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Essentials Of Personal Financial Planning 1st Edition Susan M. Tillery, Thomas N. Tillery - Solutions

Which are true regarding an annuity?I. It is a contractual obligation to make periodic payments.II. The payments may be paid at some future date.III. The payments must begin immediately.IV. The single life annuity provides the highest income stream to an individual.A. I, II.B. I, II, IV.C. I, III,
All of the following are correct as to how the PBGC is financed except A. Assets of defined benefit plans which have been taken over.B. Insurance premiums paid by plan participants.C. PBGC investments.D. Recoveries from plan sponsors.
Which of the following is a probability analysis?A. Historic returns.B. Monte Carlo.C. Straight-line returns.D. Stress testing.
If a personal financial plan’s assumed rate of return is 7 percent and the assumed inflation rate during financial independence is 6 percent, what is the inflation-adjusted return for the plan?A. .9434.B. -.9346.C. .9346.D. 4340.
Which of the following models projects the likelihood of the client achieving a goal of financial independence?A. Historic return.B. Probability analysis.C. Straight-line return.D. Stress-tested historic return.
Which federal agency was created by the ERISA?A. Bureau of Labor Statistics.B. Department of Labor.C. Pension Benefit Guaranty Corporation.D. Social Security Administration.
Which of the following is not a characteristic of a defined benefit plan?A. A guaranteed retirement benefit.B. Risk of preretirement inflation assumed by employer.C. Benefits based upon the participant’s compensation and years of service.D. Employer contributions not attributed to a specific
Which of the following is true about cash balance plans?I. Past service credit is available.II. Employer guarantees a minimum rate of return.III. Participants direct investments in hypothetical accounts.IV. Forfeitures are used to reduce employer contributions.A. I, IV.B. I, II, IV.C. II, III,
Which is an advantage to an employee who participates in a profit-sharing plan?A. Employee does not have to make investment decisions.B. Graded vesting schedule.C. Older employees receive the greatest benefit.D. Predictable employer contributions.
An SEP has which characteristic?A. Loans and hardship withdrawals are available.B. Age-weighting or cross-testing is permitted.C. Social Security integration is permitted.D. Employer matching is permitted.
Which of the following is a defined benefit plan?A. 403(b).B. 412(i).C. 457(b).D. 457(f).
Which of the following is true regarding a SIMPLE IRA plan?A. The employer must have 100 or more employees.B. Participant loans are allowed.C. It can be combined with a money purchase plan.D. An employee is immediately vested.
Which type of funding vehicle is not approved for 403(b)plans?A. Mutual fund.B. Variable annuity contract.C. Individual securities.D. Fixed annuity contract.
Which of the following entities may not sponsor a 403(b)program?A. State of Florida.B. 501(c)(3) organizations.C. Clergy.D. A for-profit hospital.
Which of the following types of business cannot establishan ESOP?A. Closely held C corporations.B. C corporation.C. Partnerships.D. S corporations
According to Section 7702B—Treatment of qualified long-term care insurance, which of the following is not an activity of daily living (ADL):A. Bathing.B. Dressing.C. Transferring.D. Walking.
Which of the following statements are correct concerning Medicare and long-term care?I. Medicare admission to a certified nursing facility requires three days of prior hospitalization.II. Medicare covers short-term certified nursing facility care only.III. Medicare does not pay for skilled care.IV.
Which of the following is not a type of reverse mortgage?A. Amortization reverse mortgage.B. Home equity conversion mortgage.C. Proprietary reverse mortgage.D. Single-purpose reverse mortgage.
Which of the following powers may not be granted to an agent?A. Change a beneficiary for an employer-sponsored retirement plan.B. Engage in litigation.C. Execute a living will.D. Sell real estate.
Generally, which of the following is not eligible for a Schedule A itemized deduction?A. Long-term care insurance premium.B. Medicare Part B premium.C. Medigap premium.D. Rent paid to an assisted living facility.
Which of the following household employees must have Social Security taxes withheld?A. Child under age18B. Individuals under age 18 whose household work is their principal occupation.C. Parent.D. Student.
The goal of palliative care is A. To improve quality of life for the patient.B. To improve quality of life for the patient and family.C. To facilitate medical treatment.D. To fulfill the Medicare mandate.
