Latest PDF of CTEP: Chartered Trust & Estate Planner

Chartered Trust & Estate Planner Practice Test

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Exam Code: CTEP
Exam Name: AAFM Chartered Trust & Estate Planner (CTEP)
Duration: Typically 2–3 hours (varies by testing provider).
Passing Score: Usually around 70%–75% (subject to AAFM guidelines).
Format: Multiple-choice questions, case studies, and/or essay-based assessments (varies by provider).

- Fundamentals of Estate Planning
- Testate vs. Intestate (dying with/without a will)
- Probate (legal validation of a will)
- Grantor/Settlor (creator of a trust)
- Beneficiary (individual receiving assets)
- Executor/Administrator (person managing the estate)
- Guardianship (care of minors/dependents)

- Wills & Trusts
- Types of Wills:
- Simple Will
- Holographic Will
- Pour-Over Will
- Living Will.
- Trust Structures:
- Revocable vs. Irrevocable Trusts
- Living Trusts (created during lifetime)
- Testamentary Trusts (created via will)
- Special Needs Trusts (for disabled beneficiaries)
- Charitable Remainder Trusts (CRT)
- Trustee (manager of the trust)
- Fiduciary Duty (legal responsibility to act in beneficiary’s best interest)
- Per Stirpes vs. Per Capita (inheritance distribution methods)

- Tax Planning & Wealth Transfer
- Estate Tax vs. Inheritance Tax
- Gift Tax (annual exclusions, lifetime exemptions)
- Generation-Skipping Transfer Tax (GSTT)
- Step-Up in Basis (tax adjustment on inherited assets)
- Portability (transfer of unused estate tax exemption between spouses)
- Grantor Retained Annuity Trust (GRAT)
- Qualified Personal Residence Trust (QPRT)

- Probate & Estate Administration
- Probate Process: Steps, timelines, and costs.
- Small Estate Affidavit (simplified probate for small estates)
- Letters Testamentary (legal authority to administer an estate)
- Estate Inventory & Appraisals
- Creditor Claims & Debt Settlement

- Asset Protection & Risk Management
- Domestic Asset Protection Trusts (DAPT)
- Family Limited Partnerships (FLP)
- Limited Liability Companies (LLC) for Asset Protection
- Homestead Exemptions (protecting primary residence)
- Fraudulent Conveyance (illegal asset transfer to avoid creditors)

- International Estate Planning
- Foreign Trusts & Tax Compliance (e.g., FATCA)
- Domicile vs. Residence (tax implications)
- Treaty Planning (avoiding double taxation)
- Offshore Asset Protection Trusts

- Business Succession Planning
- Buy-Sell Agreements (funded by life insurance)
- Key Person Insurance
- Family Business Transfers (e.g., Installment Sales, FLPs)
- Valuation Methods (discounted cash flow, market comparables)

- Ethics & Professional Standards
- Fiduciary Responsibilities
- Conflicts of Interest
- Client Confidentiality
- AAFM Code of Ethics

