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Overview of Wealth Management
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Question 1 of 30
1. Question
Which of the following refers to the sum of an individual’s financial capital and human capital less any liabilities owed by the individual?
I. The gross income of an individual refers to the sum of an individual’s financial capital and human capital less any liabilities owed by the individual.
II. The marginal wealth of an individual refers to the sum of an individual’s financial capital and human capital less any liabilities owed by the individual.
III. The net worth of an individual refers to the sum of an individual’s financial capital and human capital less any liabilities owed by the individual.
IV. Total wealth of an individual refers to the sum of an individual’s financial capital and human capital less any liabilities owed by the individual.Correct
The sum of an individual’s financial capital (FC) and human capital (HC) less any liabilities owed by the individual is known as the individual’s net worth. Net worth is the measure of the wealth of an entity, person, or corporation as well as sectors and countries. Net worth is simply the difference between assets and liabilities.
Incorrect
The sum of an individual’s financial capital (FC) and human capital (HC) less any liabilities owed by the individual is known as the individual’s net worth. Net worth is the measure of the wealth of an entity, person, or corporation as well as sectors and countries. Net worth is simply the difference between assets and liabilities.
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Question 2 of 30
2. Question
Net worth provides a snapshot of an individual’s current financial position. Which of the following terms best refers to people with substantial net worth?
I. People with substantial net worth are known as net-worth individuals.
II. People with substantial net worth are known as low-net-worth individuals.
III. People with substantial net worth are known as high-net-worth individuals.
IV. People with substantial net worth are known as high-gross-worth individuals.Correct
People with substantial net worth are known as high-net-worth individuals (HNWI). High-net-worth individual (HNWI) is a term used by some segments of the financial services industry to designate persons whose investible assets (such as stocks and bonds) exceed a given amount.
Incorrect
People with substantial net worth are known as high-net-worth individuals (HNWI). High-net-worth individual (HNWI) is a term used by some segments of the financial services industry to designate persons whose investible assets (such as stocks and bonds) exceed a given amount.
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Question 3 of 30
3. Question
Which of the following makes up an investor’s total wealth?
I. Human capital is included in an investor’s total wealth.
II. Economy capital is included in an investor’s total wealth.
III. Financial capital is included in an investor’s total wealth.
IV. Loaned capital is included in an investor’s total wealth.Correct
Wealth is the possession of a large amount of money, property, or other valuable things. An investor’s total wealth is composed of both human capital and financial capital.
Incorrect
Wealth is the possession of a large amount of money, property, or other valuable things. An investor’s total wealth is composed of both human capital and financial capital.
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Question 4 of 30
4. Question
Which of the following is not one of the general categories of attitude and style resulting from the personality typing questionnaire that provides indications into investment-related behavior?
I. Methodical investors
II. Individualistic investors
III. Unrealistic investors
IV. Risk-averse investorsCorrect
These four very general categories of attitude and style result from the personality typing questionnaire and may provide indications into investment-related behavior: Cautious, methodical, individualistic, or spontaneous. Investors can, therefore, be classified as cautious, methodical, individualistic, or spontaneous.
Incorrect
These four very general categories of attitude and style result from the personality typing questionnaire and may provide indications into investment-related behavior: Cautious, methodical, individualistic, or spontaneous. Investors can, therefore, be classified as cautious, methodical, individualistic, or spontaneous.
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Question 5 of 30
5. Question
Which of the following investors are risk-averse (minimize risk), base decisions on feelings, and have trouble making decisions?
Correct
Cautious investors are one of the four very general categories of attitude and style resulting from the personality typing questionnaire. Cautious investors are generally individuals who minimize risk and have trouble making decisions. They are characterised by the following:
– They are risk averse and base decisions on feelings.
– They prefer safe, low-volatility investments with little potential for loss.
– They do not like making their own investment decisions but are difficult to advise and will sometimes even avoid professional help.
– Their inability to make decisions can lead to missed investment opportunities.
– Once they have made investment decisions, their portfolios exhibit low turnover.Incorrect
Cautious investors are one of the four very general categories of attitude and style resulting from the personality typing questionnaire. Cautious investors are generally individuals who minimize risk and have trouble making decisions. They are characterised by the following:
– They are risk averse and base decisions on feelings.
– They prefer safe, low-volatility investments with little potential for loss.
– They do not like making their own investment decisions but are difficult to advise and will sometimes even avoid professional help.
– Their inability to make decisions can lead to missed investment opportunities.
