9. Educate a Client about the Financial Aspects of Retirement and Estate Planning (9%) Flashcards
What is the primary purpose of a will in estate planning?
A. Minimize taxes
B. Distribute assets after death
C. Protect against creditors
D.Provide life insurance
B. Distribute assets after death
A will ensures that assets are distributed according to the individual’s wishes after they pass away.
What is the primary purpose of a will in estate planning?
A. To distribute assets to beneficiaries after death
B. To avoid paying estate taxes
C. To bypass probate
D. To manage finances during a person’s lifetime
A. To distribute assets to beneficiaries after death
A will is a legal document used to distribute a person’s assets after death.
What is a defined benefit plan?
A. A plan where retirement benefits are based on investment performance
B. A retirement plan where benefits are calculated based on salary and years of service
C. A plan with a fixed employer contribution
D. A plan that only offers tax-deferred growth
B. A retirement plan where benefits are calculated based on salary and years of service
Defined benefit plans provide predetermined retirement benefits based on factors like salary and tenure.
At what age can most individuals begin withdrawing from their retirement accounts without penalty?
A. 55
B. 59½
C. 62
D. 65
B. 59½
Withdrawals from most retirement accounts are penalty-free after age 59½.
What is the main purpose of a power of attorney in estate planning?
A. Distributing assets
B. Managing finances if incapacitated
C. Settling debts
D. Managing health insurance
B. Managing finances if incapacitated
A power of attorney allows someone to manage finances if the individual becomes incapacitated.
What does the term ‘intestacy’ refer to?
A. Dying without a will
B. Establishing a trust
C. Creating a living will
D. Assigning a guardian
A. Dying without a will
Intestacy laws govern the distribution of assets when a person dies without a valid will.
What is the primary benefit of using a Roth IRA?
A. Immediate tax deduction
B. Tax-free growth and withdrawals
C. Early withdrawal without penalty
D. Guaranteed returns
B. Tax-free growth and withdrawals
Contributions to a Roth IRA grow tax-free, and qualified withdrawals are tax-free.
Which retirement income source is guaranteed by the government?
A. Social Security
B. Annuities
C. Employer-sponsored pension
D.Investment dividends
A. Social Security
Social Security is a government-backed retirement income source.
What does BAH stand for in a military context?
A. Basic Allowance for Housing
B. Basic Annual Hours
C. Budget Allocation Help
D. Beneficiary Assignment Handling
A. Basic Allowance for Housing
BAH is a housing allowance for military members.
Which of the following tools can be used to avoid probate?
A. Life insurance
B. Joint tenancy
C. Annuities
D. Roth IRA
B. Joint tenancy
Assets held in joint tenancy pass directly to the surviving owner, bypassing probate.
A client wants to plan for retirement and prioritize withdrawing funds. Which account should they generally withdraw from first to minimize taxes?
A. Roth IRA
B. Traditional IRA
C. Taxable brokerage account
D. Health Savings Account
C. Taxable brokerage account
It’s often tax-efficient to withdraw from taxable accounts first, preserving tax-advantaged growth in retirement accounts.
A client is interested in ensuring their minor children are cared for if something happens to them. What estate planning document should they prioritize?
A.Trust
B. Will
C. Power of attorney
D. Living will
B. Will
A will is necessary to designate guardians for minor children.
If a client is worried about outliving their retirement savings, which product would you recommend?
A. Fixed annuity
B. Mutual fund
C. Savings bond
D. 401(k)
A. Fixed annuity
An annuity provides a guaranteed income stream, reducing longevity risk.
Which retirement account is most suitable for a self-employed individual looking to maximize contributions?
A. Traditional IRA
B. Roth IRA
C. SEP-IRA
D. 401(k)
C. SEP-IRA
SEP-IRAs allow higher contribution limits for self-employed individuals.
A client is reviewing their estate plan and wants to avoid probate. What strategy would you suggest?
A. Designating beneficiaries on accounts
B. Leaving assets in a will
C. Using a living will
D. Setting up a testamentary trust
A. Designating beneficiaries on accounts