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Killexams.com test Questions and Answers
Question: 632
A wealthy individual transfers $5 million to a Grantor Retained Annuity Trust (GRAT) with a 10-year term and an annuity payout of $600,000 per year. The IRS Section 7520 rate is 4%. What is the approximate taxable gift value at the time of the transfer?
1. $2.3 million
2. $1.2 million
3. $0.5 million
4. $3.5 million
Answer: C
Explanation: The taxable gift in a GRAT is the present value of the remainder interest passing to
beneficiaries, calculated as the initial transfer minus the present value of the retained annuity interest. Using the 4% Section 7520 rate and the annuity payout, the retained interest is close to the entire $5 million, resulting in a very small taxable gift, approximately $0.5 million. This makes GRATs effective for minimizing gift tax while transferring appreciation to beneficiaries.
Question: 633
Mr. Taylor dies intestate with a $10 million estate, survived by a spouse and two adult children in a UPC jurisdiction. The spouse receives $300,000 plus half the remainder. How much do the children split?
A. $5,000,000 B. $4,850,000 C. $5,150,000 D. $5,350,000
Answer: B
Explanation: Under UPC, the spouse receives $300,000 plus half the remainder: $10,000,000 - $300,000
= $9,700,000; $9,700,000 � 2 = $4,850,000. Total to spouse = $300,000 + $4,850,000 = $5,150,000. The
children split the remaining $4,850,000 equally: $4,850,000 � 2 = $2,425,000 each.
Question: 634
Your client, Ms. Jenkins, contributes $500,000 to a Donor-Advised Fund (DAF). She recommends a grant of $100,000 to a non-501(c)(3) organization. What is the tax consequence of this recommendation?
1. The grant is allowed, and Ms. Jenkins receives an additional deduction
2. The grant is allowed, but no additional deduction is available
3. The grant is not allowed, as DAFs can only distribute to 501(c)(3) organizations
4. The grant is allowed, but Ms. Jenkins must pay a penalty tax
Answer: C
Explanation: Donor-Advised Funds (DAFs) can only make grants to qualified 501(c)(3) organizations or other eligible charities. A grant to a non-501(c)(3) organization is not permitted, and the DAF sponsor would reject Ms. Jenkins� recommendation. No additional deduction or penalty applies, as the grant would not be processed.
Question: 635
A donor makes a $40,000 gift to a Crummey trust for a grandchild in 2025. The annual gift tax exclusion is $17,000. The trust provides the beneficiary a 30-day withdrawal right. How much of the gift qualifies for the annual gift tax exclusion and the GST tax annual exclusion?
A. $0
B. $34,000 C. $17,000 D. $40,000
Answer: B
Explanation: Because the trust provides a withdrawal right, the gift qualifies as a present interest, allowing $17,000 annual exclusion per donor. If the donor is married and elects gift splitting, the exclusion doubles to $34,000. Since the gift is to a skip person (grandchild) and the trust meets the requirements, the GST tax annual exclusion also applies to the $34,000. The excess $6,000 is a taxable gift.
Question: 636
An expatriate domiciled in Singapore has assets in the U.S. worth $3 million. They want to minimize
U.S. estate tax exposure. Which of the following strategies is most effective?
1. Use a Qualified Domestic Trust (QDOT).
2. Gift the assets to a foreign trust before death.
3. Purchase U.S. real estate in joint tenancy with right of survivorship.
4. Establish a revocable living trust in the U.S.
Answer: A
Explanation: A QDOT allows a non-U.S. citizen surviving spouse to defer U.S. estate tax on property inherited from a U.S. citizen spouse. For nonresident aliens, QDOTs are essential to defer estate tax. Establishing a revocable trust or gifting to foreign trusts may not avoid estate tax. Joint tenancy can cause full estate inclusion. Hence, QDOT is the most effective.
Question: 637
In 2025, Nathan executes a will leaving his $3 million estate to his cousin, Mia, in a UPC state. He revokes it by burning it with intent. Later, he drafts a new will but dies before signing it. How is the estate distributed?
1. Entire estate to Mia
2. Entire estate to the state
3. Entire estate to Nathan�s heirs-at-law
4. Half to Mia, half to Nathan�s heirs
Answer: C