Which of the following is true regarding Medicare benefits for a long-term care facility?I. Benefits are only provided for 20 days.II. Benefits are only provided for 100 days.III. No benefits are provided.IV. Must be preceded by a hospital stay of at least five days.A. III.B. II, IV.C. II.D. I, IV.
The driver of an automobile was severely injured in an automobile accident. The driver is___________ .A. Incapacitated.B. Incompetent.C. Injured.D. Unfortunate.
Ralph, 55, has worked for Johnson Plastics, Inc. for 60 days and has now qualified to enroll in the company’s group benefit plan. One of the employee benefits provided is group long-term care insurance. Johnson Plastics, Inc.pays 100 percent of the premium for this insurance. How are the
A is a program established by a state or an eligible educational institution that allows taxpayers to contribute to either a fund that prepays qualified educational expenses or a savings account for a designated beneficiary.A. Coverdell education savings account (ESA).B. Education savings bond
Assets held in retirement plans reported on the FAFSA. Elective deferrals reported on the FAFSA and are counted as untaxed income.A. Are, are not.B. Are, are.C. Are not, are.D. Are not, are not.
Which of the following tax credits is applied per eligible student?A. American Opportunity Tax Credit (AOTC).B. Child tax credit.C. Earned income tax credit.D. Lifetime learning credit (LLC).
Angie and Pat Rice want to begin funding for their daughter Ashley’s education. Ashley is in pre-K at the Wilson School. She will need a computer when she begins first grade in two years. How should Angie and Pat fund for the computer?A. Coverdell ESA.B. QTP.C. Money market account.D. UTMA
Which of the following is correct about a Coverdell ESA?A. All earnings must be paid out at age 18.B. Contributions may only be made by a parent.C. Contributions to the ESA are tax-deductible.D. Multiple contributions can be made on behalf of one beneficiary per year by multiple individuals, as
For purposes of financial aid for a dependent, a prepaid tuition plan is counted as the asset of the A. Educational institution.B. Donor.C. Parent.D. Student.
Mr. and Mrs. Wilson want to establish QTPs for Dennis and their three other grandchildren, all of whom are under age11.What is the maximum amount they can contribute in one year without making a taxable gift?A. $56,000.B. $112,000.C. $140,000.D. $560,000.
Which of the following is not correct regarding a Coverdell ESA?A. Account earnings are income tax-free if the funds are used for qualified education expenses.B. Contributions are considered to be a gift of a future interest.C. A beneficiary may have multiple ESA accounts.D. The funds must be
Madge and Brent Jones want to establish an education account for their minor child, Tahoe. The Joneses do not want to incur the expense of establishing a trust and they want to gift parcels of real estate into the education account. Which of the following should they use?A. Coverdell ESA.B. QTP.C.
Which of the following are examples of income in respect of a decedent?I. Dividends declared but not received at the time of death.II. Medical expenses accrued prior to the time of death.III. Salary earned but not paid.IV. Business accounts receivable (not booked).A. II, IV.B. I, II, III.C. I, III,
Mr. Waters is age 70; which one of the following is a skip person for him?A. His certified public accountant, age45.B. His granddaughter, whose parents died in an automobile accident.C. His grandnephew.D. His son, age 30.
Mr. Able Nord is a 50 percent owner with Ms. Beatrice Wilson of the AB Bottling Company, Inc. They are considering a funded cross-purchase buy-sell agreement.How should the life insurance contract on the life of Able Nord be structured if the bottling company is valued at$10 million? Owner A. AB
Pat and Angie McDonald are married and, by every measure, considered very wealthy. Six weeks ago, Pat passed away unexpectedly. In meeting with their estate attorney, Angie discovers that the bypass trust cannot be fully funded. Pat’s will has provisions for a disclaimer trust.Which one of the
Which of the following statements about self-canceling installment notes is not correct?A. Buyer pays a premium for the seller taking on the mortality risk.B. Buyer’s remaining payments are canceled at the seller’s death.C. Seller has no estate inclusion of the remaining payments.D. Seller pays
Which of the following is not an incident of ownership in a life insurance policy?A. Right to assign.B. Right to make premium payments.C. Right to name beneficiaries.D. Right to terminate the policy.
Which of the following is another name for a marital trust?A. A Trust.B. B Trust.C. Revocable Trust.D. Portability Trust.
