Quiz 4

Question 1

What is an MSA?

Answer 1

medical savings account

Question 2

If Dale dies, what is his family’s COBRA option?

Answer 2

36 months of coverage

Question 3

If Dale is fired, what is his COBRA option?

Answer 3

18 months coverage

Question 4

If Dale is fired, what is his family’s COBRA option?

Answer 4

18 months coverage

Question 5

If Dale gets divorced, what is his family’s COBRA option?

Answer 5

36 months coverage

Question 6

What are some other qualifying events for COBRA coverage?

Answer 6

change full-time to part-time, legal separation, eligibility for medicare, loss of coverage status (marriage, age 26)

Question 7

What are the contribution sources for an HSA? (3)

Answer 7

Individual, family member on behalf of indiv, employer

Question 8

Who is eligible for an HSA?

Answer 8

individual covered under HDHP, no other plan, and below Medicare age

Question 9

Can you pay for health insurance with HSA proceeds?

Answer 9

yes

Question 10

Are HSAs use-it-or-lose it?

Answer 10

no

Question 11

Can an individual enrolled in Medicare contribute to an HSA?

Answer 11

no

Question 12

What about LTCI from an HSA?

Answer 12

yes, if it’s qualified

Question 13

What’s an HRA?

Answer 13

health reimbursement arrangement

Question 14

Who can have an HRA?

Answer 14

only C Corp

Question 15

What does an HRA do - and some particulars?

Answer 15

reimburses EE for substantiated med expenses up to a max amount per coverage period. no OTC drugs.

Question 16

The individual owns the insurance contract and pays the premium. Are premia deductible?

Answer 16

no

Question 17

The individual owns the insurance contract and pays the premium. Are benefits tax-free to him?

Answer 17

yes

Question 18

The employee owns the contract, and the employer pays the entire premium. Deductibility?

Answer 18

employer deducts as a bonus. EE recognizes the as income.

Question 19

EE owns the contract, ER pays under a group/salary continuation plan. Deductibility?

Answer 19

ER deductible, EE taxable benefits

Question 20

Taxation of cash value at surrender?

Answer 20

taxed as ordinary income

Question 21

Taxation of insurance dividends

Answer 21

treated as return of unused premium, tax-free (usually, non-MEC)

Question 22

Taxation of insurance death benefits

Answer 22

generally income tax-free

Question 23

Insurance: net cash value

Answer 23

cash value minus the loan

Question 24

TFV: policy transfers not jeopardized by TFV rule

Answer 24

1. to insured
2. to partner of insured (partnerships)
3. to corp in which insured is shareholder or officer
4. because of divorce agreement

Question 25

Are premiums for buy-sell agreements (whether stock redemption or cross-purchase) deductible?

Answer 25

No

Question 26

What are the two types of buy-sell agreements funded with insurance?

Answer 26

Stock Redemption, Cross Purchase

Question 27

What's another term for Stock Redemption buy-sell agreement?

Answer 27

Entity Purchase

Question 28

What's another term for Cross Purchase buy-sell agreement?

Answer 28

Stockholder purchase

Question 29

Basis change in cross purchase execution

Answer 29

shares bought by partner get stepped up basis, dead partner's estate also

Question 30

Basis change in stock redemption execution

Answer 30

estate steps up, buyer not

Question 31

fifth dividend

Answer 31

one-year term (only up to cash value of policy)

Question 32

What amount is taxable for a surrender of life insurance?

Answer 32

cash value less basis

Question 33

Coverage C

Answer 33

Personal property. typical sublimits: 1. $1000 for watercraft 2. $1000 for jewelry & furs 3. $2500 for silverware (theft only) 4. $200 for money/bullion

Question 34

Group life payout at EE death. Taxable?

Answer 34

no, tax free

Question 35

Company-funded payout to EE family at death of EE while employed. Taxable?

Answer 35

yes, used to be de minimis, not any more

Question 36

Defn: IRR

Answer 36

the discount rate at which the PV of the future cash flow equals the cost of the investment

Question 37

What does yield curve do?

Answer 37

compares yields of similar bonds but different maturities

Question 38

When yield curve goes negative to positive, what's best move?

Answer 38

buy longer maturities even if return slightly < than others

Question 39

What's notable about the anti-alienation rule of ERISA?

Answer 39

it's for when the money is still IN the plan

Question 40

Where do you often find disclaimer provisions?

Answer 40

in trust documents

Question 41

for a couple retiring now, with choices of home equity, sell home, obtain new mortgage, or obtain reverse mortgage, what's CFP think is best choice?

Answer 41

reverse mortgge

Question 42

CRAT

Answer 42

Charitable Remainder Annuity Trust

Question 43

definiting characteristics: CRAT

Answer 43

``` non-charitable beneficiary only 1 transfer in 5% out, fixed lasts up to 20 years or life at end, goes to charity ```

Question 44

CRUT

Answer 44

Charitable Remainder Unitrust

Question 45

defining characteristics: CRUT

Answer 45

similar to CRT but - multiple transfers OK - fixed percentage out

Question 46

CLAT: Charitable Lead Trust

Answer 46

- not while living, established on death - present value as estate tax deduction - income payable, excess to bennies (remaindermen) - giant deduction example in book ($100MM)

Question 47

CLUT: Charitable Lead Unitrust

Answer 47

- fixed percentage clat (?)

Question 48

QPRT: Qualified Personal Residence Trust

Answer 48

- end of the term, residence eliminated from grantor's estate - value of gift is discounted - if owner doesn't outlive term, asset goes back to estate

Question 49

GRAT: Grantor Retained Annuity Trust

Answer 49

- irrevocable - apprec or income-producing property - receive fixed annuity - at end of term, balance transferred to bennies - if grantor DOESN'T live out term, , property back to his estate - grantor has "string"

Question 50

GRUT: Grantor Retained Unitrust

Answer 50

- less convenient than GRAT - fixed percentage out, revalued annually - best asset is something apprec, rather than income