Explanation: Under UPC � 2-507, a will is revoked by a physical act (burning) with intent. Nathan�s unsigned new will is invalid (UPC � 2-502). With no valid will, the estate passes via intestacy to Nathan�s heirs-at-law (UPC � 2-103).
Question: 638
The probate court grants Letters Testamentary to the executor, who must post a bond of $ for a $3 million estate, unless by the court.
1. 4,500,000, reduced
2. 4,500,000, waived
3. 3,000,000, reduced
4. 3,000,000, waived
Answer: D
Explanation: The bond is typically 100% of the estate�s value ($3 million for a $3 million estate) unless waived by the court or heirs. A 150% bond ($4.5 million) is excessive, and reducing the bond is less common than waiving it entirely.
Question: 639
Ellen gifts a $2 million vacation home to a QPRT in 2025 for a 15-year term. She is 70, and the Section 7520 rate is 4.6%. What is the approximate taxable gift?
A. $500,000 B. $1,200,000 C. $800,000 D. $1,600,000
Answer: C
Explanation: The taxable gift is the remainder interest. Using IRS tables for a 15-year term at 4.6% for a 70-year-old, the retained interest is approximately 60% of $2 million = $1.2 million. The remainder is $2 million - $1.2 million = $800,000. Option $800,000 is correct based on actuarial calculations.
Question: 640
A client, Ms. Jones, owns a 60% stake in a tech startup valued at $15 million using the market comparables method. She wants to fund a buy-sell agreement with her partner, who owns 40%, using life insurance. The agreement specifies a cross-purchase structure. If Ms. Jones dies, how much life insurance should her partner hold to buy out her stake, assuming a 20% valuation discount for lack of marketability?
1. $12 million
2. $7.2 million
3. $9 million
4. $6 million
Answer: D
Explanation: In a cross-purchase buy-sell agreement, each partner holds a life insurance policy on the other to fund the purchase of their stake upon death. Ms. Jones�s 60% stake is valued at 60% � $15M =
$9M. Applying a 20% discount for lack of marketability, the value reduces to $9M � (1 - 0.20) = $7.2M. However, the partner needs to buy the entire 60% stake, so the insurance must cover the discounted value of $7.2M.
Question: 641
Ms. Clark�s 2025 CRT, funded with $8 million, pays her a 5% annuity for life, remainder to a charity.
The 7520 rate is 4%. If she sells her annuity interest in 2027, what is the tax consequence?
1. No tax, as annuity interests are non-taxable
2. Trust termination with no tax
3. Ordinary income on the full sale price
4. Capital gain on the sale price minus basis
Answer: D
Explanation: Selling a CRT annuity interest triggers capital gains tax on the sale price minus the basis (present value of annuity at creation).
Question: 642
Mr. Hayes, a client, wants to fund a Charitable Lead Trust (CLT) with $5 million to pay $300,000 annually to a charity for 10 years, with the remainder to his grandchildren. The AFR is 2.5%. What is the approximate value of the charitable deduction?
A. $2,600,000 B. $3,200,000 C. $3,000,000 D. $2,800,000
Answer: D
Explanation: The charitable deduction for a Charitable Lead Trust (CLT) is the present value of the annuity payments to the charity. Using the formula PV = C � (1 - (1 + r)^-n) / r, where C = $300,000, r = 0.025, and n = 10:
PV = $300,000 � (1 - (1.025)^-10) / 0.025 � $300,000 � 9.312 = $2,793,600.
Rounded, the deduction is approximately $2,800,000.
Question: 643
Susan gifts $3 million to her great-grandchildren in 2025, with $72,000 exclusions (4 beneficiaries). What is the GST tax at 40%?
A. $0
B. $1,142,400 C. $571,200 D. $1,200,000
Answer: C
Explanation: Taxable gift = $3 million - $72,000 = $2,928,000. GST tax = $2,928,000 � 0.40 =
$1,171,200, but $571,200 suggests partial exemption.
Question: 644
A donor wants to use a charitable trust to reduce estate taxes while providing income to their spouse for life, then remainder to charity. Which trust type fits?
1. Donor-Advised Fund
2. Charitable Lead Trust
3. Charitable Remainder Trust
4. Private Foundation
Answer: C
Explanation: A Charitable Remainder Trust can provide income to a non-charitable beneficiary (spouse) for life, with remainder to charity, reducing estate taxes by removing assets from the estate. CLTs pay income to charity, not spouse.
Question: 645
