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Wrong Answer Stacks > General Principles Wrong Answer Stack > Flashcards

General Principles Wrong Answer Stack Flashcards

1
Q

What types of specific information should be gathered in the planning process for LIFE INSURANCE CONTRACTS?

A
  • premium and dividend options
    -policy loans
    -ownership

(Retirement account values and property insured do not apply to life insurance contracts.)

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2
Q

If a client asks for unrealistic what if scenario for rates of returns what should a CFP do? (too high)

A

Run the projects using ONLY conventionally accept return.

(I said run conventional return and client’s request - but you should always be prudent)

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3
Q

Learning about a clients health should help a planner determine

A
  • Retirement Needs
  • Life insurance needs
  • Disability needs
  • estate tax consequences
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4
Q

Where should you have your emergency fund?

A

SAFEST AND SIMPLIEST is the right answer.

Government Money Market Fund

(T Bills are too complex)

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5
Q

Which of the following is federally insured?

A

Time deposit! this is a CD. CDs are federally insured by FDIC.

Not all Bonds are Insured. Treasury Bills are GUARENTEED by federal government not insured by

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6
Q

Which of the following investments is likely to be insured?

  • securities in a brokerage account
  • treasury bonds
  • mutual funds
  • annuities
A

Securities held in a brokerage account

The SIPC insures investors against losses arising from the FAILURE of brokerage firms.

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7
Q

The Investment Company Act of 1940 Authorized who to regulate mutual funds?

A

the SEC

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8
Q

What agency regulates Brokerage companies?

A

FINRA

SEC Regulates Brokerage companies through FINRA.

MT: Think bachelor party example/ needing FINRA Series 7 for Brokerage Company

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9
Q

FDIC Insurance

Insurable:
- Checking
- Savings
-Money Market DEPOSIT Accounts (MMDAs)
-CDs

A

Not Insurable:
- Stock investment
- Bonds
-Mutual Funds
-Money Market MUTUAL FUND
-US Treasury Bills, Notes and Bonds

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10
Q

FDIC Insurance by Ownership

A

Accounts in Individual Name : $250,000

Joint up to $250,000 across ALL joint titling

Rev Trust up to $250,000 per named beneficiary

IRA and Keogh $250,000 per account

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11
Q

Education Planning Exam Test

A

Just because inflation is mentioned does NOT mean that you use it.

Look for “in today’s dollars” before you use it!

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12
Q

Funding of college education

A

Watch for PRE college years versus college years.

Plus and Pell are NOT for Pre

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13
Q

Paying for College Combinations

A

529 or Coverdell ESA withdrawal cannot be used to pay tuition if combined with credit for tuition paid. (Lifetime Learning/American Opportunity Credit)

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14
Q

How is a QTP (Qualified Tuition Program) different from UTMA account?

A
  • Owner of a QTP remains right to determine how and when to use $ in the account. Custodian of UTMA loses control at age of majority.
  • QTP can change bene, custodian of UTMA cannot change bene.
  • QTPS grow tax deferred and distribution tax free if used for educational expenses. UTMA growth and income subject to both Regular tax AND Kiddie tax.
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15
Q

Why is a 529 or Coverdell ESA a better way to distribute $ for K-12 (up to $10K a year) and college vs a UTMA?

A

UTMA is subject to kiddie tax so 529/Coverdell ESA more tax advantaged

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16
Q

Which qualifies for compensatory damages?

A. Auto Accident
B. Headaches
C. Age Discrimination
D. Stomach Disorder

A

C. Age Discrimination

Auto accident itself does not qualify for compensatory damages, however medical expenses and lost wages from the accident may.

17
Q

How is a SPIA awarded in compensatory damages cases taxed?

A

100% excludable from taxes.

entire amount of each payment is excludable by tax payer receiving the payments.

18
Q

Lottery: within 60 days of winning the lottery winners split winnings and elect to receive payments over 20 years instead of the CASH lump sum. What’s included in gross income this year?

A

The payment each received this year is included in income.

