Unit 18: Type of Client Flashcards

You may prefer our related Brainscape-certified flashcards:
1
Q

Tenants in common (TIC)

A

provides that a deceased tenant’s fractional interest in the account is retained by that tenant’s estate and is not passed to to the surviving tenants, ownership is divided unequally

  • do not avoid probate
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Joint tenants with right of survivorship (JTWROS)

A

a deceased tenant’s interest in the account passes to the surviving tenants, ownership is equal and undivided

  • whenever the test uses the term joint tenants, it means JTWROS
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Tenants by the entirety (TBE)

A

only for married persons, the consent of the other tenant is required before the other tenant can sell or give away his interest in the property, upon death of one of the spouses the interest passes to the surviving spouse

  • Most commonly used for ownership of real estate
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Checks or distributions from a joint account must be

A

made payable in the account name and endorsed by all parties

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Suitability for a joint account is based on the tenant with:

A

the lowest common denominator (example where one tenant is an accredited investor and the other is a non-accredited investor)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Opening of options accounts sequence:

A
  1. Obtain essential facts from the customer
  2. Obtain approval from a qualified supervisor
  3. Enter the initial order
    Obtain a signed options agreement within 15 days
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

General Partnership

A
  • Partners are responsible for debts of the business
  • Easy to form and dissolve but generally not suited for raising large sums of capital
  • Avoids double taxation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Limited Liability Company (LLC)

A

business structure that combines benefits of incorporation (limited liability) with the tax advantages of a partnership, owners are members and are not personally liable for the debts of the LLC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

S Corporation

A

offers investors the limited liability associated with corporations in general, profits and losses are passed through directly to the shareholders in proportion to their ownership

  • May not have more than 100 shareholders
  • Shareholders may only deduct losses to the extent of their basis (money contributed or lent)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

C Corporation

A

distinguishes the company as a separate entity from its owners

  • If a business expects to need significant capital, this form is almost always the preferred choice
  • Subject to double taxation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Benefits of structuring a business as a general partnership, an LLC, or an S corporation would include

A

no double taxation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Only the sole proprietorship and the C Corporation are taxed on their income.

A

The sole proprietorship’s is the on the owner’s personal tax return and the corp’s is on a Form 1120.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

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

A

C Corporation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

The ones that have limited liability for owners as well as flow-through of income/loss is the

A

limited partnership, LLC, and S corp

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Which business structures survive the death of their owners?

A

Corporations and LLCs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Which business structure has the easiest transfer of ownership?

A

C corportion

17
Q

Orders entered after the time of the death of the grantor,

A

even if the purchase or sale was decided upon before death, are not accepted.

18
Q

The grantor of the trust can also be the

A

trustee and/or beneficiary

19
Q

Remainderman

A

the person who received the remaining balance

Example: A husband dies and has arranged for his wife to use their home until she passes away. Any surviving children then inherit the home - they are the remaindermen

20
Q

Simple Trusts

A

all income earned on assets must be distributed during the year it is received

21
Q

Complex trust

A

may accumulate income

22
Q

The key difference between a simple and a complex trust is that:

A

the simple trust must distribute all of its annual income, whereas complex trust is not obligated to do so.

23
Q

Living Trust (inter vivos trust)

A

established during the maker’s lifetime and they maintain complete control over it. Changes can be made (revocable)

24
Q

Testamentary Trust

A

the settlor retains control over assets until death (“last will and testament”)

25
Q

Living Will

A

individual’s instructions for end-of-life situations, such as withholding medical care of organ donation.
A living will is used to express the author’s end-of-life wishes

26
Q

Philanthropic Funds

A

wealthy individuals may set up donor-advised funds that allow for flexibility and tax advantages. Foundations are generally funded by their founders who usually give those managing the money greater flexibility.

27
Q

Impact Investments

A

the charity commits a portion of its funds to those companies or industries which align with its specified goal.

  • Example, the Cancer Society probably would not have tobacco stocks in its portfolio.
  • Subset of Socially Responsible Investing (SRI) that attempts to generate positive social good in addition to the goals typically outlined in an SRI approach.
  • The acronym ESG is also frequently found = Environment, Social, and Corporate Governance
28
Q

Program-Related Investments

A

the foundation make a charitable distribution

29
Q

Transfer-on-Death (TOD)

A

avoids probate but does not avoid estate taxes

  • May also “payable-on-death” (POD) although the term is used far more frequently for bank accounts
  • The only types of accounts that may have the Transfer on Death (TOD) designation are individual and JTWROS.
30
Q

Grantor Retained Annuity Trusts (GRATs)

A

estate planning tool designed to pass assets to beneficiaries (usually children) in a way to minimize gift and/or estate taxes

  • Any income from the trust is taxed to the grantor
  • The annuity portion is paid for a specified number of years. At the end of that term, the beneficiaries get wherever is left and that could be free of estate and gift taxes.
31
Q

Estate Accounts

A

an account that is directed by fiduciary on behalf of the beneficiary of an estate

32
Q

Per Stirpes

A

the deceased intended that a beneficiary’s share of the inheritance is to go to an heir

33
Q

Per Capita means

A

“by total head count”