ABA Trust and Fiduciary Advisor (CTFA) Certification Sample Questions

01. Your client is married and has a net worth of $12 million, which includes a jointly owned house worth $2.5 million. His wife has assets of $1,000,000. They have simple wills leaving everything to each other and then to their two children in equal shares.
The BEST advice to reduce federal estate taxes is that he:
a) Leave everything to his wife in his will.
b) Give $14,000 per year to each of his two children.
c) Transfer the house ownership completely to his wife.
d) Incorporate a credit shelter trust provision in his will.

02. Under the Prudent Investor Rule, which investment principle must a fiduciary follow?
a) Prioritize investment products with guaranteed returns
b) Diversify assets to minimize risk
c) Select only low-cost index funds
d) Avoid investing in equities

03. Distributions from which of the following CANNOT be rolled over into an IRA?
a) 401(k)
b) Money Purchase Pension Plan
c) Profit Sharing Plan
d) Rabbi Trust

04. A fiduciary is managing assets for multiple beneficiaries. What duty must they uphold?
a) Duty of confidentiality
b) Duty of impartiality
c) Duty of loyalty to the primary beneficiary
d) Duty to maximize investment returns

05. John creates a trust with income during life to Sam, the remainder to Sue. John retains the right to amend or revoke the agreement. Sue will have to disclaim her interest in the trust within 9 months of:
a) John's death
b) Sam's death
c) The creation of the trust
d) The appointment of the executor or administrator of Sam's estate

06. A trust you administer, in a jurisdiction that has adopted Directed Trust statutes, contains language in the trust document appointing a fiduciary for investment purposes. Your institution is a directed trustee responsible as a fiduciary for administration only.
As a directed trustee, if you suspect the investment fiduciary is making imprudent investment decisions, what is the most appropriate course of action?
a) Tell the advisor he must first obtain the consents of the current beneficiary and presumptive remaindermen.
b) Confront the advisor and, if the situation cannot be remedied, seek court guidance.
c) Follow the advisor's directions nonetheless.
d) Obtain the written consent of all fiduciaries.

07. A client faces a 30% federal income tax rate and a 5% state tax rate. Municipal bonds issued in the client’s state of residence are exempt from state taxes. Considering current income only, and not adjusting for the federal deductibility of state taxes,
In fiduciary investment planning, what is a tax-efficient strategy for a high-net-worth client seeking income while minimizing tax liability?
a) Investing in tax-exempt municipal bonds issued in the client’s state of residence
b) A 6.0% bond issued by the client's state of residence is more attractive than a 7.2% municipal bond issued by another state.
c) An 18% corporate bond is more attractive than a 12% municipal bond issued by the client's state of residence.
d) A 6.75% municipal bond issued by the client's state of residence is more attractive than a 7% municipal bond issued by a U.S. territory.

08. How do fiduciary responsibilities differ between a trustee and an investment manager?
a) Trustees are only responsible for legal compliance, while investment managers focus on returns
b) An investment manager must act solely based on trust agreements
c) A trustee has broader obligations beyond just investment decisions
d) There is no legal difference between a trustee and an investment manager

09. The Prudent Investor Rule requires fiduciaries to:
a) Avoid investing in high-risk assets altogether.
b) Ensure investments are always low-cost and tax-efficient.
c) Only invest in government securities to minimize risk.
d) Act in good faith and diversify assets appropriately.

10. What is the primary duty of a fiduciary under the fiduciary standard?
a) Prioritize low-cost financial products
b) Ensure investments yield the highest returns
c) Act in the best interest of the client with a duty of loyalty and care
d) Follow only the suitability standard in investment decisions