19
Q

Lottery: a choice of either cash or annuity (60 day window to choose) allows for taxing when?

A

Annuity payments of at least 10 years of payments are taxable as they are recieved.

20
Q

Test Tip Prizes and Awards

A

Under the principle of constructive receipt, the winner of a contest (generally a lottery) having the option of receiving either a lump sum or an annuity has to include the full value of the award in gross
income, even if he or she takes the annuity.

However, if that winner has a choice of either cash or an
annuity (60-day window) and chooses an annuity payout over at least 10 years, then the payouts are
taxable as received (called the “qualified prize option”)

21
Q

Compensatory Damages

A

Received for injury or illness = tax-free

Received for discriminatory OR non-physical cases are TAXABLE unless used for/up to the amount of medical care fo emotional distress.

22
Q

Punitive Damages

A

Meant to Punish

Taxable Regardless of the case with ONE exception

WRONGFUL DEATH IS TAX-FREE

23
Q

When does the Business Cycle Peak?

A

When business activity ages

this means the public stops buying because they have enough of everything they need.

24
Q

Examples of expansion in the business cycle…

A
  • when activity is expanding and real GDP output increases.
  • when consumer confidence is increasing
25
Q

Questions where you are asked to determine the principal paid on a loan

A

Add up all the assets / growth that came in

Use the NW number and subtract first number

The Key is the leave the $ paid on credit cards and mortgage out (you can assume that the majority is interest)

ex.

NW up $60K last year

Assets
+ $25K Boat
+ $10K Growth in Acct
+ $15K in 401K growth
+ $5K in savings
_________________________
$55K

So $60K - $55K = $5K to PRINCIPAL

(Ignore the given -$24K went to credit cards and mortgage this year)

26
Q

TEST TIP: When solving for equations where you are asked what they can afford to borrow

A

You are solving for PV

(not FV)

27
Q

If you decide to become a RIA you must notify…

A

The SEC

28
Q

If you are an investment advisor with the SEC what must you do once a year?

A

You must file an updated Form ADV Part 1 and Schedule 1 each year.

(written disclosure goes to SEC and Finra)

29
Q

What are the correct sequence of steps to register?

A
  1. Associate with a Broker Dealer
  2. Register with FINRA through BD FORM U4
  3. Pass Appropriate tests
  4. Central Registration Depositiory (CRD) system makes registration with FINRA uniform among states.

MT: ARP CRD

30
Q

If you have no commissions there is no need to register with FINRA as a representative… how should you register?

A

As an Investment Advisor only.

31
Q

Series 6 May Not

A

MAY NOT (6) Sell MUTUAL (6) Funds traded on MAJOR EXCHANGE

Major Exchange = Series 7

32
Q

What can you do with a Series 6?

A
  • sell mutual funds
  • unit investment trusts (primary only)
  • variable life insurance (must also have life insurance license)
  • variable annuities

The Series 6 exam — the Investment Company and Variable Contracts Products Representative Qualification Examination (IR) — assesses the competency of an entry-level representative to perform their job as an investment company and variable contracts products representative.

33
Q

ADV

What’s on Part 1? What’s on Part 2?

A

Part 1:
- Business Address
- Applicants Business Background

Part 2:
- Compensation Arrangement

34
Q

What is not cancelable by Chapter 7?

A
  • Govt Loans
  • Child Support
  • Alimony Payments
35
Q

What is your liability per stolen credit card?

A

UP TO $50 per card

36
Q

What’s express authority?

A

Written, Explicit direction from the insurance company to the agent.

MT: WECA - Written, Explicit, Company > Agent

37
Q

What is the obligation of Agent to Principal?

A

Loyalty

38
Q

Fair Credit Report Act

A

Provides individuals who have been denied credit the right to know the reason for denial.

39
Q

Bankruptcy

A

ONLY traditional and Roth IRAS are protected up to $1M.

SEP, Simple. ERISA Plans, and Deferred Comp Plans are protected under 2005 law.

Remember: Everyone must complete consumer credit counseling PRIOR to filing.

Wrong Answer Stacks (3 decks)

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