Test Questions Flashcards
Key employee life insurance
amount of coverage should evaluate value to firm
Liquidation of deceased’s interest in buy – sell
distributive income as ordinary income to estate
Recertification of qualification for employment
NOT letter of intent
Wait list
accelerate need for special needs to move from home
ABLE
= tax exempt, contributions cannot exceed $15k by all per year
o * disability before age 26 but may be older than 26
o *do not need to currently receive SSI/ Medicaid
o Subject to individual state & limit for 529 accounts
o Only allow “qualified disability expenses” - personal support, financial management & administrative services, housing, education
o Funds under $100K exempt from SSI
ILIT
avoid Crummery withdrawal powers
Health care POA
refuse to apply artificial nutrition/ hydration for terminal illness
AGI
= medical expenses 7.5% of AGI income
o Impairment related not to limit (only for handicapped)
o Charitable contributions deductible
o Roth IRA more favorable AGI limit than IRA
Blended family
NOT different generations
Property settlement of divorce
nontaxable event
Divorce Social security
can begin at 62 from ex-spouse’s benefit as long as ex-spouse is of retirement age
Community property
= retains status even if taken to noncommunity law state
- Remain community property & if quasi, automatically becomes it
- If award, entire amount is community property
Divorce child support
NOT tax deductible
Divorce division of pension
wait-and-see valuation NOT needed
Business ILIT
proceeds reduce liquidity burden without adding estate tax & income to surviving spouse, inheritance to heirs
LLC
= designated beneficiary
o Policyowner
o Premium payor
o Policy should approximate the amount of sale price
SNT
– income taxed to beneficiary
o Transfer of assets in is an incomplete gift
o Make distributions to child during lifetime
o Receives excess assets to permit bene to qualify for Medicaid
o Only created & funded if under 65
o Assets after death but first reimburse state for Medicaid
o Distribution for family caregiver not treated as income for SSI/ Medicaid
SSDI
Can be appealed if initially rejected
AMT for business
o Accumulated-earnings tax if profits above $250K
o No corporate AMT
Disability to Social Security
unable to do gainful activity by mental/ physical impairment (not result in death)
Supplemental Security Income (SSI)
business interest not included
System 1
animal responses (automatic)
GSTT
annual exclusion available for direct skips to grandchildren
Provisional Income
AGI + tax exempt interest + ½ social
Inflation Risk
period certain immediate annuity
*made worse by longevity risk
Longevity return
does not make sequence of return risk worse
systematic withdrawal
converting retirement assets into income = fixed distribution adjusted for inflation
o Bucket approach
o Age-banded approach
o Essential vs. discretionary (flooring)
marital deduction
must be US citizen at time of gift
Deduction from decedent’s gross estate
expenses from collecting assets & probate distribution costs to bene
Religious convictions filled out
medical POA & signing POLST
Traditional finance
Behavioral finance
= undermines human nature in relation to market
= emphasizes human nature in relation to market
Imagination capital
to save for a goal (negative emotion if don’t reach goal)
Robert Schiller
= volatility puzzle (disputed efficient market)
*prices move more than should on earnings & interest rates
Fama & French
= value ETFs can match performance of active managers (due to market inefficiencies)
* No evidence that stock managers can persistently beat markets
Decumulation phase risk tolerance
= retirement assets depleted prior to end of life (level of concern)
Biases
violations of neoclassical economic theory identified through descriptive analysis
QDRO
= court order provides special instructions to plan admin about payment to nonparticipant spouse (alternate payee) for pension splitting a pension in a divorce
“unified” system of estate & gift tax
= estate & gift share same tax schedule, exclusion amounts, credit amount (regardless is transfer life/ death
QTIP
= exception to gift tax terminable interest rule
o Qualifies for unlimited marital deduction to transferor spouse/ estate
o Transferee spouse receive only qualifying income interest for life
o Remainder interest passes in accordance w/ transferor (donor) spouse’s direction
2503(c)
NO Crummery provision
Above-the-line deductions
tax credit claimed as deduction whether or not itemizes deductions (business or income) *reduces AGI
Retirement income planning
= not synonym for retirement planning
* Client does not need to know software to calc. expected aggregate future retirement expenses
Projected retirement income shortfall
reduce current expenses to make more income avail. for contribution to tax-deferred account
Prospect Theory
o Reference dependence
o Loss aversion
o Nonlinear probability weighting
Crummery Power
= create present interest gift to qualify for annual exclusion for transfers in trust
o Allows trust bene the right to make withdrawals
o Right to withdrawal unexercised = lapsed