The Suffolk family owns a large ranching operation in Texas. It has been in the family for generations. Hal Suffolk, Sr. owns 25 percent of the ranch, and his interest represents 75 percent of his taxable estate. His son and daughter have worked on the ranch for the past 20 years, and he plans to
Mrs. Adams, owner of a large cosmetics manufacturing company, transfers a portion of her stock into a GRAT with a five-year term. One year after granting the trust, she dies in a skiing accident in the German Alps. What are the estate tax implications to Mrs. Adams?A. Nothing is included in her
Mr. Watson transferred the following life insurance contracts within three years of his death. Which of the following policies is not included in his gross estate?A. A life insurance contract on his former wife that he gifted to his daughter (Mr. Watson was the contract owner).B. A life insurance
Which of the following resources may be used to pay for a long-term care stay in a nursing home that exceeds 100 days?A. Medicaid.B. Medicare.C. Medicare supplement insurance.D. Medigap insurance.
Paul Baker is a more-than-2 percent shareholder of Gemstone Brokers, Inc., an S Corporation. The corporation pays the premium for Paul Baker’s personally owned disability income insurance contract. Which of the following is/are true?I. Gemstone Brokers, Inc. can deduct the premium.II. Benefits
Who of the following is eligible to establish a health savings account?A. An individual participating in a high-deductible health plan.B. An individual eligible for Medicare.C. An individual claimed as a dependent.D. An individual participating in an employer-sponsored group health insurance plan.
Which of the following is not an essential health benefit under the Affordable Care Act (ACA)?A. Ambulatory patient services.B. Laboratory services.C. Maternity and newborn care.D. Vision care.
Under the employer shared responsibility provision of the ACA, which of the following is correct?A. Employers with 50 or more full-time employees who offer health insurance coverage, and have at least one full-time employee who receives a premium tax credit, are assessed a fee of \($2,000\) per
Susan Jones, owner of HyperTech, LLC decided that her storefront windows need to be washed in order to attract more foot traffic. The business sells iDevices, which are visible from the windows on the street. While Chris, an employee, was on a ladder cleaning the windows, he dropped a bucket on a
An insurance payment in excess of the adjusted basis of destroyed property will result in a___________ .A. Current gain.B. Gain.C. Tax free gain.D. Taxable gain.
Workers’ compensation is an example of which of the following types of liability?A. Absolute liability.B. Joint liability.C. Strict liability.D. Vicarious liability.
A few years ago, Mr. Steed purchased a deferred annuity for \($150,000.\) It is currently worth \($200,000.\) He has decided to retire and begin periodic payments. His life expectancy is 16 years. If his periodic payments are \($1,500\) per month, how much of the monthly payment is income
What is the function of the National Association of Insurance Commissioners?I. Enact legislation for regulation of the insurance industry.II. Oversee state accreditation programs.III. Promote law and regulatory uniformity.IV. Protect the interests of policy owners while preserving state
What type of investment risk is associated with an S&P index fund?A. Diversifiable risk.B. Nondiversifiable risk.C. Nonmarket risk.D. Nonsystematic risk.
A self-assessed risk-averse client wants to accumulate wealth. Of the following, which is the most critical action the personal financial planner should accomplish to assist the client in the achievement of the goal of wealth accumulation?A. Invest the portfolio in 100 percent cash equivalent
Components of an investment policy statement include all of the following except:A. Asset allocation strategy.B. Client constraints.C. Duties and responsibilities of the client and the personal financial planner.D. Schedule pages of insurance contracts.
Susan Adams’s marginal tax rate is 25 percent. She is contemplating the purchase of either a corporate bond that has a 3.5 percent coupon or a newly issued tax-exempt municipal bond paying2.5 percent. What is Susan’s taxable equivalent yield if she were to purchase the tax-exempt municipal
Hunter Martin is considering the purchase of a bond to round out the asset allocation for his investment portfolio.Hunter is in the 25 percent marginal tax bracket. Which bond provides the highest after-tax return for Hunter?A. Municipal bond paying 3 percent.B. Corporate bond paying 3.5 percent.C.
What is the investment objective for Elizabeth and Charles Wilson?A. Education funding.B. Growth.C. Liquidity.D. Tax minimization.
Alternative investments are obtained through the use of A. Commodities.B. Exchange traded funds.C. Hedge funds.D. Mutual funds.
