Quiz 4 Flashcards
What is an MSA?
medical savings account
If Dale dies, what is his family’s COBRA option?
36 months of coverage
If Dale is fired, what is his COBRA option?
18 months coverage
If Dale is fired, what is his family’s COBRA option?
18 months coverage
If Dale gets divorced, what is his family’s COBRA option?
36 months coverage
What are some other qualifying events for COBRA coverage?
change full-time to part-time, legal separation, eligibility for medicare, loss of coverage status (marriage, age 26)
What are the contribution sources for an HSA? (3)
Individual, family member on behalf of indiv, employer
Who is eligible for an HSA?
individual covered under HDHP, no other plan, and below Medicare age
Can you pay for health insurance with HSA proceeds?
yes
Are HSAs use-it-or-lose it?
no
Can an individual enrolled in Medicare contribute to an HSA?
no
What about LTCI from an HSA?
yes, if it’s qualified
What’s an HRA?
health reimbursement arrangement
Who can have an HRA?
only C Corp
What does an HRA do - and some particulars?
reimburses EE for substantiated med expenses up to a max amount per coverage period. no OTC drugs.
The individual owns the insurance contract and pays the premium. Are premia deductible?
no
The individual owns the insurance contract and pays the premium. Are benefits tax-free to him?
yes
The employee owns the contract, and the employer pays the entire premium. Deductibility?
employer deducts as a bonus. EE recognizes the as income.
EE owns the contract, ER pays under a group/salary continuation plan. Deductibility?
ER deductible, EE taxable benefits
Taxation of cash value at surrender?
taxed as ordinary income
Taxation of insurance dividends
treated as return of unused premium, tax-free (usually, non-MEC)
Taxation of insurance death benefits
generally income tax-free
Insurance: net cash value
cash value minus the loan
TFV: policy transfers not jeopardized by TFV rule
- to insured
- to partner of insured (partnerships)
- to corp in which insured is shareholder or officer
- because of divorce agreement
Are premiums for buy-sell agreements (whether stock redemption or cross-purchase) deductible?
No
What are the two types of buy-sell agreements funded with insurance?
Stock Redemption, Cross Purchase
What’s another term for Stock Redemption buy-sell agreement?
Entity Purchase
What’s another term for Cross Purchase buy-sell agreement?
Stockholder purchase
Basis change in cross purchase execution
shares bought by partner get stepped up basis, dead partner’s estate also
Basis change in stock redemption execution
estate steps up, buyer not
fifth dividend
one-year term (only up to cash value of policy)
What amount is taxable for a surrender of life insurance?
cash value less basis
Coverage C
Personal property. typical sublimits:
- $1000 for watercraft
- $1000 for jewelry & furs
- $2500 for silverware (theft only)
- $200 for money/bullion
Group life payout at EE death. Taxable?
no, tax free
Company-funded payout to EE family at death of EE while employed. Taxable?
yes, used to be de minimis, not any more
Defn: IRR
the discount rate at which the PV of the future cash flow equals the cost of the investment
What does yield curve do?
compares yields of similar bonds but different maturities
When yield curve goes negative to positive, what’s best move?
buy longer maturities even if return slightly < than others
What’s notable about the anti-alienation rule of ERISA?
it’s for when the money is still IN the plan
Where do you often find disclaimer provisions?
in trust documents
for a couple retiring now, with choices of home equity, sell home, obtain new mortgage, or obtain reverse mortgage, what’s CFP think is best choice?
reverse mortgge
CRAT
Charitable Remainder Annuity Trust
definiting characteristics: CRAT
non-charitable beneficiary only 1 transfer in 5% out, fixed lasts up to 20 years or life at end, goes to charity
CRUT
Charitable Remainder Unitrust
defining characteristics: CRUT
similar to CRT but
- multiple transfers OK
- fixed percentage out
CLAT: Charitable Lead Trust
- not while living, established on death
- present value as estate tax deduction
- income payable, excess to bennies (remaindermen)
- giant deduction example in book ($100MM)
CLUT: Charitable Lead Unitrust
- fixed percentage clat (?)
QPRT: Qualified Personal Residence Trust
- end of the term, residence eliminated from grantor’s estate
- value of gift is discounted
- if owner doesn’t outlive term, asset goes back to estate
GRAT: Grantor Retained Annuity Trust
- irrevocable
- apprec or income-producing property
- receive fixed annuity
- at end of term, balance transferred to bennies
- if grantor DOESN’T live out term, , property back to his estate
- grantor has “string”
GRUT: Grantor Retained Unitrust
- less convenient than GRAT
- fixed percentage out, revalued annually
- best asset is something apprec, rather than income
