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Personal Finance: Estate Planning
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Avg score: 40% • Most missed: “You know that the advantages of having a will likely outweigh the disadvantages …”

What is Estate Planning?
Estate planning is the process of designating who will receive your assets in the event of your death or incapacitation.

Estate planning vs Living will:
Basically, an estate plan is a broader plan of action for your assets that may apply during your life as well as after your death. A will, on the other hand, dictates where your assets will go after you die, who will be the guardian of your children and more.
 

Personal Finance: Estate Planning
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25 Questions

1. Individuals to whom you have willed your property are known as executors.
2. Herbert's will is missing the section revoking any earlier wills- A young lawyer prepared the will and made this oversight- What dangers are present because of this omission?
3. A trust in which you relinquish title and control of the assets when they are placed in the trust, which becomes a separate legal entity, is called a(n)
4. A durable power of attorney means that the attorney who wrote the will for you is your legal guardian in case you become incapacitated and can't make decisions yourself.
5. You know that the advantages of having a will likely outweigh the disadvantages associated with probate- Which is not a disadvantage of probate?
6. If you die without one, your state will 'write one for you' based on intestacy laws.
7. Your estate tax burden can be reduced by giving gifts to your heirs prior to your death- This has the effect of reducing the value of your estate and thus lowering your tax obligation- As of 2011, each spouse can give up to $________ each year to ________.
8. Carey is a widow with two teenagers, Brenda age 13 and Terry age 15- Her health has declined and she knows that a will should be drafted- Which of the following statements is not an important reason to have a will?
9. The unified tax credit effectively nullifies the taxes on the first $5.34 million of one's estate.
10. For someone who dies intestate, or without a valid will, ________ and the applicable state laws allow for the orderly distribution of the estate.
11. A ________ is a trust that distributes income according to need, as determined by the discretion of the trustee rather than according to some preset formula.
12. A(n) ________ is a trust established to transfer assets to your children, while allowing the surviving spouse access to funds in the trust, if necessary- Trust assets are distributed to the children tax free upon the death of the surviving spouse.
13. All of the following features are common to a basic will except
14. A living will is a directive to a physician that allows you to state your wishes regarding medical treatment in the event you are unable to make decisions for yourself.
15. In most states, community property is recognized and trumps any allocations in your will.
16. A durable health care power of attorney allows you to designate another person to make life support decisions if you are unable to.
17. The ________ allows for the distribution of money and property in a will.
18. All of the following are commonly used estate planning tools except
19. You and your roommate have decided to purchase a house together- If you want your share of the asset to pass on to your relatives named in your will, what type of ownership should you establish for the house?
20. A trust is created when a grantor transfers property to a trustee for the benefit of one or more people.
21. Only about ________ Americans have created a trust as part of an estate plan.
22. Trusts are much more difficult to challenge in court than are wills which is what makes them more attractive.
23. The federal estate tax exemption is $5.34 million per person- Recently, lawmakers ruled that the exempted amount held by the first to die would be transferable to the surviving spouse. Therefore, a married couple can now avoid federal estate taxes with combined assets of up to $10.68 million even without good estate planning.
24. Probate is the legal process of distributing an estate's assets.
25. Because Toby and Jenny's children are under the age of 18 they should name a ________ to care for them and manage their property should Toby and Jenny pass away.

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