
B. As part of a living trust agreement
C. Upon the death of the grantor according to their will
D. Through a healthcare directive
Answer: C
The person appointed to carry out the terms of a will is called:
A. A trustee
B. A grantor
C. An executor
D. A power of attorney
Answer: C
Which of the following can a durable power of attorney do?
A. Manage the principal’s financial affairs during incapacity
B. Override the terms of the principal’s will
C. Make medical decisions for the principal after death
D. Administer the estate after death
Answer: A
Topic: Estate Taxes and Inheritance Planning
The annual gift tax exclusion for 2024 is:
A. $10,000 per recipient
B. $15,000 per recipient
C. $17,000 per recipient
D. $20,000 per recipient
Answer: C
Which of the following reduces the taxable estate?
A. Lifetime gifts under the annual exclusion
B. Income earned by the estate
C. Assets transferred into a revocable trust
D. Designating a primary beneficiary for life insurance
Answer: A
A qualified personal residence trust (QPRT) is used to:
A. Transfer a home to beneficiaries while reducing estate taxes
B. Avoid probate for the primary residence
C. Liquidate real estate assets upon death
D. Consolidate debts secured by real estate
Answer: A
Estate tax is levied on:
A. The entire value of the deceased’s assets
B. The value of the estate after deductions and exemptions
C. Only assets held jointly with a spouse
D. All gifts made during the decedent’s lifetime
Answer: B
Which of the following is NOT a factor in calculating estate taxes?
A. Debts owed by the deceased
B. The federal estate tax exemption
C. Life insurance policies included in the estate
D. The number of beneficiaries
Answer: D
Topic: Beneficiaries and Probate Process
If no will exists, how is an estate distributed?
A. According to state intestacy laws
B. At the discretion of the executor
C. Equally among all living relatives
D. According to federal inheritance laws
Answer: A
What is a “payable-on-death” (POD) account?
A. An account that transfers funds to a designated beneficiary upon the owner’s death
B. An account used for estate taxes
C. A trust created to manage funds after death
D. A joint account with survivorship rights
Answer: A
What does the term “probate assets” refer to?
A. Assets that bypass the probate process
B. Assets held in joint tenancy
C. Assets distributed through the court process
D. Assets subject to income tax
Answer: C
A beneficiary designation:
A. Overrides the terms of a will for specific assets
B. Must be notarized to be valid
C. Is only valid for retirement accounts
D. Cannot be updated after the initial filing
Answer: A
Which of the following is true about joint tenancy with right of survivorship?
A. It avoids probate upon the death of one joint tenant
B. It allows the surviving tenant to transfer the property through a will
C. It is automatically terminated upon incapacity of one tenant
D. It requires probate for property distribution
Answer: A
Topic: Power of Attorney and Healthcare Directives
What is the purpose of a healthcare directive?
A. To name a person to make financial decisions for you
B. To state your medical treatment preferences in case of incapacity
C. To avoid estate taxes on medical expenses
D. To authorize the distribution of medical records
Answer: B
A springing power of attorney becomes effective:
A. Immediately after it is signed
B. Only when a specified event occurs, such as incapacitation
C. When the principal requests it in writing
D. Automatically upon the death of the principal
Answer: B
In most cases, a durable power of attorney:
A. Remains effective even if the principal becomes incapacitated
B. Expires after six months
C. Terminates upon the sale of real estate
D. Can only be used for healthcare decisions
Answer: A
A living will is also known as:
A. An advance healthcare directive
B. A durable power of attorney
C. A probate document
D. A last will and testament
Answer: A
What is the role of a healthcare agent under a healthcare power of attorney?
A. To make healthcare decisions on behalf of the principal
B. To distribute the estate after death
C. To oversee the probate process
D. To transfer real property owned by the principal
Answer: A
General Knowledge
What is the primary goal of estate planning?
A. To minimize taxes and ensure assets are distributed according to your wishes
B. To avoid all legal documentation
C. To ensure creditors are fully paid before beneficiaries
D. To transfer all assets into probate
Answer: A
What is a codicil?
A. A formal amendment to a will
B. A trust established during the grantor’s lifetime
C. A healthcare directive
D. A document used to avoid estate taxes
Answer: A
Which of the following is true about intestacy laws?
A. They determine the distribution of assets when no valid will exists
B. They only apply to estates worth over $1 million
C. They are uniform across all states in the U.S.
D. They eliminate the need for probate
Answer: A
Which type of trust can be used to support charitable organizations?
A. Charitable remainder trust
B. Special needs trust
C. Testamentary trust
D. Revocable trust
Answer: A
A spendthrift clause in a trust is designed to:
A. Protect trust assets from creditors of the beneficiaries
B. Eliminate the need for an executor
C. Provide immediate distribution of trust funds
D. Ensure assets are distributed equally among all heirs
Answer: A
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