ChFC®: HS 330 Fundamentals of Estate Planning

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Sample questions

These questions are original Securities Prep practice items aligned to this topic area. They are designed for self-assessment and are not official exam questions.

Question 1

Topic: HS 330 Fundamentals of Estate Planning

Daniel, 64, and Lisa, 58, are in a second marriage. Daniel has two adult children from his first marriage, and Lisa has a 27-year-old daughter, Ava, who has a permanent disability and receives SSI and Medicaid. Most of Daniel’s wealth is $3.6 million of highly appreciated stock, and both spouses want probate avoidance. Daniel wants Lisa supported for life if he dies first, but he also wants the remaining assets fixed for his children instead of being redirected later. Lisa wants part of her estate available for Ava without disrupting Ava’s means-tested benefits. Assume any trust used can give the trustee broad authority to retain or diversify the stock. Which planning response is best?

• A. Use revocable trusts, with Daniel’s trust directing the stock to a charitable remainder trust for Lisa and Lisa’s trust creating a third-party special needs trust for Ava.
• B. Use revocable trusts, with Daniel’s trust creating a QTIP for Lisa and Lisa’s trust creating a mandatory support trust for Ava.
• C. Use revocable trusts, with Daniel’s trust creating a QTIP for Lisa and remainder to his children, and Lisa’s trust creating a third-party special needs trust for Ava.
• D. Use revocable trusts, but leave Daniel’s assets outright to Lisa and let Lisa’s trust create a third-party special needs trust for Ava.

Best answer: C

What this tests: HS 330 Fundamentals of Estate Planning

Explanation: Daniel needs a marital trust that supports Lisa yet preserves the remainder for his own children, which is a classic QTIP use in a blended family. Lisa’s goal for Ava points to a third-party special needs trust so trust assets can supplement Ava’s care without being treated like an outright inheritance for SSI or Medicaid purposes.

The core issue is matching different trust purposes to different family members. Daniel’s blended-family objective calls for a QTIP trust: Lisa can receive lifetime trust benefits, but Daniel still controls the ultimate remainder, so the assets pass to his children rather than according to Lisa’s later estate plan. Lisa’s objective for Ava calls for a third-party special needs trust because discretionary supplemental distributions are designed to help a disabled beneficiary without undermining SSI or Medicaid eligibility.

Using revocable trusts also fits the probate-avoidance goal and provides a coordinated place to include trustee powers for managing the appreciated stock. In a case like this, the best design separates spouse support, remainder control, and disability planning instead of relying on outright transfers or a single trust that ignores one of those constraints.

• Outright to Lisa fails because Daniel would lose control over the eventual remainder, so his children would not be protected.
• Mandatory support trust for Ava is a poor fit because required support distributions can interfere with means-tested benefit planning.
• Charitable remainder trust can be attractive for appreciated assets, but its remainder goes to charity, not to Daniel’s children.

A QTIP can support Lisa for life while locking Daniel’s remainder to his children, and a third-party special needs trust can benefit Ava without an outright inheritance that may disrupt SSI or Medicaid.

Question 2

Topic: HS 330 Fundamentals of Estate Planning

Maria and James, both 62, are in a second marriage and plan to retire in three years. They are buying a $600,000 lake cabin, each paying half. Each wants control of his or her share during life, and at death each wants that share to pass under his or her own estate plan to separate children from prior marriages rather than automatically to the surviving spouse. James also has an adult son with disabilities, so his inheritance should pass through a special needs trust, not outright. They do not want to give any child current ownership rights. Which property-titling approach is the single best recommendation?

• A. Use joint tenancy with survivorship and rely on reciprocal wills.
• B. Put title solely in James’s name and divide it by will.
• C. Add the adult children as co-owners now in intended percentages.
• D. Use tenancy in common and transfer each share through separate estate plans.

Best answer: D

What this tests: HS 330 Fundamentals of Estate Planning

Explanation: This couple wants separate control during life and separate transfer directions at death. Tenancy in common best fits because each spouse owns a distinct share that passes under his or her own estate plan, rather than transferring automatically by survivorship.

Tenancy in common is usually the best titling form when co-owners want separate control and separate inheritance paths. Each owner holds a fractional interest during life and, at death, that interest passes under the owner’s will or revocable trust instead of automatically to the surviving co-owner. That is the key difference from joint tenancy with right of survivorship. Here, the second-marriage facts matter: each spouse wants his or her own share to benefit different children, and James needs the flexibility to route his share to a special needs trust for his son.

