cram Flashcards
(140 cards)
<p>Tax treatment of Annuitizing</p>
<p>Portion of each payment is tax-free, and the other portion is taxable at ordinary income</p>
<p>No capital event occur in</p>
<p>Annuities</p>
<p>What if I work for a non-profit 503c3</p>
<p>Eligible to contribute to a 403b plan</p>
<p>regulated by state insurance commissioner</p>
<p>Fixed annuity</p>
<p>regulated by state insurance commissioner finra and sec</p>
<p>Variable</p>
<p>Vesting scheduled by years of service gives you certain percentages as years employed with company</p>
<p>Graded vesting</p>
<p>Vesting Scheduled by years of service at o until certain years of service than 100 percent</p>
<p>Cliff vesting</p>
<p>Traditional IRAs</p>
<p>Contribute the lesser of 5000 or 100percent of earned income contributions may or may not be tax-deductible. ( if not an active participant in a qualified plan, contributions are tax-deductible) Taxed deferred growth</p>
<p>Catch up provisions</p>
<p>age 50 plus can contribute an additional 1000 per year</p>
<p>Irs Tax Penalties</p>
<p>Excess Contributions 6%</p>
<p>Roth IRAs</p>
<p>can contribute the lesser of 5000 or 100% of earned income Contributions are always non tax-deductible. Tax deferred growth. Qualified distributions are tax-free</p>
<p>Inflation means</p>
<p>Hedge against would be Precious metals fund</p>
<p>monthly income</p>
<p>GNMA fund</p>
<p>new house, park $</p>
<p>Money market fund</p>
<p>Maximum diversification</p>
<p>Asset allocation fund</p>
<p>Familiar names</p>
<p>Blue chip fund</p>
<p>Broad exposure, low cost, passive</p>
<p>Index fund</p>
<p>Qualified</p>
<p>tax deductible contributions. earnings grow tax deferred , Zero cost basis, entire amount taxed at distribution "ordinary income tax bracket</p>
<p>Non-qualified</p>
<p>Already taxed by IRS </p>
<p>subject to legislative risk</p>
<p>Sector funds</p>
<p>invest in companies that produce gold, silver and other precious metals</p>
<p>Precious metals fund</p>
<p>invest in bonds issued by corporations yields are typically higher than treasury funds may be high grade or high yield</p>
<p>corporate bond funds</p>
<p>offers higher yields than other traditional government funds</p>
<p>GNMA Funds</p>
<p>Types of Qualified Plans</p>
<p>Killed the face amount certificate co's</p>
Private securities transaction or when a rr sells something Privately
Written notification to firm
Opening Outside account
Permitted by finra, but some firms prohibit,
Code of procedure
Violation of Conduct rules: which is B/D to public or rr to public
Code of Arbitration
violation of UPC; is BD to BD or BD carrying
ALL variable products are considered
securities and subject to prospectus delivery requirements
Variable contract owners may convert their policies to whole life within 2 years from the date of issuance often without presenting evidence of insurability
Conversion
Equity indexed annuities
returns are partially linked to a stock market index provides investors with a guaranteed minimum return tax deferred surrender charges
Ate age of retirement ways to take out money
Lump-sum=take money and run
Annuity pay out period
accumulation units are exchanged for annuity units, payments may fluctuate.
Being a limited partner is not a job (Passive)
Does not need to tell company
must be approved by a principal before use
Sales literature and advertising
Not joint accounts
UGMA/UTMA
advertising/marketing/trailer commissions
12b-1 fees no load fees of .25% max
12b 1 fees
voting for new 12b 1 fees
Rates not set by fed
prime rate
Lowest to Highest
fed funds
Easy money
lower reserve requirement
Tight money
raise reserve requirement
Four tools of the Fed
discount rate
education savings plan
Contributions are not deductible
can be used for any education level
Cordell ESA
state sponsored
section 529 Plans
reinvestment of capital gains
impact on cost basis Increases
on reinvestment of capital gains
stays the same
12b-1 fees
asset based charge
Break down of expense ration
management fee, administration fee 12b1 fees. Management fee or investment fee makes up the largest portion
Formulas to know
current yield, bond song prices of LT, discount bonds,fluctuate more in price
Annual Interest/Market Value
Current Yield
Bond song prices
Triangle
Net assest Value
(total assets-total liabilities)/# of shares outstanding
POP
NAV/(100%-SALES CHARGE PERCENTAGE)
Sales charge percentage
(pop -Nav)/POP
Expense Calculations
(management fee + administration fee + 12b1 fee) divided by average assets
annual return
ending nab + distributions - initial NAV) divided by initial NAV
Sec yield or current yield
Annual dividends /current pop
tax equivalent Yield
Municipal yield /(100%-tax bracket)
net yield
taxable yeild X (100%-tax bracket)
Product of an investment advisory firm
Wrap accounts
US imports prefer a
strong dollar
US exports prefer a
weak dollar
Fed increase money supply
interest rates fall
Fed decrease the money supply
Interest rates rise
Individual letters, individual e-mail or text message, written or electronic communication to any number of existing customers customers and/or fewer than 25 prospective customers
Correspondence
form letter, email or text to 25 or more prospective customers, research reports, telemarketing scripts , brochure or circulars, seminar texts, market letters, reprints or excerpts of previously published articles, if not independently prepared
Sales Literature
Newspaper, magazine,or billboard ads, television or radio, commercials, phone book yellow pages ads, internet websites, video taped presentations, motion pictures
Advertising
IRA acceptable investments
stocks, bonds, mutual funds, annuities, U.S minted coins
Non acceptable for IRA
Insurance, collectables (stamps, art, gems, and antiques) short sales of stock, margin trading, speculative options strategies.
