Free CFP Exam Estate Planning Practice Questions

Gift splitting allows married couples to elect to treat a gift made by one spouse as if each spouse made half the gift. This effectively doubles the annual exclusion to \$38,000 per recipient in 2026 (2 x \$19,000). For example, if one spouse gives \$38,000 to a child, gift splitting treats each spouse as having given \$19,000, and both amounts fall within the annual exclusion.
Choice A is incorrect because a gift tax return (Form 709) must be filed by both spouses when electing gift splitting, even if no tax is owed.
Choice B is incorrect because gift splitting applies when one spouse makes a gift and the other consents; both spouses do not need to make separate gifts to the same recipient.
Choice D is incorrect because gift splitting does not transfer the tax liability to the non-donor spouse — it simply treats each spouse as making half the gift.

A \$50,000 cash gift exceeds the \$19,000 annual exclusion by \$31,000 and must be reported on Form 709. The excess (\$31,000) reduces the donor's lifetime exemption (\$15M in 2026). Testamentary bequests (Option C) are subject to estate tax, not gift tax. Direct tuition payments to educational institutions (Option B) qualify for the unlimited educational exclusion under IRC Section 2503(e), completely exempt from gift tax. Annual exclusion gifts (Option D) are fully exempt from gift tax.

The tax treatment of Charitable Gift Annuity payments is complex. Each payment is partially: (1) a tax-free return of the donor's investment in the contract (excludable ratio based on actuarial life expectancy); (2) ordinary income; and potentially (3) capital gain income if appreciated property was contributed (spread over the donor's expected payment period). The donor receives a partial charitable deduction at inception (the difference between the FMV transferred and the present value of the annuity). After the donor's actuarial life expectancy is reached, all subsequent payments become fully taxable as ordinary income (Option A is wrong). Option C and D overstate or misstate the deductibility and income treatment.