• Each spouse retains a distinct share.
• No child receives current ownership.
• The first death does not override the deceased spouse’s estate plan.

Survivorship titling works when automatic transfer to the survivor is the goal, but it conflicts with this couple’s stated estate wishes.

• Survivorship trap Relying on reciprocal wills fails because survivorship title sends the entire cabin to the survivor at the first death, overriding the deceased spouse’s separate transfer plan.
• Current gift problem Adding children now gives up present control and can expose the property to the children’s creditors, divorce claims, or benefit issues.
• Sole-owner shortcut Putting title only in James’s name does not give both spouses current ownership and leaves Maria dependent on James’s later planning choices.

Tenancy in common preserves each spouse’s separate ownership interest and lets that interest pass under his or her own estate plan, including to a special needs trust.

Question 3

Topic: HS 330 Fundamentals of Estate Planning

Jordan Lee tells her planner, “My revocable trust should split everything equally among my current spouse and my two adult children.” Her file shows:

Exhibit: Estate note

• Pour-over will: probate estate to revocable trust
• Revocable trust: equal shares to spouse, Ava, and Ben
• Home: titled solely to Jordan
• Traditional IRA beneficiary: Ava
• Brokerage account TOD beneficiary: Ben
• Joint checking: Jordan and spouse with rights of survivorship

Which planning action is most clearly supported by the exhibit?

• A. Assume the trust already controls the IRA and TOD account.
• B. Align beneficiary designations and nonprobate titling with the equal-share plan.
• C. Revise only the will, because it overrides beneficiary forms.
• D. Move the joint checking account first, to avoid probate.

Best answer: B

What this tests: HS 330 Fundamentals of Estate Planning

Explanation: The exhibit shows a mismatch between Jordan’s stated equal-share intent and the way several assets will actually transfer at death. Beneficiary designations and survivorship title control major nonprobate assets, so those items should be reconciled before relying on the will or trust language.

The key estate-planning issue is that documents do not control every asset the same way. Jordan’s pour-over will and revocable trust can direct probate assets, but the IRA, TOD brokerage account, and joint checking account are nonprobate transfers. Those assets generally pass by beneficiary designation or ownership title, not by the will or trust’s equal-share clause. That means Jordan’s current arrangement would likely produce different outcomes for different assets, even though the trust says to divide trust property equally among the spouse and two children. The first planning step is to review and align those beneficiary designations and titles with the intended overall distribution scheme. Focusing first on the will alone misses the assets already set to transfer outside it.

• Will controls all fails because a will does not override beneficiary designations or survivorship ownership on nonprobate assets.
• Joint account probate issue misreads the exhibit, since rights of survivorship already direct that account outside probate.
• Trust controls everything goes beyond the facts, because the IRA and TOD account transfer under their existing designations unless changed.

Because the IRA, TOD account, and joint account pass by designation or title, they must be coordinated first if Jordan wants the trust’s equal-share plan to work.

Question 4

Topic: HS 330 Fundamentals of Estate Planning

After a discovery meeting, the planner confirms that Marisa, 61, owns most assets separately, has two adult children from a prior marriage, and wants her new spouse supported if she dies first without letting the spouse control who ultimately receives the remaining property. Her current plan is an old simple will, and several accounts name the spouse outright. What is the most appropriate next step?

• A. Retitle major assets jointly with the new spouse.
• B. Keep outright spouse designations and add children as contingents.
• C. Delay document changes until a transfer-tax projection is completed.
• D. Coordinate control-focused drafting and beneficiary review with estate counsel.

Best answer: D

What this tests: HS 330 Fundamentals of Estate Planning

Explanation: In a blended-family case, the priority is controlling ultimate disposition while still meeting support goals for the surviving spouse. Once facts and ownership are known, the planner should move to coordinated drafting and beneficiary review with estate counsel so the documents match Marisa’s control concerns.

Family structure can change document-drafting priorities. When a client wants a current spouse supported but wants children from a prior marriage to receive the remainder, simple outright transfers often defeat the control objective. After discovery confirms goals and ownership, the planner should collaborate with estate counsel to redesign the core estate plan—often using trust provisions—and then align titling and beneficiary designations with that structure. That sequence matters because joint ownership and beneficiary designations can bypass the will and give the surviving spouse full control before the client’s intended disposition is protected. The key takeaway is to solve the control issue at the drafting stage, then implement account-level changes consistently.

