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Principles Flashcards

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1
Q

What is the interest deductibility limit for home equity debt?

A

lesser of $100k MFJ or single ($50k MFS) OR FMV of primary residence reduced by amount of current acquisition indebtedness (mortgage amt)

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2
Q

National banks are subject to regulation by which of the following federal agencies?

A

The Controller of the Currency
The Federal Reserve Board
The Federal Deposit Insurance Corporation

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3
Q

Examples of those who should register as investment adviser under the Investment Advisers Act of 1940?

A

The individual provides advice about securities.
The individual is in the business of providing advice about securities.
The individual receives compensation for providing advice.

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4
Q

Describe Dodd Frank registration requirements by AUM level

A

Under this Act, advisers with assets under management of $100 million or more must register as investment advisers with the SEC unless an exemption/exclusion applies. Advisers with assets under management of less than $100 million will generally be required to register as an investment adviser with the states in which he maintains clients.

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5
Q

What are advantages of budgeting?

A

Coordinates the activities of the client and planner in developing objectives.

Enhances awareness of conservation of resources.

Provides a means of self-evaluation.

Reveals inefficient, ineffective or unusual utilization of resources.

Recognizing and anticipating problems before they occur,

highlighting the need for alternative courses of action providing motivation for performance.

To control household expenses.

To accomplish desired wealth accumulation and savings goals.

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6
Q

What information and disclosures must be in writing when engaging with a client?

A

The parties to the agreement

The date and duration of the agreement

How and on what terms each party can end the agreement

The services to be provided under the agreement

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7
Q

What are the implication of getting the CFP certificate revoked?

A

Revocation is permanent with no opportunity for reinstatement.

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8
Q

What is the max period of CFP certification suspension

A

5 yrs

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9
Q

the Rules of Conduct covers these activities:

A

Prospective Client and Client Information and Property
Obligations to Prospective Clients and Clients
Obligations to Employers
Defining the Relationship with the Prospective Client or Client
Information Disclosed to Prospective Clients and Clients
Obligations to CFP Board

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10
Q

CFP Board requires CFP® certificants to disclose which of the following verbally or in writing before entering into an agreement to provide financial planning services?

A

The obligation and responsibilities of each party to the agreement
Information regarding compensation that any party to the agreement or any legal affiliate to a party under the agreement will or could receive under the agreement
Terms under which the agreement permits the certificant to offer proprietary products
Terms under which the certificant will use other entities to meet any of the agreement’s obligation

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11
Q

A certificant must treat client information as confidential except

A

as required in response to proper legal process; as necessitated by obligations to a certificant’s employer or partners; to defend against charges of wrongdoing; in connection with a civil dispute; or as needed to perform the services.

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12
Q

CFP Board’s Disciplinary and Ethics Commission responsibilities:

A

The Disciplinary and Ethics Commission periodically issues advisory opinions addressing topics that may arise from enforcement of the Rules of Conduct or Practice Standards.
The Disciplinary and Ethics Commission is responsible for investigating, reviewing, and acting on alleged violations of the Standards of Professional Conduct.

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13
Q

Who establishes the prime rate?

A

Commercial Banks

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14
Q

Who initiates any price control legislation?

A

The executive branch or Congress

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15
Q

What is the primary purpose of the Fed?

A

Controlling the flow of capital to maintain steady economic growth with moderate inflation

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16
Q

What are goals the government pursues through fiscal policy?

A

Economic growth, price stability, and full employment.

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17
Q

What are goals the government pursues through fiscal policy?

A

Economic growth, price stability, and full employment.

… through taxation, expenditures, and debt management

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18
Q

What is the federal funds rate?

A

Rate charged between banks on ST loans

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19
Q

What rate does Fed control in implementing monetary policy?

A

discount rate

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20
Q

What is the consumer credit protection act?

A

Also known as the truth in Lending Act, this act requires lenders, before extending credit, to disclose both the dollar amount of finance charges and the annual percentage rate (APR), as well as other loan terms and conditions. The requirements of this act are seen most often when a consumer enters into a mortgage agreement with a lender and closes on a loan for personal residence.

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21
Q

What are the characteristics of the Consumer Credit Reporting Reform Act?