Which are performance benchmarks for the IPS of Elizabeth and Charles Wilson?I. Barclay’s aggregate.II. CPI – U + 2 percent.III. MSCI ACWI ex-US.IV. S&P 1500.A. III, IV.B. I, III, IV.C. IV.D. I, II, III, IV.
Who is the investment manager for Ann Marie’s 529 college savings plan?A. Hometown Wealth Management, LLC.B. Paraklete® Financial, Inc.C. T. Rowe Price.D. Vanguard.
Which accounts are managed by Hometown Wealth Management, LLC for Charles L. Wilson?I. Rollover IRA.II. Roth IRA.III. SEP.IV. Traditional IRA.A. I, II.B. II, III.C. II, IV.D. III, IV.
Which of the following factors least affects a defined contribution plan participant’s account balance?A. Investment return.B. Inflation.C. Employer contributions.D. Life expectancy.
Alice Jones is a participant in Shield, Inc.’s ESOP. Over the years, Shield, Inc. has contributed stock with a cost basis of \($100,000\) to Alice’s account. Alice is planning to retire, and the stock has a fair market value of \($300,000.\) She anticipates selling the stock at some point in
Pat’s 58-year-old husband Dennis recently died. He was employed by FastFood, Inc. at the time of his death. She brings Dennis’ retirement plan summary description to you for review. The employer-sponsored retirement plan is an ESOP. Pat is age 60. What advice might you give to her?I. If she
Which of the following retirement plans will qualify for NUA lump-sum treatment?I. Profit-sharing 401(k) plan.II. SEP/IRA.III. 403(b).IV. ESOP.A. All of the above.B. I, III, IV.C. I, II, IV.D. I, IV.
What is an exception to the tax penalty for the modification of a series of substantially and equal periodic payments within 5 years of the date of the first payment or, if later, age 59½?A. Disability.B. Illness.C. Relocation.D.Unemployment.
Herbert Johnson, age 55, participates in Miller Hospital’s 403(b) plan. His compensation for 2016 is $60,000. What is his maximum salary deferral for 2016?A. He can defer $12,000.B. He can defer $15,000.C. He can defer $18,000.D. He can defer $24,000.
Harmony Services, Inc. has 58 employees. The company would like to implement an employer-sponsored retirement plan with flexible contributions. The census indicates that integration with Social Security benefits would benefit the higher-wage earners. The director of human resources would like a
Richard Thomas, the owner of Green Scapes Lawn Services, Inc., is age 57.He began the company 30 years ago, and at times it was a real struggle. Richard would like to retire at age 67. Because the lawn services industry is physically demanding, most of his employees are younger and lower paid
Angie Walters retired from Hanson, Hanson and Roberts, LLLP on her 70th birthday on June 10. If Angie accomplishes a direct rollover to an IRA, when must she take her first RMD?A. April 1 of the following year.B. June 10 of the following year.C. December 31 of the current year.D. Within 60 days of
Which of the following retirement plans is eligible for a QDRO?I. 403(b).II. 401(k).III. SEP.IV. SIMPLE IRA.A. I, II.B. II.C. I, III, IV.D. III, IV.
Jack works for Peterson Millworks, is married, and has two children. Peterson Millworks offers a PPO to its 50 employees. If Jack and his wife Alice were to divorce, which of the following is or are correct?I. Alice and Jack’s children will be eligible for 36 months of COBRA coverage.II. Alice
Which fringe benefits are income taxable?A. Employee achievement awards.B. On-premise athletic facilities.C. Prepaid legal services.D. Occasional personal use of a company copying machine.
Who qualifies for a dependent care assistance plan?I. A dependent child who was under the age of 18 when the care was provided.II. A dependent who is mentally or physically challenged.III. A relative who is mentally or physically challenged.IV. A spouse who is mentally or physically challenged.A.
Which pays a fixed amount and only provides benefits when the insured is hospitalized?A. Hospital indemnity.B. Managed care plan.C. Point of service.D. Surgical indemnity.
An employee may exclude from wages the value of certain planning services provided by an employer maintaining a qualified retirement plan.A. De minimis.B. Fringe benefit.C. Prepaid investment services.D. Retirement.
Which is eligible to be considered an employee achievement award by an employer?A. Cash.B. Tangible personal property.C. Tickets to a sporting event.D. Vacation.
