General Principles Flashcards
Monetary Windfalls
Structured Settlements: stream of tax free payments from voluntary agreement between personal injury victim & defendant
Compensatory Damages: Injury or sickness generally tax free. Discrimination or non physical injury taxable
Punitive Damages: Taxable award for wrongdoing by highly negligent defendant.
CPI vs PPI
Consumer Price Index: Market basket of goods & services in various cities across the country.
- Food & beverage
- Apparel
- Education & communication
- Housing
- Transportation
- Other goods & services
- Recreation
- Medical care
Producer Price Index: leading indicator of inflation trends
Agent vs Broker
Agent is loyal to the company
Broker is loyal to the customer
Sales Related Compensation & Related Parties
Fee only: May not receive sales related compensation in ANY manner
Fee based: Compensation through commissions & fees
Sales related: compensation received when client buys or sells an asset
Related parties: former spouse & every other family member
Reverse Mortgage
Repayment: death of individual owner, conclusion of term or absence of elder homeowner minimum 1yr
Available to homeowners 62+ on condos & single family
Doesn’t have to be owned free & clear
Economic Indicators
Leading (5 out of 10)
1. Initial unemployment claims
2. New manufacturer orders
3. Private housing units
4. Stock prices
5. Consumer expectation index
Coincident: Industrial products (1 of 3)
Income Contingent Repayment Plan
Percent of discretionary income: 20%
Calculation of discretionary income: AGI 100% poverty level
Repayment: 25 yrs (300 payments)
Monthly payments: Adjusted income, family size, total direct debt
Eligibility: Direct Loans ONLY
Income Based Repayment Plan
Percent of discretionary income: 15%
Calculation of discretionary income: AGI 150% poverty level
Repayment: 25 yrs (300 payments)
Monthly payments: AGI, family size, total student loan debt, 10-15% discretionary income
Eligibility: FFELP & Direct Loans, partial hardship
Pay As You Earn Repayment Plan
Percent of discretionary income: 10%
Calculation of discretionary income: AGI 150% poverty level
Repayment: 20 years (240 payments)
Monthly payments: AGI, family size, total federal student loan debt, 10% discretionary income
Eligibility: ONLY direct loans, partial hardship, new borrower on or after 10/1/07 disbursed on or after 10/1/11
Revised Pay As You Earned Repayment Plan
Percent of discretionary income: 10%
Calculation of discretionary income: AGI 150% poverty level
Repayment: Undergrad 20years Grad 25 years
Monthly payments: AGI, family size, 10% discretionary income, total federal student loan
Eligibility: Some direct loans
College Years
Having wealthy parents are a PLUS (parent loan undergraduate student)
PooriSh: Pell grants, Supplemental education opportunity, grant subsidized Stafford loans
American Opportunity Credit: Max $2500, no drug conviction, 1st 4yrs only
Lifetime Learning: Max $2000, any higher learning (undergrad, grad, CE)
Coverdell withdrawal: Must be used by 30; tax free
529 withdrawal: NO MAGI phase out; tax free
Education Funding Years
UTMA/UGMA: Subject to kiddie tax, present gift, kid owned
EE bonds: parent owned
Coverdell ESA: $2000 non deductible contribution
529 (QTP): $17000 or $85000 within 5 years, 1st cousin eligible
Broker/Dealers
Dealers are individuals/firms acting as principal in a securities transaction. Principals trade for own account and risk
Brokers match buyers & sellers
SEC regulates brokerage companies via FINRA
Bank Regulation
Comptroller of Currency/Federal Reserve/FDIC: Regulate federally or nationally charted banks
State/Federal Reserve/FDIC: Regulate state charted banks
Serial Payments
Allow client to achieve their goal by making inflation adjusted payments rather than fixed payments
i.e. Couple desires to retire in 10yrs & have $1MM and withdraw $150,000 end of each year with life expectancy of 25yrs and would like to leave $1MM to family
Keystrokes:
-1,000,000 CFo
0 CF1
10 gold Nj
150,000 CF
25 gold Nj
1,000,000 CF
gold IRR/YR