A

Applicants who are denied credit must be offered the reason.
Access to a credit file is limited to bona fide users of financial information.
Credit bureau reports must include accurate, relevant, and recent information.

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22
Q

What are the characteristics of the Consumer Credit Reporting Reform Act?

A

Applicants who are denied credit must be offered the reason.
Access to a credit file is limited to bona fide users of financial information.
Credit bureau reports must include accurate, relevant, and recent information.

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23
Q

Chapter 13 Bankruptcy benefits over Chapter 7

A

Chapter 13 bankruptcy is generally more favorable for creditors because they receive at least some portion of what is owed. In a Chapter 13 bankruptcy, the debtor repays at least a portion of the debts over a specified time. Creditors may not receive any payments under a Chapter 7 bankruptcy.

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24
Q

Chapter 13 Bankruptcy benefits over Chapter 7

A

Chapter 13 bankruptcy is generally more favorable for creditors because they receive at least some portion of what is owed. In a Chapter 13 bankruptcy, the debtor repays at least a portion of the debts over a specified time. Creditors may not receive any payments under a Chapter 7 bankruptcy.

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25
Q

what are the protections provided by the Consumer Credit Protection Act

A

regulated advertisement of credit terms and protection for unauthorized credit card use. The cardholder is liable for only $50 in unauthorized charges if he or she reports the card as lost or stolen.

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26
Q

What is the term used to describe the Federal Reserve controlling the money supply, enabling it to significantly affect interest rates?

A

monetary policy

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27
Q

What Act prohibits debt collectors from engaging in certain practices, such as contacting a debtor at his place of employment if the employer objects, harassing or intimidating the debtor, or using false and misleading approaches.

A

The Fair Debt Collection Practices Act

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28
Q

What amount can be taken as a miscellaneous itemized deduction as a result of unreimbursed educational expenses?

A

Unreimbursed job-related educational expenses can be taken as a miscellaneous itemized deduction, subject to the 2% of AGI floor. i.e. any expenses above 2% of AGI

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29
Q

If the UTMA account is rolled into a Section 529 plan, what happens?

A

The account balance remains custodial property and is legally owned by Joan.
The balance in the account must be made available for distribution to Joan when she reaches the state’s age of majority.

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30
Q

What parental assets are excluded from EFC (expected family contribution)?

A

Home equity
Cash value life insurance
Retirement account balances
Distrubutions from parent-owned accounts for education (i.e. 529s)

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31
Q

What are main features of CESAs (Coverdell Education Savings Accounts)?

A

contributions limited to $2k/child regardless of # of contributors
distributions are tax-free

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32
Q

Which type of Stafford loan is need-based?

A

Subsidized

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33
Q

What are the interest differences between subsidized and unsubsidized stafford loans?

A

With a subsidized Stafford Loan, the U.S. Department of Education pays the accrued interest while the student is in school and during any deferment period.
With an unsubsidized Stafford Loan, the student is responsible for any accrued interest during the life of the loan.

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34
Q

What is a major advantage of college savings plans over QTPs?

A

college savings plans do not restrict where the child may attend college. College savings plans permit enrollment at out-of-state universities or private colleges.

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35
Q

What is a major advantage of college savings plans over QTPs (qualified state prepaid tuition programs)?

A

college savings plans do not restrict where the child may attend college. College savings plans permit enrollment at out-of-state universities or private colleges.

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36
Q

What are key features of series EE savings bonds?

A

Series EE savings bonds are purchased electronically at their full face value. They must be purchased after 1989 to be eligible for special tax treatment. To attain tax-free status, EE bonds must be purchased in the name of one or both parents of the student or child. The bonds must be redeemed in the same year that the student’s qualified higher education expenses are paid to receive preferential tax treatment.

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37
Q

What is the max amount a couple can contribution to 529 plan in one year without triggering gift tax?

A

$140k ($14/person/year * 2 * 5yr upfront)

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38
Q

What’s included in the Expected Family Contribution (EFC)?

A

student income
student assets
parent income
parent assets

does not include 529 accounts if other family members (non parents) established with student as beneficary

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39
Q

What are the American Opportunity Tax Credit limitations?

A

first $2k, then 25% of next $2k - capped at $2500

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40
Q

What are the features of series I savings bonds for education funding?

