Wills, trusts, and gift and estate tax concepts tested on the CFP estate planning domain.
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- What is an estate?
- The total value of all assets and property owned by an individual at death.
- What is probate?
- The court-supervised legal process of validating a will and distributing an estate's assets according to law.
- What is testamentary capacity?
- The legal and mental ability to make a valid will, requiring understanding of one's assets, family, and the will's effects.
- What is a holographic will?
- A handwritten will entirely in the testator's own handwriting, recognized in some states without witness requirements.
- What is a nuncupative will?
- An oral will made by a testator before witnesses, valid in limited circumstances in some jurisdictions.
- What is the key characteristic of joint tenancy?
- Right of survivorship: when one joint tenant dies, the surviving tenant(s) automatically own the deceased's share.
- What happens to a tenant in common's property interest at death?
- The interest passes to the deceased tenant's estate, not automatically to the other tenants; there is no right of survivorship.
- What is tenancy by the entirety?
- A form of joint ownership for married couples with rights of survivorship, recognized in some states only.
- In community property states, how is property acquired during marriage classified?
- Property acquired during marriage is community property, owned equally by both spouses, unless acquired as separate property.
- What is a trust?
- A legal arrangement where a trustee holds title to property for the benefit of designated beneficiaries.
- What is a revocable living trust?
- A trust created during the grantor's lifetime that can be modified or terminated by the grantor; avoids probate at death.
- What is an irrevocable trust?
- A trust that cannot be amended or revoked once created; assets are removed from the grantor's taxable estate.
- What is a testamentary trust?
- A trust created by the terms of a will that takes effect only after the testator's death.
- What does a spendthrift provision accomplish?
- It prevents beneficiaries from assigning their interest and shields trust assets from beneficiary creditors.
- What does a charitable remainder trust (CRT) provide?
- Income to non-charitable beneficiaries for a specified term, then the remainder passes to charity; provides an income tax deduction.