Test Questions Flashcards
Does satisfying ERISA 404c mean you are diversified as a fiduciary?
YES, so not liable
Who pays the copay?
Insured does
Max 2 parents can fund a 529?
$180k
Can FSA funds be stopped throughout the year?
NO
What happens to unused FSA funds?
They are forfeited
How much of personal property is covered with HO policies?
Usually a small amount, around $1,200.
What to ask client if they are unhappy?
Questions about what is bothering them
How to calc amort on Zeros?
Same as house for period
What is a good option for beneficiary of an IRA?
Spouse, they get additional options
Are gifts under annual exclusion reportable as gross gifts?
Yes, then exclusion kicks in. If directly to hospital or school then not included. If gifting from IRA before 70-1/2 that is also reported as a gift even if to charity.
Sunk cost fallacy
Person is reluctant to abandon a strategy because they are heavily invested
What amount of gift value require appraisal?
More than $5,000
What is marketability based on?
Number of shares traded
How much can each spouse contribute to a UTMA?
Each spouse can contribute $18k
What is a risk-free premium?
It is the market premium.
Is it good to educate clients?
Yes
Do NQDC plans have defined benefit or defined contribution structures?
YES
What form of business allows for business continuity?
C Corp
Are 457s available for rank and file employees?
NO
Can you have a profit sharing contribution if you don’t have profits?
NO
Calculating amount that the insured will pay in accident
$640/720 = 0.8889 - 1 = .111 or 11.12%
$102,500 - $2,500 = $100,000
$100,000 * 11.12% = 11,120
$11,120 + $2,500 = $13,620 which is how much insured will pay
I guess they take off the deductible first? Either way if you do it normal the closest answer is that one.
Client, age 56, retired from a company 3 years ago and took $500k of employer stock with in-kind distribution to a brokerage account recently. Basis is $100k, what is the tax if he is in the 35% tax bracket?
$100k * 35% = $35,000 (tax on basis)
$100k * 10% = $10,000 (penalty because he is younger than 59-1/2 and took a distribution but he retired BEFORE 55)
When should you give a recommendation on a client investment portfolio?
First analyze and THEN give a recommendation at your next client meeting.
When does Medicare pay when other insurance is involved?
Second
Are cars limited under 1245 property for the section 179 deduction?
Yes! Limited to around $12k
Business assets like machinery equipment fully qualify for the 179 deduction.
What does the nonforfeiture option under LTC allow for the client?
Allows them to receive some benefits from the policy.
Can you combine inherited IRAs?
NO
Is “debit” considered equity?
NO
When do you have to work until for separation of service at 55?
UNTIL 55
When is RBD?
April 1st
Does MACRS have mid-quarter conventions?
YES
How do DAFs work?
You get a charitable deduction the year you contribute to the fund but you don’t actually have to pay it out to the charity until you find one. Contributing to the charity from the DAF is not a deduction but contributing to the DAF is.
These have minimal administrative requirements and they are considered public or 60% charities.
What is growth rate if they give you ROE and retention ratio?
Growth rate = ROE * Retention ratio
Would a deferred annuity work for current income?
NO
Do you need to report investigation to the CFP board?
YES absolutely yes. If you know if it is a part then that is a solid answer.
What is considered a personal residence if you are renting it?
If you use it MORE than the greater of 14 days or 10% of days rented then it is considered a personal residence and expenses are not deductible.
Is depreciation taken on schedule C covered under section 121 on your primary residence?
NO it is recaptured at 25%.
The rest of the growth is covered though.
Can waiver of premiums count for terminal illness?
Yes
What offsets STCL?
Capital gain either ST or LT
If there is accumulated STCL then you need to look for something that has capital gain in it, interest will not work.
When is the financial planning relationship started?
When goals are discussed. Just opening a investment account and buying does not count as financial planning but goals does.
Is 1250 recapture always at 25%?
YES, it is always at 25% even if O.I. levels are lower than that.
1245 recapture is at ordinary income but 1250 is at 25%.
What to invest in if you want to minimize the parents assets for EFC?
If between 529 and Roth IRA, Roth IRA could work. It does not count as parents assets and if the parent is going to have the account for more than 5 years and will be 59-1/2 by the time education funds are needed, it could work because funds are taken out tax free and grow tax free. Also if they want to fund it within IRA limits.
Resistance levels vs support levels
Resistance is top
Support is bottom
Do you have a conflict of interest between spouses if they have a JT account and one wants to take out and it is not benefiting the other?
Yes, need others consent