– Once they have made investment decisions, their portfolios exhibit low turnover. -
Question 6 of 30
6. Question
Which of the following investors are risk-averse, base decisions on thinking, are conservative, gather lots of data, and look for more information?
Correct
Methodical investors are one of the four very general categories of attitude and style resulting from the personality typing questionnaire. Methodical investors are generally individuals who are conservative, gather lots of data, and look for more information. They are characterised by the following:
– They diligently research markets, industries, and firms to gather investment information.
– Their investment decisions tend to be conservative and because they base decisions on facts, they rarely form emotional attachments to investments.
– They continually seek confirmation of their investment decisions, so they are constantly on the lookout for better information.Incorrect
Methodical investors are one of the four very general categories of attitude and style resulting from the personality typing questionnaire. Methodical investors are generally individuals who are conservative, gather lots of data, and look for more information. They are characterised by the following:
– They diligently research markets, industries, and firms to gather investment information.
– Their investment decisions tend to be conservative and because they base decisions on facts, they rarely form emotional attachments to investments.
– They continually seek confirmation of their investment decisions, so they are constantly on the lookout for better information. -
Question 7 of 30
7. Question
Which of the following investors are less risk-averse, base decisions on thinking, and are confident making their own decisions?
Correct
Individualistic investors are one of the four very general categories of attitude and style resulting from the personality typing questionnaire. Individualistic investors are generally individuals who are confident and make their own decisions. They are characterised by the following:
– They do their own research and are very confident in their ability to make investment decisions.
– When faced with seemingly contradictory information, they will devote the time needed to reconcile the differences.
– Individualistic investors tend to have confidence in their ability to achieve their long-term investment objectives.Incorrect
Individualistic investors are one of the four very general categories of attitude and style resulting from the personality typing questionnaire. Individualistic investors are generally individuals who are confident and make their own decisions. They are characterised by the following:
– They do their own research and are very confident in their ability to make investment decisions.
– When faced with seemingly contradictory information, they will devote the time needed to reconcile the differences.
– Individualistic investors tend to have confidence in their ability to achieve their long-term investment objectives. -
Question 8 of 30
8. Question
Which of the following investors are less risk-averse, base decisions on feelings, have high portfolio turnover, chase fads, and continually want to do something?
Correct
Spontaneous investors are one of the four very general categories of attitude and style resulting from the personality typing questionnaire. Spontaneous investors are generally individuals who are less risk-averse, base decisions on feelings. They have high portfolio turnover, chase fads, and continually want to do something. They are characterised by the following:
– They constantly adjust their portfolios in response to changing market conditions.
– They fear that failing to respond to changing market conditions will negatively impact their portfolios.
– They acknowledge their lack of investment expertise but at the same time tend to doubt investment advice.
– Their reactions to changing investment trends combined with a tendency to over-manage their portfolios leads to high turnover.Incorrect
Spontaneous investors are one of the four very general categories of attitude and style resulting from the personality typing questionnaire. Spontaneous investors are generally individuals who are less risk-averse, base decisions on feelings. They have high portfolio turnover, chase fads, and continually want to do something. They are characterised by the following:
– They constantly adjust their portfolios in response to changing market conditions.
– They fear that failing to respond to changing market conditions will negatively impact their portfolios.
– They acknowledge their lack of investment expertise but at the same time tend to doubt investment advice.
– Their reactions to changing investment trends combined with a tendency to over-manage their portfolios leads to high turnover. -
Question 9 of 30
9. Question
The entire process of developing the investment policy statement (IPS), is valuable for both the client and the investment adviser. Which of these is not a benefit of the IPS for the client?
I. Developing the investment policy statement (IPS) should be an educational experience for the client.
II. The investment policy statement (IPS) is static and does not allow changes in objectives and/or constraints in response to capital market conditions.
III. The investment policy statement (IPS) identifies and documents investment objectives and constraints.
IV. The investment policy statement (IPS) is easily understood, providing the client with the ability to bring in new managers or change managers without disruption of the investment process.Correct
The benefits of the investment policy statement (IPS) for the client includes the following:
– The investment policy statement (IPS) identifies and documents investment objectives and constraints.
– The investment policy statement (IPS) is dynamic, allowing changes in objectives and/or constraints in response to changing client circumstances or capital market conditions.
– The investment policy statement (IPS) is easily understood, providing the client with the ability to bring in new managers or change managers without disruption of the investment process.
