finance winance ch. 19 – Flashcards
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what is true about estate planning?
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Many people do little to financially prepare for death.
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Estate planning has two parts. The first part consists of:
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building your estate through savings, investments, and insurance.
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Estate planning has two parts. The second part of estate planning consists of:
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transferring your estate in the manner you have specified.
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what are different parts of estate planning?
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Making a will Setting up a trust Accumulating funds for your future Providing for your family's financial security after you die
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Gerry Legere has died without writing a will. What is the legal term for this?
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intestate
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Gerald Wilkins owns a home worth $250,000, a car worth $15,000, various investments worth $600,000 and other personal assets worth $25,000. What are these things to Gerald?
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estate
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Joseph Vu has assets worth $1,200,000. He has written a legal document that specifies that these assets be divided equally between his wife and his two sons upon his death. What is this legal document?
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will
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Grady Perdue has assets worth $1,500,000 and has written a legal document that specifies that all of his money go to his children. After he dies, there is a legal process to determine whether his document specifying how his assets be divided is valid. This is also the legal process by which his executor manages and distributes his property. What is this legal process called?
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probate
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What is a will?
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the legal declaration of a person's mind as to the disposition of his or her property after his or her death.
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If you die without a valid will:
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your state's law of descent and distribution becomes your will.
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Which one of the following wills leaves everything to your spouse?
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simple
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Which will is sufficient for most smaller estates?
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simple
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Which one of the following wills automatically leaves one-half of your adjusted gross estate to your spouse?
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traditional marital share
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Under what type of will is half of your estate taxed at your death and half at your spouse's death?
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traditional marital share
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Under what type of will does everything pass to your spouse, with the exception of an amount equal to the exemption, which passes into trust?
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exemption trust
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Which type of will allows you to pass to your spouse any amount that satisfies your family objective?
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state dollar amount
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Which will should be written, dated, and signed entirely in your own handwriting?
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holographic
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Which will should be written, dated, and signed entirely in your own handwriting?`
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formal will
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Which type of will involves serious risks of invalidity and may not reflect the provisions of current law?
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statutory
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A person who will follow your carry out the instructions specified in your will is called a(n):
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executor or executrix
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Which document explains, adds, or deletes provisions in your existing will?
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Codicil
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A documentary agreement between spouses before marriage in which one or both parties often waive a right to receive property under the other's will or under state law is called a:
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prenuptial agreement.
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A person who assumes the responsibilities of providing the children with personal care and managing the estate for them is called a(n):
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guardian
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A person or institution that holds or generally manages property for the benefit of someone else under a trust agreement is called a(n):
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trustee
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A legal document authorizing someone to act on your behalf is called a:
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power of attorney
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Benjamin Wiley is married and has assets totaling $7 million. What type of will would most likely result in the lowest overall amount of federal estate taxes? Assume the exemption amount is $3 million.
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traditional marital share
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Matthew Miller has created a will and left everything to his wife Kate. What type of will has he created?
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simple
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Kate Wilson has created a will that leaves one-half of her adjusted gross estate to her husband, Matthew. What type of will has she created?
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traditional marital share
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Will Jones has created a will that leaves everything to his wife except an exemption amount of $2 million. This exemption amount passes into a trust. What type of will has Will created?
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exemption trust
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James Fitzwater has created a will that leaves exactly $2 million to his wife. What type of will has James created?
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stated dollar amount
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Brenda Johnson has used a preprinted form that she got from the internet to create her will. However, she was unhappy with one section of the will and crossed out the parts she didn't like and hand wrote the changes she wanted. The changes that she made most likely made her will:
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invalid
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Benjamin Barry has been named by Andie Anderson to follow her instructions and distribute her assets as she has designated in her will, pay any bills, and collect any money owed to her. To which position has Benjamin been named?
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executor
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Hugh Bowersox been selected by Sandra Tyler to assume the responsibility of raising her children and managing her estate for those children if she were to die. In what capacity would Hugh be acting?
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Guardian
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Lucy Kelson has been selected to manage the assets of Rodney Peterson until he reaches the age of 30. Rodney is currently 21. In what capacity would Lucy be acting?
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Trustee
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George Wade has been selected to receive the assets of his brother Kyle in the event of Kyle's death. What is George?
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Beneficiary
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A legal arrangement through which your assets are held by a trustee for your benefit or that of your beneficiaries is called a:
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trust
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If you establish a(n) ____________ trust, you retain the right to end the trust or change its terms.
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revocable
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If you establish a(n) ____________ trust, you cannot change its terms or end it.
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irrevocable
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A(n) ____________ trust is a property management arrangement that you establish while you are alive.
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living
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A trust established by your will that becomes effective upon your death is called a(n) ____________ trust.
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testamentary
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In what type of joint ownership may neither spouse sell the property without the consent of the other?
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Tenancy by the entirety
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A surgeon who will soon finish paying off college loans might want to set up a(n):
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disclaimer trust
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Gary Ruhle has assets worth $2,400,000. Since he plans to travel and does not want to oversee these assets, he has created a legal arrangement so the assets can be managed by an officer of his local bank. What type of legal arrangement has he most likely made?
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trust agreement
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Sally Forth has a trust that she can end at any time she wants. What type of trust does Sally have?
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Revocable trust
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A federal tax levied on the right of a deceased person to transmit his or her property and life insurance at death is called a(n) ____________ tax.
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estate
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A state tax levied on the right of an heir to receive all or part of the estate and life insurance proceeds of a deceased person is called a(n) ____________ tax.
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inheritance
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A federal and state tax levied on the privilege of making gifts to others is called a(n) ____________ tax.
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gift
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Gerald Wilkins owns a home worth $250,000, a car worth $15,000, various investments worth $600,000 and other personal assets worth $25,000. He still owes $125,000 on his mortgage and $5,000 on a car loan. The probate and administration costs of his estate are estimated at $5,000. What is his estimated net taxable estate?
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$755,000
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Advance directives are legal documents that allow you to state what kind of health care you want if you were too ill to speak for yourself. Advance directives most often include which of the following?
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Advance directives include all of these provisions.
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George Smith worries that his deteriorating health is going to make it difficult for him to conduct his day-to-day business. He wants to grant his nephew, Brandon Smith, the ability to act on his behalf. To do this, what document would he most likely need?
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Durable power of attorney
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Which of the following would keep you from being an executor of a will?
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Being 16 years of age
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Which of the following would keep you from being an executor of a will?
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Having been convicted of a felony
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The American Taxpayer Relief Act of 2012 provides a permanent gift and estate tax exemption of how much for individuals?
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$5.25 million
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A simple document stating that anything you may have neglected to place in your trust during your lifetime should be placed in it at your death is called a:
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pourover will
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If your beneficiary is too young or unable to handle money wisely, which kind of trust allows the beneficiary to receive small amounts of money at specified intervals?
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A spendthrift trust
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what is untrue of ethical wills?
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It is a legally binding document
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what is untrue about a letter of last instruction?
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It is legally enforceable in all states.
