Unit 22

A married couple opens a new account with a broker-dealer as tenants in common. In explaining the details of the account to the couple, the registered representative would not indicate which of the following?

Certificates may be registered in the name of either party. With a joint account, certificates must be registered in the names of all parties to the account.

If the beneficiary of a custodian account dies, the securities in the account pass to

A) the minor's estate.

One difference between an UTMA account and an UGMA account is

an UTMA account has a wider set of allowed investments. UTMA accounts allow real estate holdings, an UGMA account does not. Neither accounts are tax deferred and both accounts are irrevocable. The UGMA transfers at the age of majority, the UTMA may transfer as late as age 25.

Under the Uniform Transfers to Minors Act (UTMA), a custodian may invest in all of the following except

blue-chip stocks on margin. A custodian may not purchase securities in an account on margin or pledge them as collateral for a loan.

All of the following accounts would allow all parties with access to the account to make withdrawals except

individual with limited POA. Individual accounts with limited POA (power of attorney) allow a designated person to place trades but not make withdrawals. All the other do allow withdrawals as well as placing trades by all parties with access to the account.

Three brothers open a joint account instructing you that if they die, they want the cash and securities in the account to go to the remaining parties to the account. The account should be opened

with rights of survivorship. Under joint tenants with right of survivorship (JTWROS), each brother's interest in the account would go to the surviving brother. Although JTWROS accounts may be opened with a TOD designation, that is not the best answer to this question - that is a feature that would be added to the account. From time to time, you will see questions on the exam where it will be a challenge to choose between two good-looking answers. The key is to pick the one that is the most appropriate to the specific question.

Which of the following accounts would allow the assets of a single father's account to go directly to his daughter while avoiding probate but not a let her have access while he is alive?

B) Individual with TOD

Which of these business structures would pass through the results of the business to the owners and protect the owners from the liabilities of the company?

C) An LLC

Which of the following are characteristics of a revocable living trust? It is established before the grantor dies The grantor can change beneficiaries The grantor can add or remove items from the trust The grantor is subject to tax on income that remains in the trust

I, II, III, and IV In a revocable living trust the grantor has complete control over the trust while alive, and because of this, the grantor is also subject to any tax implications of the trust.

What happens to the contents of a custodial account in the event of the death of the beneficial owner (the minor child)? The account's contents are returned to the donor(s). The custodian's fiduciary responsibility ceases. The account passes to the minor's estate. The custodian remains fiduciary.

II and III

Which of the following statements are true of an irrevocable trust? The grantor may change the terms of the trust The grantor must give up ownership of items placed in the trust The structure of the trust may reduce estate taxes The grantor may retain ownership of items placed in the trust

II and III The grantor may be able to avoid some of the tax consequences because he gives up ownership of items in the trust and cannot change the terms of the trust once established.

A registered representative is appointed the fiduciary for a trust account. Which of the following is true?

Investment decisions must be made in accordance with the prudent investor rule. When acting as a fiduciary, all investment decisions must be made in accordance with the prudent investor rule, which mandates that only wise and safe investment decisions be made. Speculative positions, such as selling short or writing uncovered call options, are almost always prohibited. Margin trading can only occur if it has been specifically designated as being allowed in the trust documents. Fiduciaries may charge a reasonable fee for their services but may not be compensated based on, or share in, profits.

Craig and Judy have just married. It is a second marriage for both of them and they both have kids from a prior marriage. Craig would like his portion of their account to go to his kids when he dies and Judy would like her portion to go to her kids when she dies. As new partners in marriage, while they are both alive they would both like to have full access to the account. What type of account(s) should they set up?

Joint tenants in common (TIC)