• Retitling assets jointly gives the spouse survivorship control and can bypass the intended disposition.
• Naming children only as contingent beneficiaries still leaves the spouse with outright control if the spouse survives.
• Waiting for a transfer-tax projection misorders the process because Marisa’s main issue is family-control design, not tax-threshold analysis.

A blended-family control concern should be handled through coordinated documents and beneficiary alignment, not outright spouse transfers.

Question 5

Topic: HS 330 Fundamentals of Estate Planning

Leah and Brian are in a second marriage, and each has adult children from a prior marriage. They want the surviving spouse to have access to assets during life, with the remainder split among both families at the second death. Their planner recommends a revocable trust, updated wills, and new powers of attorney. Leah asks whether the estate strategy can be considered complete once account beneficiaries are updated. Which action best aligns with sound ChFC-level practice?

• A. Coordinate with estate counsel now and confirm new documents are executed consistently.
• B. Wait for tax-law changes before involving legal counsel.
• C. Rely on the planner’s written distribution summary until next review.
• D. Treat beneficiary updates as enough once probate assets are minimized.

Best answer: A

What this tests: HS 330 Fundamentals of Estate Planning

Explanation: When a recommendation depends on enforceable legal terms, a planner should coordinate with estate counsel before calling the estate strategy complete. Here, beneficiary changes alone cannot create the spouse-access and remainder-control structure Leah and Brian want.

Coordination with legal counsel is necessary whenever the estate strategy depends on legal control provisions rather than simple beneficiary percentages. Leah and Brian want the surviving spouse to benefit during life while preserving the remainder for children from prior marriages, so the outcome depends on proper trust terms, updated wills, fiduciary appointments, and consistency with titling and beneficiary designations. A planner can identify the need, explain the planning trade-offs, and help coordinate implementation, but should not treat the strategy as complete until counsel has drafted or reviewed the documents and the clients have executed them.

Beneficiary updates may reduce probate exposure, but they do not by themselves create the detailed control structure this couple needs.

• Minimizing probate with beneficiary forms does not replace trust and will provisions needed to balance spouse access with children’s inheritance.
• A planner’s written summary of client wishes is not a legally operative estate document and cannot stand in for executed instruments.
• Waiting for tax-law changes misframes the issue; the need for counsel arises from legal control and implementation, not transfer-tax exposure.

Because their intended transfer pattern depends on legally enforceable documents, the planner should not treat the strategy as complete without attorney coordination and implementation.

Question 6

Topic: HS 330 Fundamentals of Estate Planning

Nina and Carlos, both 64, have supported a local food bank for 15 years. Their retirement projections show they will not need about $300,000 of Carlos’s traditional IRA, and they expect no federal estate tax exposure. They tell their planner, “We want the food bank to receive a meaningful gift at our deaths even if tax laws change.” Which action best aligns with that goal?

• A. Name the food bank beneficiary of $300,000 of the traditional IRA
• B. Bunch several years of annual gifts into one tax year
• C. Delay the gift until a high-income year
• D. Open a donor-advised fund only after large capital gains

Best answer: A

What this tests: HS 330 Fundamentals of Estate Planning

Explanation: Naming the food bank as beneficiary of part of the traditional IRA reflects a lasting charitable commitment rather than a short-term deduction strategy. It also fits after-tax planning because a charity can receive IRA assets without the income tax burden individual heirs would usually face.

A charitable strategy driven by philanthropic intent starts with the client’s enduring desire to benefit the charity, even if deductions or tax rates change. Here, the couple has a long giving history, no estate tax concern, and identified surplus traditional IRA assets. Naming the food bank as beneficiary of that IRA amount directly carries out their estate objective and is consistent with integrated after-tax planning, because traditional IRA dollars are generally less tax-efficient for individual heirs than for a tax-exempt charity. By contrast, waiting for a high-income year, bunching deductions, or tying the plan to capital gains are mainly timing techniques designed to improve current tax results. The key distinction is whether the strategy is anchored to the mission or to the tax calendar.

• High-income year focuses on maximizing a current deduction, not on making a lasting charitable commitment.
• Bunching gifts can improve itemized deductions, but it is primarily a tax-timing technique.
• DAF after gains may be useful in some plans, yet this version is triggered mainly by taxable events rather than by the clients’ stated legacy goal.

