1. . Your client, Susan, age 60, cannot afford to retire until age 62 when she becomes
eligible for Social Security and company pension benefits. Susan no longer feels
appreciated by her company and was recently passed over for a promotion. Her
husband Brent, age 63, lost his company health care plan and dependent coverage
when he retired, but Susan has been able to cover the two of them on her company's
plan. If Susan takes early retirement at age 62, her company benefits plan stipulates that
her health care coverage will end. Susan's health is excellent, but Brent's health is just
fair. About which of the following issues regarding retirement should Susan be
concerned?
2.
3. I. Is now the right time?
4. II. Brent won't be eligible for Medicare for almost two more years.
5. III. How will my spouse/family be affected? - ANS-II and III only
6. Susan knows now is not the right time for retirement. She cannot afford to retire until she
turns 62. The right time may be when clients feel that they are losing their ability to
perform up to standards, the economics of working become less favorable, or the
worker's personal health is an issue. If Susan retires, neither she nor Brent will have
health care coverage; also, neither will qualify for Medicare until age 65 (almost two
more years for Brent). Although Susan's health is excellent, Brent's health is fair. Susan
is very concerned about how her spouse and family situation will be affected. A client
who doesn't feel appreciated by his or her company is typically asking whether he or she
wants to be retired, is the work satisfying, and does he or she have control over working
conditions.
7. (LO 6-2)
8. A lump sum payment of the proceeds of a life insurance policy that is made to the
beneficiary upon the insured's deat - ANS-is generally exempt from income taxation.
9. The lump sum proceeds of a life insurance policy (even if a MEC) paid to a beneficiary
are generally exempt from taxation. Withdrawals and loans from a MEC may be taxable.
10. A Medicare Part A patient must pay
11.
12. all costs for a hospital stay beyond 150 days.
13.
14. the annual deductible for out-of-hospital doctor's services.
15.
16. all costs above the hospital deductible for a 30-day stay in a hospital.
17.
18. the approved costs of care in a skilled nursing facility for the first 10 days. - ANS-all costs
for a hospital stay beyond 150 days.
19.
,20. The patient must pay all costs related to a hospital stay beyond 150 days. Answer b. is
wrong because it describes a gap in Medicare Part B coverage, not Part A. Answer c. is
incorrect because it does not describe a gap; Medicare pays for the cost of the first 60
days in a hospital, but the patient must pay the Part A deductible. Answer d. is wrong
because Medicare will pay the approved charges for the first 20 days in a skilled nursing
facility. The gap results from the cost of care that exceeds 20 days (the patient pays the
per day copayment) or the need for custodial care.
21. A springing durable power of attorney - ANS-gives the attorney-in-fact authority only
when the principal becomes incompetent.
22.
23. The very purpose of any durable power of attorney is to give the attorney-in-fact
authority to act after the principal becomes incapacitated. However, such authority does
not survive the principal's death. Such authority is created in an independent document
(not part of a living will), and is effective immediately in this type of power of attorney. A
springing durable power of attorney becomes effective when the principal becomes
incompetent or incapacitated.
24. (LO 5-2)
25. All of the following are correct statements regarding longevity annuities except
26.
27. owners can put no more than 25% of their retirement plan money into a longevity annuity
with an overall cap of $130,000.
28.
29. accumulations in these annuities are exempt from minimum distribution rules.
30.
31. payments from longevity annuities are larger than those received from a regular annuity
due to the delay in receipt of the annuity payments.
32.
33. owners must begin receiving income by age 75. - ANS-owners must begin receiving
income by age 75.
34. Owners must begin receiving income from a longevity annuity by age 85. All of the other
statements are correct.
35. (LO 4-5)
36. All of the following are ways that a person can voluntarily transfer estate assets to
another person or entity at death except - ANS-by gift.
37. Probate and will substitute are ways that a person can voluntarily transfer estate assets
to another person or entity at death. Gifting is one of the two ways that a person can
voluntarily transfer estate assets to another person or entity during life, not at death.
38. (LO 8-9)
39. All of the following assets in a decedent's estate require probate except
40.
41. the decedent's interest in property held in tenancy in common.
42.
43. the decedent's interest in a family limited partnership.
44.
, 45. the decedent's interest in property held in joint tenancy with right of survivorship that the
decedent left to his son in his will.
46.
47. the decedent's interest in property that he owned in fee simple when the decedent had
no will. - ANS-the decedent's interest in property held in joint tenancy with right of
survivorship that the decedent left to his son in his will.
48. Right of survivorship property bypasses probate, while property held as a tenant in
common or in which the decedent solely owned his interest does not.
49. All of the following assets would be included in a decedent's gross estate except -
ANS-the proceeds from a life insurance policy on the decedent that was always owned
by the decedent's spouse, with the spouse as the named beneficiary.
50. Because the decedent never owned this policy, and his estate is not the beneficiary,
these proceeds are not included in the decedent's gross estate. The decedent's retained
right to income in option c. causes inclusion. The decedent owned an interest in the
residence at death, and therefore his interest must be included in his gross estate. In
option a., because the decedent assigned incidents of ownership in this policy within
three years of death, the proceeds must be included in the decedent's gross estate.
51. (LO 8-8)
52. All of the following could stand alone as descriptions of the process of "estate planning"
except
53.
54. planning for the conservation and distribution of the client's estate during life and at
death.
55.
56. considering both tax and non-tax implications of estate transfer transactions.
57.
58. creating a will. - ANS-creating a will.
59. "Creating a will" does not adequately describe the process of estate planning. Estate
planning generally focuses on the conservation and distribution of the client's estate
during life and at death and requires consideration of both tax and non-tax implications
of estate planning transactions.
60. (LO 8-7)
61. An income-tax-penalty-free distribution cannot be made from a tax-sheltered annuity
(TSA) until the employee does which of the following?
62.
63. I. separates from service after attaining age 55
64. II. attains age 55
65. III. becomes disabled or dies
66. IV. takes a distribution under most hardship withdrawal rules - ANS-I, and III only
67.
68. Penalty-free distributions can be made from a TSA or 401(k) when an employee
separates from service after attaining age 55, attains age 59½, becomes disabled or
dies, or takes a hardship distribution for deductible medical expenses only. All other
hardship withdrawals are subject to early withdrawal penalty rules. Attaining age 55
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