A

issued at face value and have no guaranteed rate of earnings.
The annual interest rate reflects the combined effects of a fixed rate and a semiannual inflation rate.
Redemption proceeds from Series I savings bonds may be tax free if they are used for qualified education expenses.
The tax advantages of Series I savings bonds when used for education funding are phased out at certain levels of adjusted gross income.

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41
Q

What is the main difference between UTMA/UGMA and 529 account?

A

Unlike the case with custodial accounts (UGMA or UTMA), the beneficiary of a Section 529 plan does not gain control of the account assets at the age of majority. The account remains under the control of the contributor.

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42
Q

What is the max deduction for student loan interest?

A

$2500

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43
Q

What are 2 unique features of student loan interest deduction?

A

the deduction for student loan interest is taken as an adjustment to adjusted gross income (an above-the-line deduction) and is available regardless of whether the taxpayer itemizes deductions.

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44
Q

Major benefit of CESA vs 529

A

Elementary and secondary education expenses are considered to be qualified education expenses for purposes of a CESA. This is a major advantage of CESAs over Section 529 plans.

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45
Q

What is key difference in how American Opportunity Tax Credit and Lifetime Learning Credit are claimed?

A

AOTC - by child; LLC - by family

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46
Q

characteristics of PLUS loans include

A

interest rates that vary with the rate of 52-week Treasury bills and the availability of reduced loans for students enrolled in programs that are shorter than an academic year.
PLUS loans are available to parents of students.
PLUS loans are not needs based.
The borrower under a PLUS loan must meet federal standards of creditworthiness.
repayment of loan must begin within 60 days

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47
Q

What happens if 529 plan funds are withdrawn and not used for educational purposes?

A

the earnings portion of the withdrawal is included in the beneficiary’s gross income and is generally subject to a 10% penalty tax.

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48
Q

What are characteristics of Perkins loans?

A

Perkins loans are funded by the federal government.
Perkins loans are given on a needs basis.
Different amounts are available for undergraduate and graduate study.

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49
Q

What are the key tenants of education funding coordination?

A

the student loan interest deduction may be used in combination with any of the other educational tax benefits, such as the qualified higher education tuition deduction, the American Opportunity Tax Credit, or the Lifetime Learning Credit.
The American Opportunity Tax Credit and Lifetime Learning Credit may not both be claimed in the same year for the same student.

A taxpayer can claim an American Opportunity Tax Credit or Lifetime Learning Credit for the taxable year and can also exclude from gross income amounts distributed from a Section 529 plan or Coverdell ESA (CESA), but only if the 529 plan or CESA tax-free distributions are not used to pay the same expenses for which either the American Opportunity Tax Credit or Lifetime Learning Credit was claimed.

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50
Q

Main characteristics of Pell Grants

A

Pell Grants are the primary type of grant dispersed directly to students.
Financial need and availability of federal funds are the criteria for receipt.
Receipt of other grants is sometimes contingent upon applying for or receiving a Pell grant.
Only for undergraduate studies
largest need-based student aid program

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51
Q

What is the economic-resource approach?

A

Clients are assumed to be rational and will change to the most favorable behavior if given the appropriate counseling. In this approach, the financial planner is the agent of change. The focus is on obtaining and analyzing quantitative data, such as cash flow, assets, and debt.

52
Q

What is the Classical economics approach?

A

Clients choose among alternatives based on objectively defined cost-benefit and risk-return tradeoffs. The belief in this approach is that increasing financial resources or reducing financial expenditures results in improved financial out- comes.

53
Q

What is the Strategic management approach?

A

A client’s goals and values drive the client-planner rela- tionship. Conducting a SWOT analysis (identifying strengths, weaknesses, opportunities, and threats) is done early in the financial planning process. Here, the financial planner serves as a consultant.

54
Q

What is the Cognitive-behavioral approach?

A

Clients’ attitudes, beliefs, and values influence their behavior. Planners using this approach attempt to substitute negative beliefs that lead to poor financial decisions with positive attitudes, which should result in better financial result

55
Q

What does the Investment Advisers Act of 1940 (IAA) require?

A

investment advisors must register w/ SEC or w/ states in which they do business

56
Q

Who must register as an investment adviser?

