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CHFC > TEST 2 > Flashcards

TEST 2 Flashcards

1
Q

Relative comparison

A

= anchoring

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2
Q

Neoclassical economics

A

full international knowledge to make choices that reflect preferences

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3
Q

GRAT beneficiaries

A

CANNOT change at all

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4
Q

GSTT exemption

A

= $22,360,000

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5
Q

High risk aversion

A

90% chance of winning or certain payment, choose certain payment

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6
Q

Representative bias

A

“past performance does not predict future results”

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7
Q

Longevity risk rule of thumb

A

30 years

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8
Q

Social security

A

CANNOT collect before retirement age or reduction in benefits
*no amount is entitled to everyone

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9
Q

Long-term capital gain

A

often 15% (but up to 28%)

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10
Q

No liquidity risk

A

stock

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11
Q

Completed gift

A

= remainder interest – all rights have to be given up (nothing stopping it)
** Revocable trust NOT a completed gift

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12
Q

Underperform mutual funds

A

return chasing, weight more recent information

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13
Q

Framing bias

A

o Gain frame = risk avoidant

o Loss frame = risk-seeking

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14
Q

Reference dependence

A

specific $ amount

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15
Q

Engagement letter changes?

A

only if client gives consent

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16
Q

“unified system” of gift/ estate tax

A

= same exemption for gift & estate (NOT GST)

- applicable credit amount = lifetime/ death transfers

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17
Q

GSTT

A

= grandchildren

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18
Q

Computation of federal estate tax

A

= deduction/ credit interchangeable

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19
Q

Not a taxable gift

A

= services (construction)

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20
Q

Market anomalies

A

o Low volatility anomaly
o Value effect
o Small stock effect

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21
Q

CAPM

A

= diversification
o Weak: technical, past performance
o Semi-strong: public information
o Strong: private information

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22
Q

TWO Systems do NOT explain

A

neoclassical theory

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23
Q

Behavioral finance

A

o Sunk cost
o Availability
o Confirmation

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24
Q

No monte carlo

A

in step 3

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25
Q

Converting retirement asset to retirement income

A

= NOT RMD
o Bucket approach
o Age-banded approach
o Essential vs. discretionary (flooring)

26
Q

Sub-optimal decisions

A

o Framing
o Heuristics
o Bias
*NOT information

27
Q

Disposition effect

A

= lock in gains on winning/ reference points, unwillingness to sell losing

28
Q

Qualified distribution from a ROTH IRA

A

= prior to 59.5, taking out closing cost for first home up to $10,000

29
Q

SSI/ Medicaid eligibility test

A

= all resources affect it (parents, gift, inheritance, trust, etc.)

30
Q

Individuals can only have ONE ABLE account

A

ABLE account
o Funds can only be used for disability expenses not covered by gov. program
o Adjusted up to twice a year

31
Q

Spousal support end

A

= payments end at payee’s death

32
Q

Risk management

A

o Life insurance
o Health insurance
o Property & casualty

33
Q

General partnership

A

= raise capital from others
o Does NOT have to file documents with the state
o Does NOT provide continuity of life of entity at death of owner

34
Q

Section 6166 Installment payment of estate tax

A

first 10 are interest only

35
Q

Child/ dependent care credit

A

limit $3,000 ($6,000 married)
o For child under 13 or incapacitated
o Dependent on AGI
o Reduced for upper-income

36
Q

Corporation

A

= reinvest earnings & defer income on individual federal income tax returns

37
Q

single-parent home

A

= life insurance

38
Q

Comprehensive financial planning

A

= client-oriented

39
Q

Education/ child tax credits

A

o American opportunity fund credit
o Lifetime learning fund credit
o Child tax credit

40
Q

Limited partnership

A

= equal control, significant capital, compensate passive owners

41
Q

S corporation

A

= minimize risk & taxes , equal control

42
Q

Continuity of life after business

A

o S corp
o LLC
o Limited partnership

43
Q

GRAT

A

= estate freezing

44
Q

Springing power of attorney

A

= not in effect until special needs is disabled/ incompetent

45
Q

Nonrecognition rule of Sec. 1041

A

= apply to sale to a former spouse (not taxable)

46
Q

Unlimited liability for damages of business activity

A

= sole proprietorship & general partnership

47
Q

LLC

A

= members choose to be taxed as partnership

o Treated as self-employed

48
Q

Prescription drug coverage

A

= available to all Medicare participants

49
Q

Living will

A

= pull plug

50
Q

Medical POA

A

= make decisions

51
Q

POLST

A

= doctor order for life sustaining treatment

52
Q

QTIP

A

= unlimited marital deduction for property

o Decide what happens to assets

53
Q

Annual gift exclusion

A

= $15,000 per BENE

54
Q

Provisional income NOT taxed

A

= less than $25,000

55
Q

Want to take social security early

A

= increases by 8%

56
Q

Exemptions for inclusion in estate

A 
o 5% or $5,000
o HEMS (not direct cash to them)
57
Q

Disclaimer effective

A

= say you don’t want assets to estate & walk away

***in writing

58
Q

2035

A

= add back into estate within 3 years (especially gift tax)

59
Q

ILIT

A

= NO RIGHTS, CANNOT CHANGE
o Grantor cannot change it (IRREVOCABLE)
o Can only GIFT premiums
o Only annual exclusion if Crummery provision (present interest)
o Last for 3 years before moves out of estate

60
Q

ROTH IRA

A

= low income/ tax bracket

*convert by Dec 31St of that year

61
Q

Capital gain exclusion

A

= $250K or $500k couple for sale of home

CHFC (8 decks)

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