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Testing Your Charitable Aptitude


Featured Article
April 2014

The College Board recently announced that it is redesigning the SAT test. The new version, which will be available beginning in 2016, supposedly will be a better measurement of readiness for college.

Those of us who finished college years ago are relieved that we never again have to take such an aptitude test. However, it might be a good idea for us to take what might be dubbed the “ESAT.” The letters refer to the “EState Aptitude Test,” and it would measure our understanding of estate planning principles, a necessary precondition for ensuring that our estates are distributed as we wish without unnecessary taxes. Following are some sample questions that might appear on such a test. Like most of the SAT, they are multiple choice. Please see the answers at the end.

  1. Which of the following would be transferred per a provision in your will?
    a. A residence owned in joint tenancy with right of survivorship
    b. A brokerage account in your name
    c. Life insurance proceeds with an individual as beneficiary
    d. Assets transferred to your living trust

  2. Which document provides direction to a physician about end-of-life decisions if you cannot speak for yourself?
    a. Durable power of attorney
    b. Living trust
    c. Living will
    d. Holographic will

  3. In 2014 what is the lifetime federal gift/estate-tax exemption for gifts to individuals?
    a. $5,340,000
    b. $1,000,000
    c. $14,000
    d. $10,000

  4. From a tax standpoint, what is generally the best way to make a legacy (end of life) gift to a charity?
    a. Make a cash bequest
    b. Make a bequest of appreciated securities
    c. Name it as beneficiary of a life insurance policy
    d. Name it as a beneficiary of an IRA or other retirement account

  5. Which of the following statements is not true?
    a. If you have a living trust, you probably do not need a will.
    b. If you die without a will, state law determines how your property is divided.
    c. Probate is the process of validating a will and distributing property according to its terms.
    d. Death proceeds from a life insurance policy are not subject to income tax.

  6. Check all of the following instruments that could be used to make a charitable gift and provide income to heirs?
    a. Donor advised fund
    b. Charitable remainder trust
    c. Named endowment at a charity
    d. Gift annuity

This short quiz may have prompted you to raise other questions about your estate plan and how to include charitable gifts in it. If so, we would be pleased to meet with you and/or send information to you. Please contact us.

………………………………………….

Answers to test: 1-b, 2-c, 3-a, 4-d, 5-a, 6-b and d

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