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Series 65 (FIN-451) > Unit 16 > Flashcards

Unit 16 Flashcards

Types of Clients

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Series 65 flashcards
1
Q

Individuals who can have an individual account (4)

A

Natural person, trust, deceased person through an estate account, sole proprietorship businesses

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2
Q

The account holder is the only person who can (2)

A
  1. Control the investments within the account
  2. Request distributions of cash or securities from the account
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3
Q

What Joint Tenants with Right of Survivorship (JTWROS) says

A

Deceased tenant’s interest in the account passes to the surviving tenant(s)

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4
Q

What Community Property with Right of Survivorship says (3)

A
  1. Married couples to share property equally
  2. Each person legally has 50% ownership stake
  3. When first person dies, entire property is taken over by survivor
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5
Q

Whenever the test uses the term joint tenants, does it mean JTWROS or tenants in common?

A

JTWROS

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6
Q

What Tenants in Common ownership stipulates

A

A deceased tenant’s fractional interest in the account is retained by that tenant’s estate and is not passed to the surviving tenant(s)

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7
Q

Difference between JTWROS and Tenants in Common

A

Tenants in Common interest can be divided unequally

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8
Q

Tenancy by the Entirety

A

Ownership from multiple persons where each co-tenant has an undivided interest

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9
Q

What is Tenancy by the Entirety mostly used for

A

Real estate

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10
Q

What undivided interest means

A

No tenant has a designated interest in any specific asset in the account

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11
Q

Right of survivorship

A

Surviving owner receives the deceased’s interest in the account

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12
Q

What is suitability for a joint account generally based on?

A

Lowest common denominator individual

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13
Q

Information that must be obtained from client (5)

A

Legal capacity, employment info, Customer Identification Program notice, citizenship details, client’s financial standing

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14
Q

When broker-dealer must obtain from the customer a written agreement that the customer is aware of and agrees to be bound by FINRA rules applicable to the trading of option contracts and that the customer has received a copy of the current ODD

A

15 days after account is opened

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15
Q

Steps in opening an options account (4)

A
  1. Obtain essential facts about the customer
  2. Give the customer an options disclosure document
  3. Have the manager approve the account
  4. Enter the initial order
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16
Q

What must an S corp not do (2)

A
  1. Have more than 100 shareholders
  2. Have more than one class of stock
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17
Q

If a sole proprietorship operates under a DBA (Doing Business As) name that might seem to imply it is a corporation, does it remove the full liability from the individual owner?

A

No

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18
Q

What document sole proprietorship taxes are listed on

A

Schedule C of owner’s Form 1040

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19
Q

What partnerships file

A

Information return, Form 1065

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20
Q

What LLC’s can file taxes as (3)

A

Corporation, partnership, or sole proprietorship

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21
Q

Where is return filed in a C-corp

A

Form 1120

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22
Q

Where is return filed in an S-corp

A

Form 1120S

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23
Q

Dividend exclusion rule for C-corps

A

Dividends paid from one corporation to another are 50% exempt from taxation

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24
Q

Do corporations pay federal taxes on interest received from municipal bonds

A

No

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25
Q

Fiduciary account

A

Chosen individual enters trades, makes all decisions, and manages accounts in owner’s best interest

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26
Q

Examples of fiduciaries (6)

A

Trustee, executor, Administrator, reciever, guardian, Custodian

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27
Q

What full power of attorney grants control person

A

Ability to buy and sell, ability withdraw funds

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28
Q

What limited power of attorney grants

A

Ability to buy and sell only, no withdrawal

29
Q

What Durable Power of Attorney is designed to do

A

Give specifically designated persons power over the account even upon the grantor’s incapacitation (not death)

30
Q

Trust definition

A

Legal entity that offers flexibility to an individual who wishes to transfer property

31
Q

What three parties must be specified in a trust document?