A

ABC: Those who…
Provide Advice or issue reports or analysis regarding securities
In the Business of providing these services
Compensated for such services

57
Q

When is a broker-dealer registered w/ SEC under Securities Exchange Act of 1934 excluded from the Act?

A

advice given is…

  1. solely incidental to conduct of its business
  2. does not receive special compensation for providing investment advice
58
Q

How does an investment adviser register w/ SEC?

A
  1. app submitted electronically through IARD (investment advisor registration depository)
  2. adviser pays filing fee
  3. adviser submits Form ADV part I annually
59
Q

How do advisers terminate SEC registration?

A

form ADV-W

60
Q

What does Form ADV Part 2A provide?

A

details of advisory relationship and other business inerests of adviser
costs and services provided

61
Q

When must form ADV part 2a be delivered to client?

A

48+ hrs prior to entering into any written or oral advisory contract w/ client OR
time of entering into such contract if client can terminate contract w/out penalty within 5 business days after entering into contract

62
Q

Define The Securities Act of 1933.

A

This Act (also known as the 33 Act or Paper Act) requires the registration of new issues of securities or issues in the primary securities market and pro- vides applicable procedures for issuing an initial public offering (IPO) of securities while also specifying which securities are exempt from registration requirements.

63
Q

Define series 6

A

Series 6. This entitles the holder to sell all open-end investment companies (mutual funds), variable annuities, variable life insurance, and initially-offered (not secondary) unit investment trus

64
Q

Define series 7

A

Series 7. This is the broadest license and entitles the holder to sell any security, including individual stocks and exchange-traded funds.

65
Q

What are the ownership categories and coverage limits for FDIC insurance coverage?

A 
$250k/acct limit
individual
joint (per individual)
retirement
revocable trust (per beneficiary)
66
Q

What notification periods to the CFP Board must candidates abide by?

A

changes in info w/in 45 days

conviction of crime w/in 30 days

67
Q

Define the Securities Exchange Act of 1934.

A

This Act (also known as the Exchange Act, 34 Act, or People Act) extended the regulation of securities to the secondary market or exchanges. The Act also established the SEC as the primary regulatory body overseeing the sale and purchase of securities by a potential investor

68
Q

define the investment company act of 1940

A

authorized the SEC to regulate financial products, most notably open-end investment companies or mutual funds. The Act also gave the SEC regulatory authority regarding the sale of variable products, such as variable annuities, as well as the separate accounts within any variable product.

69
Q

Define The Federal Bankruptcy Act of 1938

A

as amended in 1978, requires a court-appointed trustee to oversee the affairs of a firm for which bankruptcy charges have been filed. This Act provides for the liquidation of hopelessly troubled firms and provides for the reorganization of troubled firms that might be able to survive.

70
Q

planner who wishes to sell variable contracts, such as variable life insurance or variable annuities, must hold

A

a FINRA Series 6 or Series 7 registration (and, in most states a Series 63 or Series 66 registration) as well as the particular state’s variable insurance license

71
Q

National banks are subject to regulation by three independent federal agencies:

A
  1. The Office of the Comptroller of the Currency (OCC)
  2. The Federal Reserve Board
  3. The Federal Deposit Insurance Corporation (FDIC)
72
Q

Who uses the three major tools of monetary policy and what are they? All seek to control the overall money supply and, thus, affect future economic behavior.

A

The Fed
They are:
lowering or increasing the amount of required reserves that must be held by banking members of the Federal Reserve System;
raising or lowering the Fed’s discount rate (the amount of interest that is charged by one of the 12 Federal Reserve Banks to other banks)
engaging in open-market operations, which is the buying or selling of government securities in the open marketplace by the Federal Reserve Board.

73
Q

federal funds rate is

A

the interest rate charged on short-term borrowing (often overnight to fulfill reserve requirements) between banks; the Fed targets, but does not directly control, this rate in all of its interest rate decision

74
Q

prime rate is

A

the rate of interest charged by commercial banks to its best business and personal customers. This rate is set directly by commercial banks; however, it nor- mally is about 3% higher than the federal funds rate.

75
Q

recession occurs when

depression occurs when

A

the GDP has experienced a decrease in real terms for two consecutive quarters or a minimum of six months from a baseline of zero.

Alternatively, a depression is when the GDP has experienced a decrease in real terms for six consecutive quarters or a minimum of 18 months from a baseline of zero.