Which is required in order to participate in an HSA?A. Health maintenance organization.B. Point of service.C. Preferred provider organization.D. Qualified high-deductible plans.
Which is considered an indirect gift by an employee to a trust?A. Contributions to an adoption assistance program.B. Irrevocable assignment of group term life insurance.C. The revocation of a Crummey withdrawal right.D. Use of prepaid legal services.
Dr. Dante DeMarco, dermatologist, wants to provide fringe benefits to his staff. Which fringe benefits can be provided income-tax free to his employees?I. 50 percent off on microdermabrasion.II. $100,000 group life insurance.III. Occasional theater tickets.IV. Qualified parking.A. I, II.B. I, IV.C.
Benefits from which employer-provided plans will be received by the employee income-tax free?A. $7,000 in educational assistance.B. Group disability plan paid for by the employer.C. Prepaid legal services plan paid for by the employer.D. Retirement planning services.
Under an endorsement form of split-dollar life insurance, the insured’s spouse is which of the following?A. The owner of the life insurance contract.B. The beneficiary of the life insurance contract.C. The premium payer of the life insurance contract.D. The contingent beneficiary.
The___________ is an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees.A. Employment agreement.B. Executive bonus plan.C. Secular trust.D. Top-hat plan.
Income is taxable to a cash basis taxpayer in the year in which it is paid, or made available to the taxpayer. This is the doctrine of_____________ .A. Constructive receipt.B. Economic benefit.C. Risk of forfeiture.D. Variable bonus.
All of the following are required for a qualified employee stock purchase plan except:A. All eligible employees must be allowed to participate in the plan.B. An employee may not purchase more than $25,000 worth of stock (based on fair market value on the first day of the offering period) for each
Which of the following is Section 1244 stock?A. Ledger stock.B. Qualified employee stock purchase plan.C. Restricted stock unit.D. Unrestricted stock unit.
The need for a rabbi trust would be indicated in which of the following situations?I. An acquisition.II. Bankruptcy.III. Hostile takeover.IV. Mergers.A. I, IV.B. I, II, III.C. II, III.D. I, III, IV.
With the opening of a local casino, the Bank of Red River is having record earnings. The bank’s increased profits and the new casino are the direct result of the bank’s president, Mortimer Rock. The bank wants to establish a secular trust for Mortimer. Which of the following statements is or
Which of the following are correct about a nonqualified deferred compensation plan?I. A nonqualified deferred compensation plan is an unsecured promise of a future benefit.II. Nonqualified deferred compensation plan assets are not subject to the claims of creditors of the employer.III. The plan may
Which of the following trusts is a top-hat plan?A. ERISA trust.B. Grantor trust.C. Rabbi trust.D. Secular trust.
Restricted stock is taxable as____________ in the year_________ .A. Long term capital gains/it is granted.B. Long term capital gains/it is sold.C. Ordinary income/it is granted.D. Ordinary income/it is sold
Which of the following are true about a pooled income fund?I. It is a fund that is established and maintained by a public charity.II. It is a trust that is established and maintained by a public charity.III. It receives contributions from individual donors that are segregated for investment
Jack and Alice McWilliams made a charitable cash contribution of \($50,000\) to a 50 percent organization and \($30,000\) charitable cash contribution to a 30 percent organization. The McWilliams’ adjusted gross income is \($120,000.\) What are their deductible charitable contributions for the
The IRC allows individuals and businesses to make noncash contributions to qualifying charities and to claim deductions for these contributions on their income tax returns. The Internal Revenue Manual defined four types of noncash property. Which of the following are types of noncash property?I. A
Gene MacArthur, a wealthy 55-year-old widower, wants to reduce his taxable estate, supplement his current income, provide an inheritance for his children, and benefit his alma mater. He doesn’t want to gift money outright to charity now. What should he consider?A. A donor-advised fund with a
What is the required minimum payout rate to a qualified charity from a CLT?A. 0 percent.B. 5 percent of the initial corpus.C. 5 percent of the corpus valued annually.D. 5 percent of the fair market value of the corpus valued annually.
Dr. Dirk Mallard donated stock he purchased six months ago to his employer, State University. He purchased the stock for \($50,000.\) The current fair market value is \($60,000.\) Dr. Mallard’s adjusted gross income is \($120,000\).What is his maximum allowable charitable deduction in the current

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