Highest rate of return no benefit payout option annuity
Straight life
Annuity -least rate of return
joint and last survivor
middle rate of return
life annuity with period certain
lower lowest rate of return has beneficiary set balance if an annuitant dies (estate)
Unit refund life
as bond prices rise
bond Yields fall
bonds yields rise
bond prices fall
ABC
agent broker commission
md p
mark up dealer principal
use credit to purchase securities
Margin account
Time frame to appeal FINRA Rules
25 days
Found in the Prospectus
Distribution /service fee = 12-b1 fees and management fees
Asset class thought as classes of investments is
an Index
Production is also known as
pop
a joint in which the decease portion of the account goes to his estate
Tenants in common
the assets would go to the surviving owner
joint tenants with right of survivor
Required by patriot act for anti money laundry
establish a independent audit function that will monitor and evaluate the firms anti money laundry program
Higher fees, lack of liquidity, lack of diversification, no guaranteed redemption at the nAV
Hedge funds
Priced once per business day (4pm), forward pricing, Nav and pop determined by formula
Open-end Funds or Mutual funds. Have no secondary market
priced all day (continued pricing) Bid and Ask prices set by supply and demand
Closed end funds in the secondary market
time frame to fill out CTR
15 calendar days
attempts to prevent the price of a security from falling
Pegging
attempts to prevent the price of a stock from rising
capping
created to protect those who invest in companies whose primary business is to invest in other securities on behalf of their shareholders
Investment company act of 1940
is the federal law that governs distributions of securities to the public usually an offering of new securities by an issuer. New issues must be 1 registered with the sec under the act or 2 exempt from registration of one of the provisions of the act
securities act of 1933
regulates broker dealers and the sales practices regarding variable products
securities act of 1934
Market as a whole and pay little costs
Index funds: they traditionally mirror a particular index "s & P 500"
Undewriter acts as an agent
Best efforts, All or none, Minimax
Underwriter acts as principal
Firm Commitment, and Standby underwriting
Unsold shares for firm commitment
retained by underwriter. Transaction will not be canceled if mimimum amount is not sold
Best efforts unsold shares
return to issuer , transaction will not be canceled if minimum amount is not sold
All-or -none unsold shares
return to issuer, sale will be canceled if munimum is not sold
Minimax
returned to issuer, sale will be canceled if minimum is not sold
Stand by Underwriting
may attempt ot use a right offering to raise additional capital from existing shareholders. may choose to purchase the new shares for its own account
may not be sold to more than 35 non accreditied purchasers and has no limit on the number of accreditied investors who may purchase the offering
Reg d
Accredited investors include
banks and savings and loans
To be wealthy individual net worth or income
1 million in net worth or joint net worth of over 1 million. income of 200 thousand and 300 joint each of the last two years
Registered is a term found in the IRS code to designate
an investement company that distributes at least 90% of its net investment income.
Sell short means
to borrow
sell Long
means to buy
Bullish
buy calls and sell puts
Bearish
buy puts and sell calls
offers "pure protection" only
Term life Policies
Invested in the general account
Whole life Policies
Invested in the general acccount
Universal life policies
Has a guaranteed minimum death benefit
Variable universal life insurance
Fluctuating death benefit, put with a gauranteed mimimum
Variable life insurance
Frequency of variable policy calculations
Value of Assets is daily
Greater of 45 days from execution of the application or 10 days from receipt of the policy. Sign on dotted line July 1st got policy july 20
Free-look
Life insurance taxation
pass free to the beneficiary are potentially subject to estate taxation
1035 exchange
tax free exchange to another product offered by their existing provider or to move assets to a different insurance comp. one annuity to another or life insurance product to an annuity product.
Valid reason for 1035
better performance, low costs or economic benefit
Viaticals
Selling the benefits of a life insurance policy to a third party.
During the acccumulation period
variable annuities get accumulation units
Once annuitized
these accumulation units become annuity units
fixed and variable annuities can be bought in three ways
single premium deferred
lump sum investment is made and grows on a tax deffered basis
SPDA or single premium deferred
typically used to provide retirement income
Periodic payment deferred
lump sum is deposited and disributions begin imediately.
Single premium immediate
Air
assumed interest rate
the insurance company promises to pay the annuitant for life.
Straight life
covers the life of the annuitant and one another person
Joint and Last survivor
Annuitant will select a certain mimimum time period certain option. 5 10 15 years
life annuity with period certain
annuitant the ability to name a beneficiary on the account. If the annuitant passes away before he recieves an amount equal to the value of the annuity units are paid out to him is benneficairy will recieve the balance
unit refund life
death benefits on annuity contracts
do not pass tax free to the beneficiary. any benefit above the contracts tax basis is taxable
joint account who intend to leave all of thier assets to each other in the event that one of them dies
Joint tenants with right of survivors
joint account if someone dies the money goes to the person who dies estate
tenants in common
IDR taxed
Taxed at alternative minimum tax rate
front end load 1940
50% of first years payments maximum of 9% over the life of the plan
Spread Load /1970)
Maximum of 20% of any one time payment maximum of 16% average of the first four years payment. maximum of 9% over the life of the plan