76
Q

Stagflation occurs when

A

inflation and unemployment rise and the general growth of the economy is slow as business output falls.

77
Q

Define Chapter 13 bankruptcy

A

involves the adjustment of debts of an individual with regular income. When an individual files this form of bankruptcy, payments are typically restructured and, in some cases, reduced so that payments are more manageable for the debtor. However, the debtor is not generally required to relinquish any assets in payment of creditors.

78
Q

Define Chapter 7 bankruptcy

A

historically been the most popular type of bankruptcy filed because an individual’s personal unsecured debts are generally canceled. However, under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, the availability of Chapter 7 bankruptcy filings for individuals has been significantly restricted.

exemptions include homestead, some personal property, ERISA plans, cash value life proceeds, disability benefits, and annuity proceeds

79
Q

the debts and obligations that are not generally dischargeable through bankruptcy

A

student and government loans
child support and alimony obligations
recent federal income taxes due.

80
Q

Define the Consumer Credit Protection Act (also known as the Truth in Lending Act)

A

requires lenders, before extending credit, to disclose both the dollar amount of finance charges and the annual percentage rate (APR), also limits consumer liability for a lost or stolen credit card to the lesser of the amount charged or a maximum of $50 per card. The requirements of this Act are seen most often when a consumer enters into a mortgage agreement with a lender and closes on a personal residence.

81
Q

If an individual can pay their debts, what type of bankruptcy can they file

A

Individuals who have the ability to pay their debts (as defined in the Act) are required to file under Chapter 13 of the Federal Bankruptcy Code.
This is in substitution for having their debts canceled entirely under a Chapter 7 filing.

82
Q

Define the Fair Credit Billing Act

A

requires consumers to notify the creditor in writing of any billing errors within 60 days of the date they receive the billing statement. Creditors then have 30 days to respond to the consumer with respect to the possible billing error and 90 days to resolve the complaint.

83
Q

Define the Privacy Act of 1974

A

establishes a code of fair information practices that regulates the types of personal information the federal government can col- lect and how this information can be used. Written consent from an individual must be given before personal information may be disclosed unless the disclosure falls under one of 12 statutory exceptions.

84
Q

Define Fair and Accurate Credit Transaction Act of 2003 (FACTA)

A

added new sections to the federal Fair Credit Reporting Act that gives consumers greater protection against the growing crime of identity theft. Under FACTA, consumers can obtain a free credit report every 12 months from each of the three national credit reporting agencies, Equifax, TransUnion, and Experian. FACTA also requires that consumer information be disposed of in a secure manner. Under the Act, individuals can place alerts on their credit histories if identity theft is suspected or if deploying overseas in the military. The Act also requires the secure disposal of consumer information.

85
Q

What are the funding differences between UTMA and UGMA accounts?

A

UTMA account may be funded with any cash-type asset, including securities and mutual funds, but it may also include real estate (although uncommon). An UGMA account may not be funded with real estate assets of any kind

86
Q

What Special tax advantages are provided to certain owners of U.S. savings bonds who qualify under the Education Savings Bond program?

A

The savings bond education tax exclusion permits the exclusion from income at the time of redemption any amount used to pay for qualified higher education expenses.
Qualified Series EE bonds must have been issued after 1989.
The Series EE or I bonds must be issued to an individual at least 24 years of age at the time of issuance.
When using bonds to fund a child’s education, the bonds must be registered in the name of the parent(s).
The child cannot be registered as a co-owner.
Qualified higher education expenses include tuition and fees (not room and board) required for enrollment at any eligible educational institution incurred by either the taxpayer, the taxpayer’s spouse, or any dependent of the taxpayer claimed for income tax reasons (such as a child).

87
Q

What are the phaseouts of the qualified Series EE or I bonds?

A

excludable amount at redemption of the qualified Series EE or I bond is subject to a phaseout during the years when the bonds are redeemed and the tuition is paid. Above the phaseout ranges, no exclusion is allowed. For 20172, the phaseout limits applying to the savings bond education tax exclusion are $117,250–$147,250 of modified adjusted gross income (MAGI) for married taxpayers filing jointly and $78,150–$93,150 of MAGI for single taxpayers. A

88
Q

What are the Coverdell Education Savings Account (CESA) beneficiary limits and tax benefits?