– Developing the investment policy statement (IPS) should be an educational experience for the client. Clients learn more about themselves and investment decision making and they are better able to understand the manager’s investment recommendations.Incorrect
The benefits of the investment policy statement (IPS) for the client includes the following:
– The investment policy statement (IPS) identifies and documents investment objectives and constraints.
– The investment policy statement (IPS) is dynamic, allowing changes in objectives and/or constraints in response to changing client circumstances or capital market conditions.
– The investment policy statement (IPS) is easily understood, providing the client with the ability to bring in new managers or change managers without disruption of the investment process.
– Developing the investment policy statement (IPS) should be an educational experience for the client. Clients learn more about themselves and investment decision making and they are better able to understand the manager’s investment recommendations. -
Question 10 of 30
10. Question
The entire process of developing the investment policy statement (IPS), is valuable for both the client and the investment adviser. Which of these is a benefit of the IPS for the investment adviser?
I. Guidance for resolution of disputes.
II. Guidance for investment decision making.
III. Guidance for the institution of conflicts.
IV. Greater knowledge of the client.Correct
The benefits of the investment policy statement (IPS) for the investment adviser includes the following:
– Greater knowledge of the client.
– Guidance for investment decision making.
– Guidance for resolution of disputes. This could involve signed documentation that can be used to support the manager’s investment decisions as well as the manager’s denials of client investment requests.Incorrect
The benefits of the investment policy statement (IPS) for the investment adviser includes the following:
– Greater knowledge of the client.
– Guidance for investment decision making.
– Guidance for resolution of disputes. This could involve signed documentation that can be used to support the manager’s investment decisions as well as the manager’s denials of client investment requests. -
Question 11 of 30
11. Question
What term refers to the method of increasing a position size by using unrealized profits from successful trades to increase margin?
Correct
The method of increasing a position size by using unrealized profits from successful trades to increase margin is known as pyramiding. An investor who is pyramiding uses additional margin from the increasing price of a security in his or her portfolio to purchase more of the same security.
Incorrect
The method of increasing a position size by using unrealized profits from successful trades to increase margin is known as pyramiding. An investor who is pyramiding uses additional margin from the increasing price of a security in his or her portfolio to purchase more of the same security.
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Question 12 of 30
12. Question
Psychology plays a key role in investing. Investor psychology indicates investors will form portfolios via which method?
Correct
Investor psychology indicates investors will form portfolios via pyramiding. Pyramiding is the concept applied to investor portfolio formation in which portfolios are created by matching layers of assets to specific goals. Each layer of assets is not particularly evaluated within an overall portfolio context.
Incorrect
Investor psychology indicates investors will form portfolios via pyramiding. Pyramiding is the concept applied to investor portfolio formation in which portfolios are created by matching layers of assets to specific goals. Each layer of assets is not particularly evaluated within an overall portfolio context.
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Question 13 of 30
13. Question
Which of the following statements about personality typing for individual investors is correct?
I. An ad hoc approach to personality typing is to ignore the investors.
II. An ad hoc approach to personality typing is to administer a short questionnaire.
III. Subjective assessments of investors are easy to standardize.
IV. It is difficult to render precise categorizations of broad groups of investors.Correct
An ad hoc approach would be a less formal approach based on the investment professional’s interview with investors. As opposed to precise categories, broad classifications are easy to derive. The more subjective the assessment, the more difficult it is to standardize.
Incorrect
An ad hoc approach would be a less formal approach based on the investment professional’s interview with investors. As opposed to precise categories, broad classifications are easy to derive. The more subjective the assessment, the more difficult it is to standardize.
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Question 14 of 30
14. Question
Which of the following statements is true, if expenditures are small, relative to the client’s portfolio?
Correct
The ability to take risk means the ability of the portfolio to sustain losses without putting the client’s goals in jeopardy; how much volatility the portfolio can withstand and still meet the client’s required expenditures. Generally, the client has an increased ability to take risk, if expenditures are small relative to the client’s portfolio.
Incorrect
The ability to take risk means the ability of the portfolio to sustain losses without putting the client’s goals in jeopardy; how much volatility the portfolio can withstand and still meet the client’s required expenditures. Generally, the client has an increased ability to take risk, if expenditures are small relative to the client’s portfolio.
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Question 15 of 30
15. Question
Willingness to take on risk refers to an individual’s risk aversion. The client’s willingness to take risk is subjective and determined through an analysis of which of the following?
Correct
The client’s willingness to take risk is subjective and determined through an analysis of the client’s psychological profile. There is no hard-and-fast rule for judging willingness to tolerate risk, so you have to look for statements or evidence in the client’s actions. Willingness to bear risk is determined by statements the client makes or by actions or by life experience.