A

Settlor, trustee, beneficiary

32
Q

Settlor

A

Person who supplies the property for the trust

33
Q

Trustee

A

Individual or another party holding legal title to property held for the benefit of another person

34
Q

Can settlor, trustee and beneficiary be the same person?

A

Yes under certain circumstances

35
Q

Remainderman

A

Person who receives remaining balance of a trust

36
Q

Basic rule of a simple trust

A

All income earned on assets must be distributed during first year it is received

37
Q

What living will has to do with

A

Advance directive of medical care directive (not assets or beneficiaries)

38
Q

Foundation vs. charity

A

Foundations can be more flexible with funds

39
Q

Impact Investing

A

The intentional allocation of capital to generate a positive social or environmental impact that can be measured

40
Q

If a variable life insurance policy is surrendered, what is cash taxed as

A

Ordinary income

41
Q

If someone named as the insured individual on a life insurance policy holds incidents of ownership in that policy, how much of death benefit payable is subject to taxes?

A

All of it

42
Q

Benefits of having a life insurance policy transferred to an irrevocable life insurance trust

A

Premiums paid by the insured may qualify for the annual gift tax exclusion

43
Q

When a trust or estate must report on IRS form 1041

A

If it has income

44
Q

What is not included in Distributable Net Income

A

Realized gains reinvested

45
Q

Benefits of transfer on death account (2)

A
  1. No legal documentation necessary
  2. Percentage of beneficiaries can be split any way owner wants
46
Q

What transfer on death might also be called

A

Payable on death

47
Q

What totten trusts allow

A

Allows for the transfer of ownership of a bank account to a beneficiary after the owner’s death

48
Q

3 primary tools to avoid probate

A
  1. Designate a beneficiary
  2. Using on a Transfer on Death designation on a bank or investment account
  3. Title as asset in names of two or more people
49
Q

What do pretty much all IRAs have

A

A specificized beneficiary

50
Q

What must be true for an irrevocable trust to be considered irrevoacable

A

Settlor must give up all ownership in property transferred to a trust

51
Q

Basics of Grantor Retained Annuity Trust

A
  1. Any income from trust is taxed to grantor
  2. The annuity portion is paid for a specified number of years. At the end of that term, the beneficiaries get whatever is left, and that could be free of estate and gift taxes
52
Q

Methods of determining the distribution of an estate’s assets

A

Per Stirpes, Per Capita

53
Q

Real benefit of Donor Advised Funds

A

Only one tax statement to the payer at the end of the year

54
Q

What a donor-advised fund is

A

Separately identified fund or account that is maintained and operated by a 501(c)(3) organization

55
Q

What carryover basis does

A

The cost basis of the gift to the recipient (the donee) is the donor’s cost basis

56
Q

What cost basis is for inherited securities

A

Fair market value on date of owner’s death (step up provision)

57
Q

What is not included in a step up provision

A

Annuity

58
Q

When estate taxes are due

A

No later than 9 months after death

59
Q

What computation of estate tax is recorded on

A

Form 706

60
Q

Where estate income tax computation is done

A

Form 1041

61
Q

What gift tax is

A

Progressive federal tax imposed on the transfer of property during the lifetime of the donor up to $11.7 million

62
Q

How much an individual can give without incurring gift tax

A

$16,000

63
Q

If a new joint tenants with rights of survivorship account is opened by two related individuals whose name does the money need to be in

A

Both parties

64
Q

When customer has to receive the OCC Options Disclosure Document

A

At or prior to the time the account is approved for options trading

65
Q

Vehicles that make use of unified estate tax credit (2)

A
  1. Bypass trust
  2. Generation-skipping trust
66
Q

What must simple trusts do that complex trusts do not have to?

A

Annually distribute income to the beneficiaries

67
Q

only common form of account registration requiring the consent of both parties prior to any activity

A

Tenants by the entirety

68
Q

Difference between gifts and inheritances

A

Recipient assumes normal cost basis on gifts, recipient receives step up basis to market value

Series 65 (FIN-451) (11 decks)

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