Investment Recommendations Flashcards
Three types of clients are _____, _____ and ______
personal, institutional, and fiduciary
TOD allows your assets to be transferred upon death to a ______ without going through _______
transferred to a named bene without going through probate
Another small bank version of TOD accounts is the _______ (not really a trust), which are ______
Totten Trust (don’t need a trust document), but they are revocable by the depositor at any time
Family LPs are used for ______ purposes where the parents are typically the ______
estate planning purposes where the parents are the GPs
Assets contributed to a family LP are ______ since they are less liquid inside the LP
discounted
Does a sole proprietorship require any filing with the state?
NO - no state charter is required
SPs do not pay _____ bur rather ____
do not pay corporate income tax, just personal income tax
SPs have ______ liability
unlimited
GPs are formed under a general partnership ______; some states require that the agreement be ______
GP agreement; some states require that it be filed
An LP has _____ investors and is also known as ______ programs
have passive investors (also known as direct participation programs)
A C Corp is a ______ entity
taxable
A copy of the _______ is required to open a C Corp account
copy of the corporate charter
A copy of the ______ is needed to open an LP account
certificate of limited partnership
A corporation that has _____ or less is considered an ______ for tax purposes
100 shareholders or less is considered an S Corp
LLCs give the tax benefits of _____ without the restriction on # of ______
tax benefits of S Corps without the restriction of # of investors
The Settlor of the trust is also known as the _____ or the _____
grantor or the Trustor
The trustee is the _____ of the assets in the trust
manager
The legal list is a set of _____ that the trustee can invest in under the prudent man rule
securities
Trusts that are set up during one’s lifetime are called _______
inter-vivos (revocable or non-revocable)
Trusts that are set up at your death according to your will are called ______
testamentary trusts (non-revocable)
In a revocable trust, the grantor retains _____ over the assets in the trust (and can remove them)
control
Income in a revocable trust is taxed at ______ to the _____
personal income levels to the grantor
For non-revocable trusts, any income in the trust is taxed to the _____ at _____ rates
taxed to the trust at trust rates
To open an estate account, you must have a copy of the ____, the ______, and the _____
death certificate, copy of the last will and testament, and the inheritance tax waivers
The five tax filing statuses are:
- single
- head of household
- qualifying widow(er) with dependent children
- married filing jointly
- married filing separately
If unmarried, choosing ____ or _____ status will result in a lower tax bill
head of household or widow(er) status
To qualify for widow(er) status, spouse must have died within last _____
2 years
A “capital needs” analysis is used to determine how much ______ in needed
life insurance
If life insurance is owned by an irrevocable trust or by another person, it is ______ from the decedent’s (deceased’s) gross estate
excluded
Transfer payments (alimony, pension, social security) received by retired individuals are NOT considered _____
earned income
The first ______ of capital gain from the sale of a personal residence is excluded from tax
$250k
To qualify for the capital gain tax credit on home sale, the residence must have been lived in by the owners for at least ______ of the last ____ years
2 of the last 5 years
Inherited securities are transferred with a cost basis set at ______
date of death
An executor can deduct the following from an estate to bring down the overall total:
- funeral expenses
- admin expenses
- legal fees
- unpaid bills / claims against the estate
- mortgages against estate-owned property
- assets donated to charity
- estate liability tax
For estate tax purposes, any securities are valued as of ______, and if any tax is due, payment must be made by _____ after the date of death
valued as of date of death; any payments are due by 9 months after date of deat
Deductions that are NOT allowed against the AMT calculation are:
- personal exemption
- standard deduction
- state and local deduction
- misc deductions, such as tax preferences
A family LP must have a ______
legitimate business reason (not just to avoid taxes)
Self-dealing by a trustee is ______
fraudulent
Income excluded from the definition of Adjusted Gross Income are ______ bond interest and retirement plan distribution amounts from _____ plans attributable to the _____
muni bond interest and distributions from non-qualified plans attributable to the cost basis
A form _____ must be filed for reporting trust taxes
form 1041
“Micro-cap” is any company with less than ____ in market cap
$300m
Small cap is between ___ and ____ market cap
$300m to $1,000m
Mid cap is between ____ and ____ market cap
$1,000m and $5,000m
Large cap is above _____ market cap
$5,000
The Value Line Index is mainly a ____ cap index
large cap
The Wilshire Index is all _____
listed companies
The Russell 2000 is a ___ cap index
small cap
EAFE Index is for ______
Europe, Australia, and the Far East
Typical to fund bond portfolios between ___ and ___ months; equity portfolios between ___ and ___
3 and 9 months for bonds; 12-24 months for equities
If rebalancing more than annually, considered ____
active
A QDRO is used when a legal _____ happens between two people with claims on a retirement account
legal separation (as in a divorce)
If a plan sponsor complies with rule 404(c), then they are not accountable for poor _____
investment decisions made by the plan participants
Is there a penalty for premature withdrawals from 457 plans?
NO
A “top-heavy” plan is one that favors _____
highly paid employees (non-qualified)
Money purchase retirement plans are a type of _______ plans
defined contribution
PBGC covers _____ and _____ plans
defined benefit and corporate pension plans (NOT defined contribution plans)
Expenses that exempt you from the 10% premature withdrawal penalty are:
- unreimbursed medical expenses (above 7.5% of gross income
- disability
- death
- higher education expenses
- medical insurance (if unemployed)
- first time home (up to $10,000)
- rollover into another plan
The only time that losses can be deducted on losses within an IRA is if the IRA is _____
liquidated and terminated
A safe harbor 401(k) relieves the employer of having to perform annual ____ to show that the plan does not favor highly compensated employees
annual benefits testing
To get “safe harbor” status, the employer must agree to matching contributions of either ____ of salary of participating employees or ____ of all eligible employee salaries. Employer-paid benefits must ____ vest _____
4% of participating employees, 3% of all eligible employees; 100% vest immediately
Employees can contribute to a 403(b) plan by electing how much of their salary they want to ______, up to a limit of _____ in 2016
want to defer, up to $18k limit in 2016
Permitted investments for 403(b) plans are:
- life insurance
- variable / fixed annuities
- mutual funds
Early withdrawals prior to age 59.5 from a 403(b) plan are exempt from the 10% penalty tax if the employee has ______
terminated their employment after age 55 and takes distributions based on life expectancy
457 plans are _______
non-qualified
457 permit withdrawals ______ without a _____
allow withdrawals at any time without a penalty tax (regular income tax is still due)
529 rollovers are permitted every _____ without any tax penalty
12 months
Fixed UITs can be traded on the _____ market
OTC
The “settlor” of an ERISA plan is responsible for:
- choosing type of plan
- amending the plan or changing plan options
- requiring employee contributions
- terminating a plan
Is there a requirement for the trustee of a trust to get beneficiary approval prior to delegating investment management functions to an agent?
NO
An index fund manager is expected to generate a return that _______ the benchmark index’s performance
exceeds (weird, but they have to cover the cost of running the fund)
What takes precedence - the prudent man rule or the provisions of the trust?
PROVISIONS of the trust - even if they seem stupid
