Chartered Life Underwriter (CLU) Estate Planning Fundamentals Syllabus

Estate Planning Fundamentals syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Estate Planning Fundamentals in Chartered Life Underwriter (CLU), not a summary of it.

1. 1

   The Estate Planning Process and Documents

   4 topics

   • Goals and Objectives of Estate Planning
     • Property transfer and tax minimization
     • Liquidity and management continuity
   • Wills and Intestacy
     • Requirements for a valid will
     • Intestate succession rules
   • Powers of Attorney and Advance Directives
     • Durable and springing powers
     • Health care directives
   • Probate Process and Avoidance
     • Probate versus nonprobate property
     • Costs and delays of probate
2. 2

   Property Ownership and Transfers at Death

   4 topics

   • Forms of Property Ownership
     • Sole ownership and tenancy in common
     • Joint tenancy with right of survivorship
     • Community property considerations
   • Beneficiary Designations and Will Substitutes
     • POD and TOD designations
     • Coordination with the estate plan
   • Step-Up in Basis at Death
   • Lifetime Gifting Strategies
     • Annual exclusion gifts
     • Gifts to minors and 529 plans
3. 3

   Federal Gift, Estate, and GST Taxation

   4 topics

   • Federal Gift Tax
     • Taxable gifts and exclusions
     • Gift splitting
   • Federal Estate Tax Computation
     • Gross estate inclusions
     • Deductions and the unified credit
   • Unlimited Marital and Charitable Deductions
     • Portability of the exclusion
   • Generation-Skipping Transfer Tax
     • GST exemption allocation
     • Direct skips and taxable distributions
4. 4

   Trusts in Estate Planning

   4 topics

   • Trust Fundamentals
     • Parties to a trust and fiduciary duties
     • Revocable versus irrevocable trusts
   • Marital and Bypass Trusts
     • QTIP and credit shelter trusts
   • Irrevocable Life Insurance Trusts
     • Crummey powers
     • Three-year rule on transfers
   • Specialized Trusts
     • Grantor retained annuity trusts
     • Charitable remainder and lead trusts
5. 5

   Estate Liquidity and Charitable Planning

   3 topics

   • Sources of Estate Liquidity
     • Life insurance for liquidity
     • Installment payment of estate tax
   • Charitable Giving Techniques
     • Outright gifts and bequests
     • Donor-advised funds and private foundations
   • Valuation of Estate Assets
     • Alternate valuation date
     • Special use valuation

Estate Planning Fundamentals flashcards for Chartered Life Underwriter (CLU)

18 of 62 cards from the Estate Planning Fundamentals deck — real questions with worked answers.

1. What are the primary goals of estate planning?

   To transfer assets to chosen beneficiaries in the manner desired, while minimizing taxes, costs, and delays; providing for dependents; ensuring liquidity; and maintaining control during incapacity and after death.

2. Distinguish between the 'objective' and 'subjective' (personal) goals of estate planning.

   Objective/financial goals are measurable (minimize estate tax, provide liquidity, avoid probate). Subjective/personal goals reflect the client's wishes (caring for a special-needs child, charitable legacy, family harmony, business succession).

3. What is a will?

   A legally enforceable written document, executed with required formalities, that directs the disposition of a person's probate property at death and can name an executor and guardians for minor children.

4. What does it mean to die 'intestate,' and what governs distribution?

   Dying without a valid will. The decedent's probate property passes according to the state's intestacy (descent and distribution) statutes, typically to the surviving spouse and blood relatives in a fixed order; the state effectively writes the 'will.'

5. What is a codicil?

   A separate document that amends, adds to, or revokes part of an existing will. It must be executed with the same formalities as a will.

6. What is a testamentary trust and when is it funded?

   A trust created within a will that comes into existence and is funded only at the testator's death; because it is created by the will, it is subject to probate.

7. What is the difference between a durable and a non-durable power of attorney?

   A durable power of attorney remains effective after the principal becomes incapacitated; a non-durable power terminates upon the principal's incapacity (or death).

8. What is a 'springing' power of attorney?

   A durable power of attorney that becomes effective only upon a specified future event, typically the principal's incapacity, rather than immediately upon signing.

9. What is a healthcare power of attorney (healthcare proxy)?

   A document appointing an agent to make medical decisions for the principal when the principal is unable to do so. It differs from a living will, which states treatment wishes directly.

10. What is a living will (advance medical directive)?

    A document expressing a person's wishes regarding life-sustaining medical treatment in the event of terminal illness or permanent unconsciousness; it directs care rather than appointing a decision-maker.

11. What is probate?

    The court-supervised legal process of validating a will, appointing a personal representative, paying debts and taxes, and distributing the decedent's probate assets to beneficiaries or heirs.

12. List the main disadvantages of probate.

    It is public, can be time-consuming and costly (court fees, attorney/executor fees), and can delay distribution. Ancillary probate may be required for out-of-state real property.

13. Name four common techniques used to avoid probate.

    Revocable living trusts, joint tenancy with right of survivorship, payable-on-death/transfer-on-death accounts, and beneficiary designations on life insurance and retirement accounts.

14. What property passes through probate versus outside of probate?

    Probate: solely owned assets and property payable to the estate. Non-probate: jointly held property with survivorship, assets with beneficiary designations, POD/TOD accounts, and property held in trust.

15. Describe joint tenancy with right of survivorship (JTWROS).

    A form of co-ownership in which, at one owner's death, that owner's interest passes automatically by operation of law to the surviving joint tenant(s), bypassing probate.

16. What is tenancy by the entirety?

    A form of joint ownership available only to married couples that includes right of survivorship and offers creditor protection; neither spouse can unilaterally sever or transfer their interest.

17. How does tenancy in common differ from joint tenancy?

    Tenants in common own separate, freely transferable fractional interests with no right of survivorship; at death an owner's share passes through their will or by intestacy (probate), not to the co-owner.

18. For estate inclusion, how much of JTWROS property held by spouses is included in the first spouse's estate?

    Under the qualified joint interest rule, exactly one-half of the value is included in the first spouse-to-die's gross estate, regardless of which spouse contributed.

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