Session 14 - Types Of Clients

Question 1

The adviser should establish, in consultation with the client, a written statement of objectives and investment strategy before making recommendations to the client. This document is frequently referred to as an ___________ ___________ ___________.

Answer 1

Investment Policy Statement (IPS)

Question 2

LLC owners are _______, not shareholders, and are not personally liable for the debts of the LLC.

Answer 2

Members

Question 3

S-Corps may not have more than ______ shareholders

Answer 3

100

Question 4

The easiest business to set up, especially if you don’t expect much liability, is the _________. However, because the business and the owner are inseparable, there is unlimited liability and no limits to the amount of the loss (if any) that may be claimed on the tax return.

Answer 4

Sole Proprietorship

Question 5

_________ and _______’s are generally easier to form and dissolve than a C corporation.

Answer 5

Partnerships and LLC’s

Question 6

Benefits of structuring a business as a general partnership, and LLC or an S corporation would include NO double taxation, as is the case with a ________________.

Answer 6

C corporation

Question 7

A company that expects to be very profitable should be a _________ instead of a partnership, an LLC or an S corporation because in those three, all earnings pass to owners - nothing can be retained.

Answer 7

C corporation

Question 8

Only ________ and ________ are taxed on their income.

Answer 8

Sole proprietorship and c corporation are taxed on their income. The sole proprietorship on the owner’s personal tax return and the corporation on a Form 1120

Question 9

The only logical choice where a large amount of capital is to be raised is the _____________

Answer 9

C corporation

Question 10

The business entities that have limited liability for owners as well as flow-through of income or loss are the _______, _______ and _________.

Answer 10

Limited partnership, LLC and S corporation

Question 11

The _______ has limited liability but no flow-through

Answer 11

C Corporation

Question 12

The ______ and _________ have flow through-but unlimited liability

Answer 12

Sole proprietorship and general partnership

Question 13

________ (including LLCs) survive the death of their owners

Answer 13

Corporations (including LLCs) survive the death of their owners (even if there is only one shareholder in an S corporation or C corporation, or one member of the LLC.

Question 14

When it comes to transferability of ownership, the corporation form, especially the _____ corporation, is the preferred choice (selling shares is usually pretty straight forward.

Answer 14

C corporation

Question 15

Enables the investment adviser representative to make investment decisions in the client’s account

Answer 15

Discretionary Authorization

Question 16

A deceased’s fractional interest in an account is retained by his estate

Answer 16

Tenants in common

Question 17

Legal document that authorizes someone other than the customer to have all privileges in an account

Answer 17

Full power of attorney

Question 18

A client has an account where, upon her death, she desires that her only son will receive 50% of account value and her 4 daughters will receive 12.5% each. The easiest way to accomplish this would be to title the account ________

Answer 18

TOD - transfer on death requires no additional legal work and allows the account owner to designate beneficiaries in whatever percentages she wants. Furthermore, changes can be made at any time prior to death.

Question 19

Three friends plan to start a new business. It is anticipated it will be several years before the business turns a profit. Which of the following types of business organization would be the best if they wish to limit their liability while, at the same time, being able to receive favorable tax treatment for the expected losses?

A. C corporation
B. S corporation
C. General partnership
D. Sole proprietorship

Answer 19

S corporation. The only way to limit liability is through a corporation (or LLC or limited partnership - either of which is offered here as a choice). The S corporation allows the flow-through of operating losses to shareholders while the C corp does not.

Question 20

Trust property is also referred to as it’s principal or ______

Answer 20

Corpus

Question 21

the grantor of the trust can also be the ________ and/or _______

Answer 21

Trustee and/or beneficiary

Question 22

When a trust has run its course and all expenses and distributions have been made, the person who receives the remaining balance is called the ________

Answer 22

Remainderman

Question 23

All income earned on assets placed into a _______ trust MUST be distributed during the year it is received.

Answer 23

Simple trust

Question 24

A _______ trust may accumulate income

Answer 24

Complex

Question 25

The key difference between a simple and a complex trust is that the simple trust ______ distribute all of it’s annual income, whereas a complex trust is not obligated to do so.

Answer 25

A simple trust must distribute all of it’s annual income

Question 26

A revocable trust must be a living trust because only the living _____ has the power to change or revoke (undo) the trust

Answer 26

Living grantor

Question 27

No estate tax benefit is available for a _____ living trust

Answer 27

Revocable living trust

Question 28

Always follow the terms of the trust. Unless specifically stated in the trust documents, _______ trading is not permitted.

Answer 28

Margin trading is not permitted

Question 29

__________ , also called limited trading authorization, allows entering of buy and sell orders but not the withdrawal of funds. Entry of orders and withdrawal of funds is allowed if full power of attorney is granted

Answer 29

Limited power of attorney

Question 30

A _______ power of attorney survives the physical or mental incompetence of the grantor but not the death of either party.

Answer 30

Durable power of attorney. This means that orders received after the time of death of the grantor, even if the purchase or sale was decided upon prior to death, are not accepted.

Question 31

Person legally appointed to manage and/or hold assets for the benefit of another person

Answer 31

Fiduciary

Question 32

Once established, changes may not be made in this type of trust

Answer 32

Irrevocable trust

Question 33

Person authorized by law to manage the estate of a decedent

Answer 33

Executor

Question 34

Each party specifies a percentage interest in the account. If one party dies, her interest is the account passes to her estate.

Answer 34

TIC

Question 35

Parties share an undivided interest in the account. If one party dies, his interest passes to the other owner(s) of the account

Answer 35

JTWROS

Question 36

The assets in the account become the property of the beneficiary on the death of the account owner without passing through probate (it’s the type of account)

Answer 36

TOD

Question 37

An unincorporated interest of two or more individual. A written agreement specifies which individuals can trade the account.

Answer 37

Partnership account

Question 38

The most appropriate term to use when referring to a trust that is established upon the death of the grantor is a _________trust

Answer 38

A testamentary trust

Question 39

_______ investing is when the entity commits a portion of its funds to those companies or industries which align with those goals.

Answer 39

Impact investing

Question 40

An estate planning tool designed to pass assets to beneficiaries in a way to minimize gift and/or estate taxes.

Answer 40

Grantor Retained Annuity Trusts (GRATs)

If the grantor dies during the term of the trust, the remaining assets are considered part of the deceased’s estate.