15. Which of the following is true regarding the role of executor? a) After grant of a probate or letters of administration the executor’s or administrator’s role, after taking inventory and assessing the value of the deceased’s estate, is to follow the rules set out in the ISA whilst distributing the estate b) Expenses of obtaining probate and costs that may be incurred in respect of judicial proceedings necessary to administer estate, are to be paid. c) Wages due to any labourer, artisan or domestic servant, for services rendered within three months of death, are to be paid. d) Other debts according to their respective priorities. Debts are to be paid before payment of legacies. e) All the above are true 16. For ensuring the trust is managed and administered by the trustees in accordance with the trust deed, and for safeguarding the interests of its beneficiaries, a settlor may retain oversight and control by assuming the position of, or appointing another person, as -------- -------- of the trust a) Trustee b) Author c) Protector d) None of the above 17. A testamentary trust is created under a will, and comes into existence effect after the testator’s death. a) True b) False CFP Level 3 - Module 2 – Estate Planning – India Specific - Workbook Page 47
18. A -----------------trust may not ring-fence assets and the assets of the trust may be attached in recovery of the settlor’s of debts under law. In addition, assets transferred to a trust by a settlor would continue to be treated as the settlor’s assets, under income tax law. a) Revocable b) Charitable c) Private d) Irrevocable 19. A trust in which the beneficiaries and/or their shares are also determined is known as a non-discretionary trust, or a determinate, or specific trust. Trustees do not have any discretion over the distribution of the benefits and income of such trust, amongst beneficiaries. a) True b) False 20. Four partners (A, B, C and D) have an equal 1/4th interest in a partnership valued at Rs. 2,40,00,000. If the partners use the buy-sell cross purchase method, how much coverage should partner B have on life of each of the other partners? a) Rs.2,40,00,000 b) Rs.80,00,000 c) Rs.60,00,000 d) Rs.2,00,00,000 (In a buy sell cross purchase method, each partner’s interest is Rs.60,00,000 which needs to be protected.) The cross-purchase buy-sell agreement typically occurs with a 2 owner situation. While the business purchases an exiting owners interest in a an entity purchase plan, the remaining owners purchase the business interest of their departing or deceased partner with a the cross purchase plan. CFP Level 3 - Module 2 – Estate Planning – India Specific - Workbook Page 48
21. Muslim Law recognizes which of the following two types of heirs? A. Sharers B. Residuaries C. Receivers D. Acceptors a) B &C b) A & B c) A & D d) C & D (Muslim law recognizes two types of heirs, Sharers and Residuaries. Sharers are the ones who are entitled to a certain share in the deceased’s property and Residuaries would take up the share in the property that is left over after the sharers have taken their part.) 22. How can Probate fees be reduced (Probate may be expensive). One of the options is the transfer of non-appreciated assets to an Inter vivos trust a) True b) False 23. Your Client A is the owner of a family owned business. She has 4 daughters and wishes to ensure that there is no dispute amongst them with regard to the assets of the family business after her death but the business should also stay within the family. Further she has a grandchild with special needs and wants to leave a large sum of money for her support. Suggest the most efficient method to execute A’s wishes of protecting her family and legacy? a) A family arrangement including all four daughters and all the assets of family business with clear demarcation and a private trust which will hold money for her grand child b) Advising the daughters to enter into an arbitration agreement to resolve any future CFP Level 3 - Module 2 – Estate Planning – India Specific - Workbook Page 49
disputes relating to the assets of the family business and putting the proposed amount for her grandchild in a public Trust c) Verbal agreement with an amongst her 4 daughters regarding distribution of assets of the family business and transferring the proposed amount for her grandchild to a bank 24. Insurance and Annuities paid to a named beneficiary will not be subject to Probate process a) True b) False 25. Can the settlor of Trust become beneficiary? a) No b) Yes c) Yes, he can be one of the beneficiaries CFP Level 3 - Module 2 – Estate Planning – India Specific - Workbook Page 50
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