Incorrect
The client’s willingness to take risk is subjective and determined through an analysis of the client’s psychological profile. There is no hard-and-fast rule for judging willingness to tolerate risk, so you have to look for statements or evidence in the client’s actions. Willingness to bear risk is determined by statements the client makes or by actions or by life experience.
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Question 16 of 30
16. Question
Which of the following is a mathematical model often used in investment for risk assessment and retirement planning to project the likelihood of achieving financial or retirement goals?
Correct
The Monte Carlo method is a mathematical model often been used in investment for risk assessment. The Monte Carlo simulation can be used to help plan for retirement to project the likelihood of achieving financial or retirement goals, and whether a retiree will have enough income given a wide range of possible outcomes in the markets.
Incorrect
The Monte Carlo method is a mathematical model often been used in investment for risk assessment. The Monte Carlo simulation can be used to help plan for retirement to project the likelihood of achieving financial or retirement goals, and whether a retiree will have enough income given a wide range of possible outcomes in the markets.
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Question 17 of 30
17. Question
A Monte Carlo simulation can be used to test if one will have enough income throughout retirement. Which of the following is an advantage of Monte Carlo simulation.
I. Tax modeling that is simplistic and not tailored to the investor’s situation.
II. It can more clearly display tradeoffs of risk and return.
III. A clearer understanding of short-term and long-term risk can be gained.
IV. It is superior in assessing multi-period effects.Correct
Monte Carlo simulation is very flexible. The advantages of the Monte Carlo simulation include the following:
– It considers path dependency.
– It can more clearly display tradeoffs of risk and return.
– Properly modeled tax analysis, which considers the actual tax rates of the investor as well as tax location of the assets (held in taxable or tax-deferred locations), can be assessed.
– A clearer understanding of short-term and long-term risk can be gained.
– It is superior in assessing multi-period effects.
– Points along the timeline can be considered to answer questions, such as, “Do savings need to be increased?” “Can I retire earlier?” “Must I retire later?”Incorrect
Monte Carlo simulation is very flexible. The advantages of the Monte Carlo simulation include the following:
– It considers path dependency.
– It can more clearly display tradeoffs of risk and return.
– Properly modeled tax analysis, which considers the actual tax rates of the investor as well as tax location of the assets (held in taxable or tax-deferred locations), can be assessed.
– A clearer understanding of short-term and long-term risk can be gained.
– It is superior in assessing multi-period effects.
– Points along the timeline can be considered to answer questions, such as, “Do savings need to be increased?” “Can I retire earlier?” “Must I retire later?” -
Question 18 of 30
18. Question
A Monte Carlo simulation can be used to test if one will have enough income throughout retirement. Like any complex model, there are pros and cons. Which of the following is a disadvantage of Monte Carlo simulation.
I. Models that simulate the return of asset classes but not the actual assets held.
II. Tax modeling that is simplistic and not tailored to the investor’s situation.
III. Simplistic use of historical data, such as expected returns, for the inputs.
IV. It is superior in assessing multi-period effects.Correct
Like any complex model, it is only as good as the inputs. Poor or simplistic inputs or modeling can create poor results. The disadvantages of Monte Carlo simulation include the following:
– Simplistic use of historical data, such as expected returns, for the inputs. Returns change and have a major effect on projected future values of the portfolio.
– Models that simulate the return of asset classes but not the actual assets held.
– Tax modeling that is simplistic and not tailored to the investor’s situation.Incorrect
Like any complex model, it is only as good as the inputs. Poor or simplistic inputs or modeling can create poor results. The disadvantages of Monte Carlo simulation include the following:
– Simplistic use of historical data, such as expected returns, for the inputs. Returns change and have a major effect on projected future values of the portfolio.
– Models that simulate the return of asset classes but not the actual assets held.
– Tax modeling that is simplistic and not tailored to the investor’s situation. -
Question 19 of 30
19. Question
Situational profiling places individuals into categories according to the stage of life or economic circumstances. Which of the following phases refers to the period when an individual is working and planning and ultimately building up the value of their investment through savings?
I. The foundational phase refers to the period in a person’s life in which they are saving for retirement.
II. The distribution phase refers to the period in a person’s life in which they are saving for retirement.
III. The retirement phase refers to the period in a person’s life in which they are saving for retirement.
IV. The accumulation phase refers to the period in a person’s life in which they are saving for retirement.Correct
The period when an individual is working and planning and ultimately building up the value of their investment through savings is referred to as the accumulation phase. The length of the accumulation phase will vary based on when an individual begins saving and when the person plans to retire.
