3.1.4 Basic Quiz -- 5% Probability Test/10% Termination Test

All charitable remainder trusts must pass a 5% probability test.

True False

The 5% probability test is applied to all charitable remainder annuity trusts.

True False

If given the selected applicable federal rate there is a 5% or greater probability that the donors will live long enough for the trust to be exhausted, then the trust will not pass the 5% probability test.

True False

If a charitable remainder annuity trust does not pass the 5% probability test, the trust will not qualify as a tax-exempt trust.

True False

Payment frequency is a factor when determining whether an annuity trust passes the 5% probability test.

True False

With a testamentary annuity trust, the 5% probability test is applied when the will containing the trust document is signed.

True False

If a testamentary annuity trust fails the 5% probability test, it may be possible to reform the trust so that it passes the test.

True False

With a charitable remainder annuity trust, it may be possible to exhaust the trust corpus.

True False

To ensure better likelihood of passing the 5% probability test, the donor should choose the highest applicable federal rate allowable.

True False

The purpose of this 5% probability test is to protect the charitable remainder.