Possibly The Last Deck

Question 1

Do pour over assets go thru probate? Are they poured into an existing trust?

Answer 1

Yes, and yes.

Question 2

If NPV is positive, what must IRR be?

Answer 2

Greater than the required rate of return; when NPV = 0, IRR = required rate of return.

Question 3

How do you calculate life insurance under the capital needs approach? Do you adjust for inflation?

Answer 3

Divide the annual need by the interest rate. Adjust for inflation if necessary, and add in any chunks of capital you’ll need to pay off mortgages.

Question 4

When is a 529 included in a bankruptcy estate?

Answer 4

When it was created in the last 24 months.

Question 5

Do SEPs prohibit forfeitures?

Answer 5

Yes.

Question 6

How long can employees be excluded from SEP’s?

Answer 6

3 years or age 21, whichever is longer.

Question 7

What is the filing date for all qualified plans?

Answer 7

Tax return date + extensions.

Question 8

Is capital loss on stock investment above the line or below the line?

Answer 8

Above.

Question 9

Are net expenses on rental property deductible above the line?

Answer 9

Yes, assuming it’s not mixed-use property.

Question 10

How long do conversions have to stay in a Roth?

Answer 10

5 years if you’re not 59.5

Question 11

If you’re 55+, can you take substantially = payments from your IRA? As long as…?

Answer 11

Yes, as long as they last the greater of 5 years or until you reach 59.5

Question 12

If you help someone figure out their insurance needs, is that financial planning or financial advice?

Answer 12

Financial advice

Question 13

If a neighbor is suing a CFP for putting a fence across the property line, does that need to be reported to the CFP board?

Answer 13

Yes. Any civil lawsuit involving theft or fraud needs to be reported.

Question 14

Can private placements be offered to non-accredited investors? Is there any limit to the number of accredited investors?

Answer 14

Yes, private placements can be offered to up to 35 non-accredited investors, and an unlimited number of non-accredited investors.

Question 15

Under what circumstance can you have no earned income and contribute to an IRA?

Answer 15

If you’re spouse works you can use her income to qualify to make a contribution.

Question 16

What is the best life insurance choice for a middle-age or older person looking to fund an ILIT to pay his estate taxes?

Answer 16

Whole Life because the guaranteed growth of the cash value is higher.

Question 17

What is the maximum deduction for charitable gifts?

Answer 17

50% of AGI.

Question 18

Is there an education penalty exception for a 401k Roth early withdrawal? Why not?

Answer 18

No. A 401k Roth is a qualified plan, and there is no early withdrawal penalty exception for qualified plans.

Question 19

What is the latest date an S-corp can file? What is the latest date with extensions? What is the latest date an S-corp can start a SEP or other plan?

Answer 19

3/15. 9/15 with extensions. This is because an S-corp files K-1s which are due on 3/15.

Question 20

What are the three splits for auto insurance policy?

Answer 20

Injury per person / total personal injury per accident / total property damage.

Question 21

Does the CFP board require a written agreement for financial advice?

Answer 21

No.

Question 22

When is the $ value of an LI policy exempt from bankruptcy?

Answer 22

When the beneficiary is a spouse or dependent.

Question 23

Does a non-elective contribution make you an active participant?

Answer 23

Yes.

Question 24

What is a simple trust? What is a complex trust?

Answer 24

A simple trust pays out all income annually. A complex trust allows the trustee discretion in whether to pay out income or accumulate it.

Question 25

Who rates insurance companies?

Answer 25

Moody’s, Standard & Poor’s, A.M. Best.

Question 26

What’s the riskiest option move?

Answer 26

Selling a naked call. It says, “I promise you can buy this from me at this price.” It is riskiest because the stock can go infinitely high.

Question 27

In bond trading, what is a tax swap?

Answer 27

Swapping bonds with capital gains for those with capital losses to equal out taxes.

Question 28

What is Markowitz’s theory regarding creating a diverse portfolio?

Answer 28

The risk, return, and covariance of assets are important input variables in creating a portfolio.

Diversity among asset classes is more important than diversity within an asset class.

Question 29

What is the tax rate where the extra .038% for Medicare starts? At what income level does it start?

Answer 29

37%. Starts at single, $200,000; MFJ, $250,000

Question 30

What bonds have the greatest reinvestment rate risk?

The greatest interest rate risk? The longest duration?

Answer 30

Highest coupon (or highest price) = greatest reinvestment rate risk.
Zeroes always have the greatest interest rate risk, and the longest duration.

Question 31

Must FSA’s pass discrimination testing?

Answer 31

Yes.

Question 32

How much can you withdraw from a 529 for private high school, junior high, or elementary tuition?

Answer 32

$10,000