Experience the Quality With Free CFP Exam Questions That Helps Candidates Pass

Inherited property receives a step-up in basis to fair market value at death. Lifetime gifts (A) carryover basis. Revocable trust transfers (C) do not trigger step-up until death. Charitable gifts (D) give donor FMV deduction but charity’s basis is FMV.

The back-end ratio measures all debt obligations vs income, typically recommended ≤36%. Front-end ratio (A) applies only to housing. Liquidity and net worth ratios measure different aspects.

“For AGI” deductions reduce gross income to arrive at adjusted gross income (AGI) and are available whether or not the taxpayer itemizes. Educator expenses qualify (up to limits). Mortgage interest (A), charitable contributions (B), and state/local taxes (D) are itemized deductions (“from AGI”). Knowing the distinction helps planners assess tax strategies and impacts on AGI-sensitive benefits like IRA deductions or Social Security taxation.

A Qualified Personal Residence Trust (QPRT) removes the home from the estate at a discounted gift-tax value, as the grantor retains the right to live there for a set term. QTIP (A) is for spousal income, ILIT (C) shelters insurance, CRT (D) benefits charity.

A general power of appointment allows the holder to direct property to themselves, creditors, or others—thus includable in their estate. Special powers restrict choices and typically avoid estate inclusion. Powers of attorney (B, D) relate to agency authority, not testamentary transfers. CFP estate planning emphasizes these distinctions for tax consequences.