A

The total contributions to all CESAs for a beneficiary, who must be under age 18 when the contribution is made, cannot be more than $2,000 in any year. Although contributions to a CESA are not deductible, the earnings on the account accumulate income tax free. In turn, when a Coverdell ESA is distributed and used for the payment of qualified education expenses, the amounts distributed are free of income taxes and penalties regardless of the age of the donor.

89
Q

What are the key benefits of a CESA?

A

Qualified education expenses are not limited to qualified higher education expenses in the case of the Coverdell ESA; expenses for private elementary and secondary education (K–12) are also allowed. In addition to tuition, expenses for room and board are permitted.
Key points regarding the Coverdell ESA include the following.
The CESA is established either in a trust or custodial account on behalf of the child until they’re 18.
Contributions are limited to $2,000 per year per child, regardless of the number of donors to the account.
Contributions are subject to phaseout. In 2019, this phaseout amount is $95,000– $110,000 of modified AGI for single taxpayers and $190,000–$220,000 of modified AGI for married taxpayers filing jointly.
All funds within the CESA must be used before the student reaches age 30. Any remaining funds will be disbursed to the CESA beneficiary, and the earnings will be subject to income tax and a 10% penalty. However, in order to prevent this from occurring, the owner of the CESA has the right to change the beneficiary to another family member of the original beneficiary.
Only one rollover for a CESA is allowed per individual per year.
If beneficiary dies and account was not distributed within 30-day period, remaining balance is considered distributed to the beneficiary and included in the beneficiary’s estate

90
Q

Define the benefits and penalties of the Qualified Tuition Plan

A

A QTP offers significant income tax benefits, including the ability to make contributions regardless of the contributor’s AGI, tax-free earnings growth, and tax-free withdrawals to the extent they are used to pay qualified higher education expenses. If withdrawals are not used to pay qualified higher education expenses, the income portion is included in the gross income of the beneficiary and generally subject to a 10% penalty tax.

91
Q

How are 529 plan contributions treated relative to the contributor’s estate?

A

Contributions are also removed from the contributor’s gross estate. Note, too, that even though the contributor retains control of the account balance at his death, the balance in the 529 plan is not included in his estate for estate tax purposes. Thus, the Section 529 plan can be a significant estate planning tool. However, if the contributor does not outlive the five-year period, the $70,000 contribution exclusion is prorated annually; for example, if the contributor-owner dies after three years, $28,000 (or $14,000 multiplied by two) would be included in his estate

92
Q

What happens if the owner of a 529 plan decides not to attend college?

A

if the child for whom the Section 529 plan was established decides not to attend college, the account balance may be rolled over to any family member as defined in the Treasury Regulations for Section 529.

93
Q

What are the main features of a prepaid tuition plan (QTP)?

A

prepaid tuition plan permits contributors (usually parents) to prepay future tuition at today’s tuition rates or purchase tuition credits (units) to apply to future tuition costs.
Typically, these plans apply to tuition and mandatory fees only.
plan is state guaranteed and not subject to market based performance
This type of program also usually requires that the designated beneficiary (usually the contributor’s child) go to any public college or university within the state (or the specific private institution) that established the QTP.

94
Q

What is a significant advantage of the college savings plan over the prepaid tuition plan?

A

it does not restrict where the child beneficiary may attend college.

95
Q

For income tax purposes, scholarship amounts expended for tuition, fees, and books are nontaxable, but the amount used for room and board is usually

A

taxable.

96
Q

Define a Subsidized Stafford Loan.

A

This is a need-based loan. The U.S. Department of Education pays the accrued interest while the student is in school and during any deferment period
repayment up to 10 yrs and deferred until 6 mo after graduation or leaving school

97
Q

Define a Unsubsidized Stafford Loan.

A

This is a non-need-based loan. Interest begins to accrue as soon as funds are disbursed. However, the interest may be capitalized while the stu- dent is in school and during any deferment peri

98
Q

Define a Parent Loan for Undergraduate Students (PLUS).

A

This is a non-need-based loan available to parents of dependent undergraduate students. If a parent does not other- wise qualify for financial aid because of a high income level, this is the only federal loan that will typically be available to assist in the payment of college education expenses. The only requirement is that the parent or borrower meets federal standards of creditworthines

99
Q

Define a Perkins Loan.