Incorrect
The period when an individual is working and planning and ultimately building up the value of their investment through savings is referred to as the accumulation phase. The length of the accumulation phase will vary based on when an individual begins saving and when the person plans to retire.
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Question 20 of 30
20. Question
Life stages are a progression. Which of the following is characteristic of the foundation phase of life?
I. Younger investors (foundation phase) typically have no ability to take risk.
II. Younger investors (foundation phase) typically don’t take risk.
III. Younger investors (foundation phase) typically have a lower ability to take risk.
IV. Younger investors (foundation phase) typically have a higher ability to take risk.Correct
In the foundation phase, individuals are seeking to accumulate wealth through a job and savings, seeking education, or building a business. An inverse relationship exists between age and risk tolerance. Younger investors (foundation phase) typically have a higher ability to take risk.
Incorrect
In the foundation phase, individuals are seeking to accumulate wealth through a job and savings, seeking education, or building a business. An inverse relationship exists between age and risk tolerance. Younger investors (foundation phase) typically have a higher ability to take risk.
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Question 21 of 30
21. Question
Which of the following is one of the problems associated with estimating an individual’s human capital and total liabilities?
I. Determining the individual’s lifetime.
II. Determining required future outlays.
III. Determining the values of future net employment income.
IV. Determining the individual’s lifestyleCorrect
The problems associated with estimating an individual’s human capital and total liabilities include the following:
– Determining the values of future net employment income.
– Determining required future outlays.
– Determining the individual’s lifetime.Incorrect
The problems associated with estimating an individual’s human capital and total liabilities include the following:
– Determining the values of future net employment income.
– Determining required future outlays.
– Determining the individual’s lifetime. -
Question 22 of 30
22. Question
Which of the following shows an individual’s expected remaining years based upon attaining a given age?
Correct
Mortality tables show an individual’s expected remaining years based upon attaining a given age. A mortality table, also known as a life table or actuarial table, shows the rate of deaths occurring in a defined population during a selected time interval, or survival rates from birth to death.
Incorrect
Mortality tables show an individual’s expected remaining years based upon attaining a given age. A mortality table, also known as a life table or actuarial table, shows the rate of deaths occurring in a defined population during a selected time interval, or survival rates from birth to death.
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Question 23 of 30
23. Question
Asset ownership can be a fuzzy concept with trusts. What statement falsely describes trusts?
I. A trust is a three-party fiduciary relationship in which the first party, the trustor or settlor, transfers property to the second party for the benefit of the third party, the beneficiary.
II. A trust is a fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary.
III. Trusts are a means by which a grantor (or settlor) can transfer assets to beneficiaries outside of the probate process.
IV. Trusts are a 2-party relationship in which a grantor (or settlor) transfers assets to beneficiaries directly.Correct
Trusts are a means by which a grantor (or settlor) can transfer assets to beneficiaries outside of the probate process. A trust is a three-party fiduciary relationship in which the first party, the trustor or settlor, transfers property upon the second party for the benefit of the third party, the beneficiary. A trust can also be defined as a fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary.
Incorrect
Trusts are a means by which a grantor (or settlor) can transfer assets to beneficiaries outside of the probate process. A trust is a three-party fiduciary relationship in which the first party, the trustor or settlor, transfers property upon the second party for the benefit of the third party, the beneficiary. A trust can also be defined as a fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary.
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Question 24 of 30
24. Question
Which of the following has possession of and manages the assets for the benefit of the settlor and/or beneficiaries?
Correct
A trustee has possession of and manages the assets for the benefit of the settlor and/or beneficiaries. The trustee may be considered the owner of the assets for tax purposes only.
Incorrect
A trustee has possession of and manages the assets for the benefit of the settlor and/or beneficiaries. The trustee may be considered the owner of the assets for tax purposes only.
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Question 25 of 30
25. Question
Asset ownership can be a fuzzy concept with trusts. The ownership of assets for tax purposes may reside with which of the following persons?
I. Ownership for tax purposes may reside with the settlor.
II. Ownership for tax purposes may reside with the beneficiary.
III. Ownership for tax purposes may reside with the trustee.
IV. Ownership for tax purposes will reside with the resident.Correct
Depending on the structure of the trust, the legal owner and the owner for tax purposes may be two different entities. Ownership for tax purposes may reside with the settlor or the trustee, while legal ownership of the assets may be held by the settlor or transferred to the trustee or beneficiaries.
