National Association of Estate Planners and Councils
Estate Planning Law Specialist

Sample Questions

The following are sample questions designed to assist an EPLS applicant in understanding the nature, type, and complexity of questions on the exam. You will note that most of these questions are estate and gift tax related. Others are planning related. The actual exam also has ethics related questions.

Unless stated, assume a 2001 date of death or gift, whichever is applicable, and assume a Section 7520 rate of 7%. On the actual exam, you will be given any applicable tables from the Code or Regulations. For this sample, use the current tables in the Regs issued under §2031 (Table S, April 30, 1999 and Table B, April 30, 1989).

Question 1: 

H died on January 5.  H died owning 100 shares of General Motors stock.  On his date of death, GM stock opened at $44 per share.  During the day, it went to a high of $46 and a low of $38.  At closing, GM was last traded at $40 per share.  Had H desired to sell his 100 shares of GM stock, the brokerage commission would have been $50.  What is the value of the 100 shares of the General Manager stock included in H’s gross estate?

(A) $3,950

(B) $4,000

(C) $4,200

(D) None of the above

Question 2: 

The Executor of D’s estate decided to value the gross estate using the alternate valuation date pursuant to Internal Revenue Code § 2032.  The Executor is unsure of how to value several of the assets that were included in D’s gross estate.  These assets are as follows:

Asset  Value at Date of Death Value Six Months After
Stocks $25,000 $20,000
Patent (5 years, 6 months remaining at date of death) $150,000 $135,000
Residence (based on appraisal) $270,000 $280,000

The stocks were distributed to D’s sole beneficiary three months after D’s death when they were worth $35,000.  The residence was sold to an unrelated party five month’s after D’s death for $270,000.  If the Executor elects to use the alternate valuation date and the estate is eligible for the election, the gross estate is:

(A) $435,000

(B) $440,000

(C) $450,000

(D) $455,000

(E) None of the above

Question 3:

Husband and Wife make maximum annual exclusion gifts each year to their son and to their only grandchild.  They do not make gifts to their son’s wife because they do not trust her not to immediately spend it on herself.  The grandson has just enrolled at a very expensive Ivy League college and they have asked you what is the best way to provide some help with the costs.  You would advise them that the simplest solution is:

(A) Include their son’s wife in the annual exclusion gifts so the family unit has more money to meet costs.

(B) Pay their grandson’s tuition directly to the college each year as a “qualified transfer.”

(C) Give the grandson amounts in excess of the annual exclusion, even if it results in use of some of their exemption amount.

(D) Set up a trust for the grandson’s education and fully fund it now.

Question 4: 

H and W (husband and wife) maintain a joint checking account, each having deposited their own monies into this account.  On December 25 of last year, W wrote a check to their daughter in the amount of $20,000 and gave the daughter the check as a gift on Christmas Day.  The daughter deposited the check the next day and it cleared H’s and W’s account by year end.  No other gifts were made during the year.  H and W did not file a gift tax return for the last year.  The amount of W’s taxable gift for the last year is:

(A) Zero

(B) $10,000

(C) $20,000

(D) None of the above

Question 5:

You are preparing an estate plan for John who was divorced and has solely owned assets of $3,200,000.  In addition to his solely owned assets, John has voluntarily begun putting assets aside for his son, Jason.  The transfers were made over a number of years and none exceeded the annual gift tax exclusion under § 2503.  The transferred assets were in an account titled, “John, Custodian for Jason, Uniform Transfers to Minors Act (UTMA).”  As of this date, the UTMA account contains $100,000 and Jason is 10 years old.  Which of the following is correct?

(A) The $100,000 account will be distributed to Jason, outright in the event of the death of the custodian, regardless of the age of Jason.

(B) The $100,000 account is includible in John’s estate for federal estate tax purposes under § 2036 and/or §2038.

(C) The $100,000 amount is not includible in John’s estate for federal estate tax purposes because no transfer exceeded the annual exclusion and John’s control over the account is in a fiduciary capacity.

(D) The $100,000 account is automatically payable to Jason’s mother as his other surviving parent in the event of John’s death.

(E) None of the above is correct.

Question 6:

A testamentary trust established under T’s Will provides that all of the trust income be paid to T’s spouse for life, remainder to T’s children.  XYZ Bank is Trustee.  No principal payments can be made.  The Trustee of this trust was empowered to use the income of the trust to pay for the medical expense for T’s mother.  When T executed his Will, his mother was 78 and in frail health.  T’s mother died while T was alive.  T never changed his Will.  The trust came into existence at the time of T’s death.  Which of the following statements concerning T’s estate is correct?

(A) The full value of the trust qualifies for the marital deduction if T’s Executor makes the QTIP election.

(B) The trust fails to qualify for the marital deduction because T’s Will provided for invasion for his mother.  This language disqualifies the trust for the marital deduction even though she is deceased.

(C) The trust qualifies for the marital deduction without a QTIP election.

(D) The trust fails to qualify for the marital deduction unless T’s mother disclaimed her interest in the trust within nine months of the date T’s Will was executed.

(E) None of the above is correct.

Question 7:

You are assisting in the estate plan for Jane.  She has solely owned assets of $3,500,000.  In reviewing Jane’s income tax returns, you find that she had been receiving substantial income from a trust established by her grandfather in 1950 when Jane was 20 years old.  XYZ Bank was the initial Trustee and upon reaching age 30, Jane became her own Trustee.  The trust directed that all of the net income be distributed to Jane during her lifetime as well as principal, if needed in the Trustee’s reasonable discretion, to provide for Jane’s “health, support and medical care.”  The principal value of the trust is $2,000,000.  No distributions of principal have been made.  Which of the following is correct with respect to possible inclusion of the trust established by her grandfather in Jane’s estate for federal estate tax purposes?

(A) It is includible because she possesses a general power of appointment under Section 2041.

(B) It is not includible because her power of withdrawal was subject to an ascertainable standard.

(C) It is not includible because she has never actually received any distributions of principal and agrees not to ever take a distribution.

(D) The actuarial value of Jane’s life estate in the principal, determined immediately prior to her death, will be includible in Jane’s estate.

(E) None of the above is correct.

Question 8:

In 1998, a father established a funded irrevocable trust for the benefit of his daughter.  The daughter is to receive all trust income for life.  At her death, the property will be distributed to her only child, an adult son.  Which of the following powers, if included in the trust instrument, would cause the entire trust corpus to be included in daughter’s gross estate for federal estate tax purposes?

(A) The noncumulative power to withdraw each year the greater of $5,000 or five percent of the trust corpus.

(B) The power to withdraw any amount of the trust corpus with the written consent of her father.

(C) The power to withdraw any amount of the trust corpus necessary to provide for her health, support, education and comfort.

(D) None of the above.

Question 9: 

H is married to W.  H makes a gift of Z stock to W that has a fair market value of $90,000 on the date of the gift and a basis of $190,000.  One year later, H dies and the stock has a fair market value of $80,000.  Six months thereafter, W sells the Z stock she received from H for $100,000.  W’s gain or loss for income tax purposes on the sale of Z stock is:

(A) Zero

(B) $90,000 loss

(C) $10,000 gain

(D) $190,000 gain

(E) None of the above