A

With this federal loan, the institution determines whether the student needs the loan. If a determination is made that the student does, he can borrow up to one specified amount per year for undergraduate study and a higher, different specified amount per year for graduate study. The Perkins loan has the advantage of a low interest rate and a longer deferral period than Stafford loans.

100
Q

Define a Pell Grant.

A

This federal grant is available to undergraduates only and is available if the family’s EFC does not exceed a specified amount, as determined annually.

101
Q

Define Supplemental Educational Opportunity Grants (SEOGs).

A

These are federal grants given to students, with priority given to students who also received Pell Grants.
exception financial need
auto consideration with FAFSA
managed by colleges instead of fed govt

102
Q

Define Federal Work-Study Programs.

A

These programs provide students with part-time jobs while attending college. In turn, the institution disburses the earned funds to the student.

103
Q

What is the section 162 employee benefit?

A

An employer may provide an unlimited amount of educational assistance to an employee so long as this assistance is job related. This is known as a “Section 162” employee benefit because it is made part of an employer’s deductible ordinary and necessary business expenses under IRC Section 162

104
Q

What are the key characteristics of the American Opportunity Tax Credit?

A

the American Opportunity Tax Credit reduces a family’s tax dollar-for-dollar in an amount equal to 100% of the first $2,000 of qualified post-secondary expenses and 25% of the next $2,000 of qualified expenses incurred for the first four years of post-secondary education. Therefore, a maximum credit of $2,500 is allowed. Qualified expenses include tuition, fees, and course materials (e.g., books, equipment); room and board are excluded.
Up to 40% of the eligible credit is refundable, so even those who owe no tax can get up to $1,000 of the credit for each eligible student as cash back. However, none of the credit is refundable if the taxpayer claiming the credit is a child who (1) is under age 18 (or a student who is at least age 18 and under age 24 and whose earned income does not exceed one-half of her own support), (2) has at least one living parent, and (3) does not file a joint tax return.
the student must be enrolled in an educational program leading to a degree, certificate, or other recognized credential and must be enrolled in at least half the minimum hours of a full-time student. The $2,500 maximum credit is per student and not per family or income tax return filed. The availability of the credit is also subject to phaseout for taxpayers with income above certain limits. In 2019, these phaseout ranges are $160,000–$180,000 of modified adjusted gross income for married taxpayers filing jointly and $80,000–$90,000 for single taxpayers. The American Opportunity Tax Credit is neither available to married taxpayers who file separate returns, nor is it available for students who have felony drug convictions.

105
Q

What are the key characteristics of the Lifetime Learning credit?

A

Lifetime Learning Credit may be claimed for an unlimited number of years while the students are pursuing their educations.
neither requires enrollment in a degree program nor does it necessitate at least half-time enrollment. The amount of Lifetime Learning Credit permitted is 20% of the first $10,000 of qualified tuition expenses paid by the taxpayer for any year in which the American Opportunity Tax Credit is not claimed for the same student. This results in a maximum nonrefundable credit of $2,000 per return or per family. The Lifetime Learning Credit is available per eligible family, whereas the American Opportunity Tax Credit is available per eligible student.
subject to phaseout for taxpayers with income above certain limits. In 2019, these phaseout ranges are $116,000–$136,000 of modified adjusted gross income for married taxpayers filing jointly and $58,000–$68,000 for single taxpayers.

106
Q

what are the education coordination considerations if two or more children in the same household incur qualified expenses in the same year?

A

the parents may claim a Lifetime Learning Credit for the family
an American Opportunity Tax Credit may be claimed for each eligible child
a Lifetime Learning Credit may be claimed for one child and an American Opportunity Tax Credit may be claimed for each of the other eligible children

107
Q

How is interest on student loans treated for deductibility on tax return?

A

interest paid by individuals during the tax year on any qualified education loan is deductible as an adjustment to reach AGI (an above-the-line deduction), up to a maximum of $2,500 per year. Like the education credits just discussed, phaseout limitations also apply to the deduction for student loan interest. For example, in 2017, the allowable deduction is phased out as follows:
■ Married filing jointly taxpayers: $135,000–$165,000 of modified AGI
■ Single taxpayers: $65,000–$80,000 of modified AGI In 2017, borrowers are allowed to deduct interest over the term of their loan obligation.