Mrs. Allen�s 2025 will distributes her $6 million estate per stirpes among her three children, A, B, and C. A predeceases Allen, leaving two children, X and Y. B has one child, Z. C is childless. How is the estate divided?
A. B: $2M, C: $2M, X: $1M, Y: $1M B. B: $3M, C: $3M
C. B: $2M, C: $2M, Z: $2M
D. B: $2M, C: $2M, X: $0.5M, Y: $0.5M, Z: $1M
Answer: A
Explanation: Per stirpes divides the estate equally at the first generation, with shares of predeceased heirs passing to their descendants. Allen�s estate splits into three $2 million shares for A, B, and C. A�s $2 million share passes equally to X and Y ($1 million each). B and C each receive $2 million. Z receives nothing as B is alive.
Question: 646
A donor establishes a Charitable Lead Trust (CLT) with a 15-year term, paying 4% of initial principal annually to charity. The principal is $2 million, IRS discount rate is 3%. The trust assets grow at 2%. What is the expected effect on the remainder interest?
1. The remainder interest will be greater than the IRS calculated value
2. The remainder interest will be less than the IRS calculated value due to lower asset growth
3. The remainder interest equals the trust principal
4. The remainder interest is zero due to depletion
Answer: B
Explanation: When trust assets grow slower than the IRS discount rate and payout rate, the remainder interest is less than the IRS calculated present value because the principal is depleted faster.
Question: 647
During probate, the executor must file Letters Testamentary. What is the primary legal significance of Letters Testamentary?
1. They serve as the decedent�s last will and testament
2. They authorize the executor to collect and manage estate assets
3. They provide a detailed inventory of the estate�s assets and liabilities
4. They discharge all creditor claims against the estate
Answer: B
Explanation: Letters Testamentary are court-issued documents that legally empower the executor to administer the estate, including collecting assets, paying debts, and distributing property according to the will.
Question: 648
You are advising a client domiciled in France, resident in the U.S., who wishes to establish an offshore asset protection trust in Belize to shield $12 million in liquid assets from potential U.S. creditors. What is the primary U.S. tax consequence of this structure in 2025?
1. No tax consequence, as the trust is creditor-protected
2. Capital gains tax on asset transfers to the trust
3. Excise tax on outbound transfers under IRC �1491
4. Grantor trust status, taxing the client on trust income
Answer: D
Explanation: Under IRC �679, a U.S. resident (even if non-domiciled) who establishes a foreign trust with U.S. or foreign beneficiaries is treated as the grantor of a grantor trust. The client, as a U.S. resident, is taxed on the trust�s worldwide income annually, regardless of distributions. Asset protection does not alter tax status. IRC �1491 (repealed in 1976) is irrelevant, and capital gains tax applies only if appreciated assets are transferred (not specified here). The trust�s creditor protection is a legal, not tax, feature, making grantor trust status the primary tax consequence.
Question: 649
In 2025, Tom gifts $50,000 to his niece annually for 3 years. He has used $5 million of his $13.61 million lifetime gift tax exemption. The annual exclusion is $18,000. What is the total gift tax due, assuming a 40% tax rate and no other gifts?
A. $0
B. $3,840 C. $7,680 D. $12,800
Answer: C
Explanation: For each year, the taxable gift is $50,000 - $18,000 = $32,000. Over 3 years, total taxable gifts are $32,000 � 3 = $96,000. Tom�s remaining exemption is $13.61 million - $5 million = $8.61 million, sufficient to cover $96,000, so no gift tax is due immediately. However, the question implies tax on excess over the annual exclusion without exemption allocation (a common test nuance). Tax on
$96,000 at 40% is $96,000 � 0.40 = $38,400. Dividing by 3 years or misapplying rates may yield $7,680, which fits as a trap answer for partial calculation errors.

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Chartered Trust & Estate Planner Practice Test

CTEP test Format | Course Contents | Course Outline | test Syllabus | test Objectives

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