This creates a durable charitable transfer based on mission, while also placing income-tax-heavy assets with a tax-exempt recipient.

Question 7

Topic: HS 330 Fundamentals of Estate Planning

Jordan, a divorced client, wants his adult daughter to receive assets efficiently at death, but he does not want to give her any current ownership rights. He owns a bank account and taxable brokerage account in his sole name, plus a traditional IRA and a life insurance policy that already name his daughter as beneficiary. He also has a valid will. Which action best aligns with his goal?

• A. Name his estate beneficiary of the IRA and life insurance.
• B. Rely on the will to direct all transfers at death.
• C. Add POD/TOD designations to the bank and brokerage accounts.
• D. Retitle the bank and brokerage jointly with his daughter.

Best answer: C

What this tests: HS 330 Fundamentals of Estate Planning

Explanation: The key distinction is that a will controls probate assets, while beneficiary designations and POD/TOD registrations create nonprobate transfers. Jordan’s IRA and life insurance already pass outside probate, so the best step is to add POD/TOD designations to the solely titled bank and brokerage accounts while keeping full lifetime control.

Probate administration applies to assets owned solely in the decedent’s name without a built-in transfer mechanism at death. Nonprobate transfers occur by contract or title, such as beneficiary designations on IRAs and life insurance or POD/TOD instructions on financial accounts. Here, the IRA and life insurance already bypass probate because the daughter is the named beneficiary. The bank and taxable brokerage account, however, would normally be part of Jordan’s probate estate if left in his sole name. Adding POD/TOD designations moves those accounts outside probate while letting Jordan keep full ownership during life. By contrast, joint ownership gives the daughter present rights, and naming the estate as beneficiary would usually increase probate involvement. The will still matters, but it does not avoid probate for probate assets.

• Joint ownership shortcut avoids probate but gives the daughter current ownership rights and possible creditor exposure.
• Relying on the will does not bypass probate; it only directs assets that remain in the probate estate.
• Naming the estate as beneficiary would usually pull the IRA and insurance into the probate process instead of using their nonprobate transfer features.

POD/TOD designations shift the solely titled accounts out of probate without giving the daughter a current ownership interest.

Question 8

Topic: HS 330 Fundamentals of Estate Planning

Jordan and Priya, both age 62, are in a second marriage. Each has two adult children from a prior relationship. Their estate is well below current federal estate tax exposure and consists mainly of separate brokerage accounts, IRAs, and a jointly owned home. They tell their planner, “We want the survivor financially secure, but when the survivor dies, whatever is left must pass to our own children.” They ask whether updated beneficiary designations and TOD registrations will complete the estate plan. Which factor is most decisive in determining that the planner should coordinate with legal counsel before treating the strategy as complete?

• A. The need for probate avoidance on brokerage assets
• B. The need for enforceable remainder control in a blended family
• C. The need for lower income tax on inherited IRAs
• D. The need for more liquidity for settlement costs

Best answer: B

What this tests: HS 330 Fundamentals of Estate Planning

Explanation: The decisive issue is the couple’s blended-family objective: support the surviving spouse now while ensuring the remainder ultimately passes to each spouse’s own children. That usually requires coordinated legal documents, not just beneficiary updates or TOD registrations, so the planner should involve estate counsel before calling the strategy complete.

In estate planning, a strategy is not complete when the client’s intended result depends on legal rights that titling or beneficiary forms alone may not create. Here, the couple wants the surviving spouse supported during life while preserving the ultimate remainder for each spouse’s own children. That blended-family objective often requires attorney-drafted will or trust provisions, coordinated with asset titling and beneficiary designations, so the planner should identify the issue and work with legal counsel rather than assume TOD and beneficiary updates are enough.

Probate avoidance is helpful, but it is not the main issue when control over the remainder after the survivor’s death is the client’s central objective.

• IRA tax focus matters, but tax efficiency does not create binding control over who receives assets after the surviving spouse’s death.
• Probate avoidance alone can streamline transfers, but TOD designations may bypass the very trust or will structure needed here.
• Liquidity concern is a valid review item, yet the facts do not indicate settlement costs are the primary barrier to the clients’ goal.

Their goal requires legally enforceable documents that protect the surviving spouse while directing the remainder to separate children, which beneficiary forms alone may not accomplish.