108
Q

What is the main coordination consideration for using the education credits with the 529 plan or CESA?

A

A taxpayer can claim an American Opportunity Tax or Lifetime Learning Credit for the taxable year and can also exclude from gross income amounts distributed from a Section 529 plan or Coverdell ESA, but only if the Section 529 plan or CESA tax-free distributions are not used to pay the same expenses for which either the American Opportunity Tax or Lifetime Learning Credit was claimed.

109
Q

What is the main coordination benefit w/ the student loan interest deduction?

A

.The student loan interest deduction may be used in combination with any of the other educational tax benefits

110
Q

What is the main coordination consideration b/w the LLC and the AOTC for education benefits?

A

The American Opportunity Tax Credit and Lifetime Learning Credit may not both be claimed in the same year for the same student.

111
Q

Series 65.

A

This entitles the holder to provide investment advice to clients within the holder’s primary state of residence. (Note: CFP Board has entered into a reciprocity agreement with many state securities departments permitting a waiver of this examina- tion if the individual already is a CFP® certificant.)

112
Q

Define The Fair Debt Collection Practices Act

A

prohibits debt collectors from engaging in certain practices such as contacting a debtor at his place of employment if the employer objects, harassing or intimidating the debtor, or using false and misleading practices. A state court may issue an order for garnishment of a portion of a debtor’s wages in order to satisfy a legal judgment that was obtained by a creditor.

113
Q

What is the section 127 education benefit?

A

An employer may also provide up to $5,250 of non-job-related educational assistance to an employee during any one year as a tax-free employee benefit under IRC Section 127, the benefit is limited to the lesser of the amount of qualifying educational expenses (defined as tuition, fees, books, supplies, or equipment) or $5,250 in any given year

114
Q

Debts and obligations that are not dischargeable under Chapter 7 bankruptcy include:

A

intentional tort claims, child support, student loans, government loans, and recent federal income taxes due

115
Q

how do you calc geometric mean?

A

PV = -1
FV = (1 + R1)(1+R2)(1+Rn)……
N = n
Solve for I/YR

116
Q

What is the employer’s educational assistance program?

A

employer can reimburse employee tuition upon to $5,250/yr and this is excluded from employee’s income up to this amount. Cannot claim same expenses on LLC or AOTC

117
Q

when is gift tax triggered resulting from a 529 plan beneficiary change?

A

if rollover assigns benefits to a beneficiary of a lower generation

118
Q

how are non-parent owned 529s treated relative to the student beneficiary?

A

FAFSA treats distributions as student income two yrs after funds are disbursed, so seek to get distrubuted during the last 2 yrs of college

119
Q 
how portable are the following? 
529
coverdell (CESA)
UT]MA/UGMA
trusts
A

parent owners can transfer to another beneficiary
can be transferred to another ben
cannot
not designed to switch, typically allocate up front

120
Q 
how are funds controlled at age of majority?
529
CESA
UGMA/UTMA
Trusts
A

account owners’ assets, do not transfer to student at 18
all funds must be used before child age 30
custodial accounts in child’s name, when reaches age of majority, they assume ownership of account and not required to use funds for education
2503(b) can hold funds beyond majority; 2503(c) principal/income distributions required by 21; spendthrift - disburses funds for college only and remains control of trustee

121
Q

what are the debt percentage benchmarks as a % of gross income?
total debt
housing
consumer debt

A

36%
28%
20% of net income

122
Q

FINRA registration is required whenever

A

publicly traded securities are offered for sale.

123
Q

Schedule I of Form ADV must be filed with the SEC

A

each year and must be filed no later than 90 days after the end of the adviser’s fiscal year.

124
Q

prospectus disclosure requirements

A

board of directors
investment objective
expenses and fees
composition of investment portfolio

125
Q

what are the CFP CE requirements

A

30 hours every 2 yrs, including 2 hrs of ethics

126
Q

if a client withholds information, what are the two actions that can be taken?

A

terminate relationship

restrict scope

127
Q

what age do you have to be to qualify for a reverse mortgage?

A

62+

CFP (6 decks)

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