Financial Planning Flashcards
CFP board code of ethics
Integrity Objectivity Competence Fairness Confidentiality Professionalism Diligence I only choose fun chilled party drinks
CFP boards practice standards
Establishing relationship Gathering data and goals Analyzing financial status Present and recommend Implementation Monitoring EGAPRIM
Total consumer debt as a % of net income
20%
Medicare parts
A: hospital, hospice, zero premium if 40 quarters of contribution
B: physician and out of hospital, ambulance, lab services
C: Medicare advantage a,b,d
D: prescription drugs out of pocket $4,700
Truth in lending 1968
$50 limit of lost/ stolen credit cards
Fair credit reporting act 1971
Credit agencies must have correct and accurate info
Life insurance 5th dividend option
Dividends treated as net single premium, purchasing one year term insurance at insured attained age
4 elements of insurable risk
1) must have a sufficient large number of homogeneous exposure to make losses reasonably predictable
2) loss must be definite and measurable
3) loss must be fortuitous or accidental
4) loss must NOT be catastrophic
Rules of risk management
Do not risk more than u can afford to loss
Consider the loss
Do not risk a lot for a little
3 pronged test for investment advisor
A, advice or analysis
B, business
C, compensation
Insurance broker
Represents the insured
Works with many insurers
Insurance agent
Represents the insurance company
Has implied or apparent authority to bind coverage
Passes legal liability to the insurer
Life ins settlement options
1) interest option- proceeds left with with insurer
2) fixed period option
3) fixed amount option
4) life income options
Straight life
Period certain
Income refund
Joint and last survivor
Life ins non forfeiture options
1) cash surrender
2) reduced paid up premium
3) extended term, keep existing DB for a specified time period
CFP rules of conduct
D, defining the relationship I, information disclosed C, client information and property O, obligations to client O, obligation to employer O, obligation to CFP board Report to CFP board within 10 days
RBC ratio
Risk based capital as it pertains to insurance companies
Vatican agreements and life settlements
Death benefit is taxable to the purchaser as an investment
( above cost basis)
Insured is diagnosed terminally ill, die in 2 years
Homeowners insurance ho5
Cadillac of insurance open peril a,b,c
Homeowners insurance ho8
Antique home, basic a,b,c
Homeowners insurance ho6
Renters insurance, ( renter has 6 letters)
Section 1 under homeowners insurance
Covers property losses A= insures dwelling (some landscape) B= other structures ( detached garage) C= general personal property ( renters excluded) D= loss of use coverage ( expenses)
Linton yield
Compares cash value life insurance vs buying term insurance and investing the difference
Buy/sell agreement life insurance
Stock redemption
Or
Cross purchase
Stock redemption= business agrees to buy the deceased shareholders stock
Cross purchase = each business owner agrees to buy out the interest of the deceased business owner
Investment advisor EXCEPTIONS, does not have to register with the SEC…not considered advisors
Bank
Lawyer, accountant, teacher
Broker, dealer ( incidental without compensation)
Publisher
Person who advise is limited to government issues securities
Other persons not within the intent of SEC law
Exemption to register as investment advisor
1) clients are all residents in the state which is the advisors principle residence and advise is only on non-listed securities
2) clients are only insurance companies
3) fewer then 15 clients during the last 12 months
4) charitable organizations
5) provides advice to church group plan
6) commodity futures trader, not providing advice
Disability insurance continuation provisions
Non-cancelable (non can): no can increase premium for stated number of years
Guaranteed renewable: similar to non-can, but insurer can raise premium for an entire class
Life insurance method that requires the greatest amount of insurance
Interest only method, because it will replace lost income without depleting principle
1933 1934 1940 1970 1988
1933: new issue requires prospectus
1934: secondary market
1940: requires registration with SEC, mutual funds, UIT
1970: SIPC protects investors from losses due to brokerage house failure
1988: insider trading
Legal characteristics of insurance contracts
Aleatory, unequal dollars
Adhesion, you wrote it, your stuck with it
Conditional, pay premium
Personal, between insurer and insured
Unilateral, only one side is under legal obligation
Types of permanent life insurance
Whole life, insurer invests & bundled
Variable life, insured invested & bundled
Universal life, insurer invests & Unbundled
Variable Universal, insured invests & Unbundled
Basic home owner perils
Fire & lightening Wind and hail Explosion Riot Vehicle Aircraft Smoke Vandalism Theft Volcanic eruption NOT earth movement or FLOOD
Cobra coverage terms
18 months for termination
29 months disability
36 months for spouse if employee is eligible for Medicare or dies
Presumptive disability
Loss of 2 limbs is viewed as totally disabled
As is loss of sight, hearing or speach
Per stirpes
Per capita
Per stirpes, by branch, only on share of the deceased
Per capita, by head, share equally
Part time student financial aid
Pell grant or supplementary grant
DO NOT get loans
Life insurance dividends
1) dividends paid out in cash
2) reduce premiums
3) accumulate at interest
4) paid up dividend additions
5) one year term insurance
Monthly housing payment,
PITI, principle, interest, taxes, insurance
No more than_______% gross income
28%
Total monthly debt payments no more than
_________% of gross income
36%
Grants for graduate students
Grad students ONLY get grants for teaching
Grad students DO NOT get grants
HIPPA rules
Pre-existing condition : can not apply coverage exclusion for more than 12 months
Pregnancy NOT a pre-existing condition
If between job plans more than 63 days, NO pre-existing allowed
Surrogation
Repayment of insurance claim by the party at fault to the insurance co NOT at fault
Non participating life insurance company dividends
Dividends are paid to shareholders, taxable
Participating life insurance companies
Mutual insurance
Dividends are paid the policy holders as return of premium,
NOT taxable
HSA limits
HDHP min. Deductible $1,200/$2,400, single / family
HDHP max out of pocket $6,050/$12,100, single/family
Max annual contribution, $3,100/$6,250 + $1,000 over age 55
20% penalty for non eligible expenses
Medicare part D parts
1) $320 deductible
2) $652.50 co-pay
3) $3727.50 , 100% paid out of pocket
= $4,700, total paid out of pocket
Unemployment benefits last ? Weeks
Unemployment benefits can last 26 weeks
- also require minimum income and
A period of covered employment is required
Employers with less than ? Employees are NOT subject to COBRA rules
Less than 20 employees
Employer Penalty for not offering continuation (cobra) coverage
$110/day, per beneficiary fine
Employee funded secular trust
Funded Deferred comp plan Employer gets tax deduction Employee is taxed Employe gets partial tax free income from trust in retirement
Constructive receipt of non qualified deferred comp
Constructive receipt results in taxation of benefits , this is generally only relevant for funded plans
Individuals who are eligible for Medicare Part A area automatically enrolled in
Medicare Part B
Penalty for a disqualified person (fiduciary) engaging in prohibited transaction
15% penalty is imposed annually until transaction is corrected
Standard, required percent coverage for home owners on dwelling
80% coverage on dwelling