Question 9

Topic: HS 330 Fundamentals of Estate Planning

Marissa, 61, expects a one-time surge in taxable income this year from selling her business. She and her spouse want to support charity, but they have not yet selected the organizations that will receive larger gifts and would like time to involve their adult children in that process. They do not need income from the donated assets and understand the gift will be irrevocable. Their advisor is considering funding a donor-advised fund this year with appreciated securities. Which client objective is most decisive in favoring that recommendation?

• A. Lock in this year’s deduction and recommend grants later
• B. Establish a family-governed charitable legacy
• C. Preserve access to the assets if needs change
• D. Keep retirement income from the donated assets

Best answer: A

What this tests: HS 330 Fundamentals of Estate Planning

Explanation: A donor-advised fund is often most compelling when a client wants to bunch a large charitable deduction into a high-income year but does not need to finalize grant choices immediately. Here, the unusually high sale-year income and the couple’s desire to decide on charities later make tax timing the key driver.

The core concept is separating a charitable strategy motivated mainly by philanthropy from one motivated mainly by tax timing. In this scenario, the decisive fact is the temporary spike in taxable income from the business sale. A donor-advised fund allows the couple to make an irrevocable charitable contribution now, claim the deduction in the high-income year, and recommend grants to specific charities later after more discussion with their children. That makes the recommendation primarily tax-timing driven, even though charitable intent is real. If their main priority were building a customized family giving structure or retaining income from the transferred assets, a different charitable vehicle would usually fit better. The best choice is the one centered on deduction timing plus deferred grant selection.

• Family governance is a real philanthropic goal, but a desire for a custom family-run legacy points more toward a private foundation or other tailored structure.
• Retirement cash flow would favor a split-interest arrangement such as a charitable remainder trust, not a donor-advised fund.
• Future access fails because a completed charitable gift is irrevocable, so the contributed assets cannot be reclaimed for personal needs.

The sale-year income spike makes immediate deduction timing, combined with delayed grant decisions, the decisive reason to use a donor-advised fund.

Question 10

Topic: HS 330 Fundamentals of Estate Planning

After discovery and preliminary estate analysis, a planner learns that Neil and Rosa, both 61, have a $19 million estate made up mostly of a family business and investment real estate, only $700,000 of liquid assets, and wills leaving everything outright to their two children. Their son works in the business; their daughter has a permanent disability and receives SSI and Medicaid. Assume the survivor’s estate would owe federal estate tax and face a $3 million liquidity shortfall. What is the planner’s most appropriate next step?

• A. Have them buy survivorship coverage personally and name both children outright beneficiaries.
• B. Coordinate a special needs trust and ILIT-owned survivorship policy, then update beneficiaries and funding.
• C. Retitle illiquid assets to a revocable trust first and address liquidity later.
• D. Start equal lifetime gifts of business interests before changing documents or beneficiary provisions.

Best answer: B

What this tests: HS 330 Fundamentals of Estate Planning

Explanation: The next recommendation should solve all three problems at once: estate tax exposure, lack of liquidity, and the daughter’s need for protected inheritance planning. A special needs trust can preserve means-tested benefits, and a new survivorship policy owned by an ILIT can provide estate liquidity without adding proceeds to the taxable estate.

The core concept is coordinated estate planning. Neil and Rosa have an illiquid estate, a projected estate tax bill, and a beneficiary whose inheritance should not be distributed outright because she receives means-tested benefits. A new survivorship life insurance policy owned by an ILIT is commonly used to create cash at the second death, helping cover estate taxes and expenses without forcing a sale of the business or real estate, and without including the insurance proceeds in the insureds’ estates if properly structured. At the same time, their documents should direct the daughter’s share to a special needs trust so support can be managed without disrupting SSI or Medicaid eligibility. In the planning process, the appropriate next step is to coordinate this integrated recommendation with the estate attorney and insurance professional, then align beneficiary designations and funding.

• Personal ownership leaves insurance proceeds potentially includible in the estate and gives the daughter assets outright.
• Gifting first may reduce estate size somewhat, but it does not create needed liquidity or protect means-tested benefits.
• Revocable trust first may help administration, but it does not solve the estate tax or cash shortfall by itself.

This recommendation addresses beneficiary protection and estate liquidity together by pairing a special needs trust with tax-efficient life-insurance ownership.

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