Incorrect
Depending on the structure of the trust, the legal owner and the owner for tax purposes may be two different entities. Ownership for tax purposes may reside with the settlor or the trustee, while legal ownership of the assets may be held by the settlor or transferred to the trustee or beneficiaries.
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Question 26 of 30
26. Question
In which of the following types of trusts can the settlor reverse the trust and resume ownership of the assets?
Correct
A revocable trust is a trust whereby the settlor reverses the trust and resumes ownership of the assets. During the life of the trust, income earned is distributed to the grantor, and only after death does property transfer to the beneficiaries. The settlor is considered the legal owner of the assets for tax and reporting purposes and creditors, divorcing spouses can make claims against the trust assets.
Incorrect
A revocable trust is a trust whereby the settlor reverses the trust and resumes ownership of the assets. During the life of the trust, income earned is distributed to the grantor, and only after death does property transfer to the beneficiaries. The settlor is considered the legal owner of the assets for tax and reporting purposes and creditors, divorcing spouses can make claims against the trust assets.
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Question 27 of 30
27. Question
In which of the following types of trusts can the settlor relinquish ownership and control of the trust?
Correct
In an irrevocable trust, the settlor relinquishes ownership and control of the trust. Irrevocable trust is a trust that cannot be modified or terminated without the permission of the beneficiary. The trustee is considered the owner of the assets for tax purposes and is responsible for reporting and paying taxes on income generated by the trust.
Incorrect
In an irrevocable trust, the settlor relinquishes ownership and control of the trust. Irrevocable trust is a trust that cannot be modified or terminated without the permission of the beneficiary. The trustee is considered the owner of the assets for tax purposes and is responsible for reporting and paying taxes on income generated by the trust.
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Question 28 of 30
28. Question
A fixed trust is a kind of living trust that’s established for the purpose of estate planning. Which of the following statements about a fixed trust is false?
I. The pattern of distributions to the beneficiaries is predetermined by the trustee.
II. The pattern of distributions to the beneficiaries is predetermined by the settlor.
III. The pattern of distributions to the beneficiaries is predetermined by the beneficiary.
IV. The pattern of distributions to the beneficiaries is predetermined by the beneficiary’s next of kin.Correct
In a fixed trust, the pattern of distributions to the beneficiaries is predetermined by the settlor and incorporated into the trust documents. For example, when setting up a trust for a minor, the settlor may wish the trustee to distribute a portion of the assets when the minor reaches 21 years of age and then distribute a given percentage each year until they are exhausted.
Incorrect
In a fixed trust, the pattern of distributions to the beneficiaries is predetermined by the settlor and incorporated into the trust documents. For example, when setting up a trust for a minor, the settlor may wish the trustee to distribute a portion of the assets when the minor reaches 21 years of age and then distribute a given percentage each year until they are exhausted.
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Question 29 of 30
29. Question
In which of the following types of trusts does the trustee determine how the assets are to be distributed?
Correct
A discretionary trust is a trust in which the number of shares of each beneficiary is not fixed by the settlor in the trust deed but at the discretion of the trustees. The primary concern is that the assets are distributed to produce the greatest benefit to the beneficiary or beneficiaries. Beneficiaries have no legal right to either the income or the assets of the discretionary trust. Thus, the trust assets are protected from claims against the beneficiaries.
Incorrect
A discretionary trust is a trust in which the number of shares of each beneficiary is not fixed by the settlor in the trust deed but at the discretion of the trustees. The primary concern is that the assets are distributed to produce the greatest benefit to the beneficiary or beneficiaries. Beneficiaries have no legal right to either the income or the assets of the discretionary trust. Thus, the trust assets are protected from claims against the beneficiaries.
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Question 30 of 30
30. Question
Which of the following types of trust is used to transfer assets to a beneficiary who is too young or is otherwise unable to manage the assets?
Correct
A spendthrift trust is used to transfer assets to a beneficiary who is too young or is otherwise unable to manage the assets. A spendthrift trust is a trust that is created for the benefit of a person (often unable to control his spending) that gives an independent trustee full authority to make decisions as to how the trust funds may be spent for the benefit of the beneficiary.
Incorrect
A spendthrift trust is used to transfer assets to a beneficiary who is too young or is otherwise unable to manage the assets. A spendthrift trust is a trust that is created for the benefit of a person (often unable to control his spending) that gives an independent trustee full authority to make decisions as to how the trust funds may be spent for the benefit of the beneficiary.