Unit 22

Which of these is not correct? A) There is no annual contribution limit for a 529 plan. B) Both a 529 College Savings Plan and an ESA may be used to pay for pre-college education expenses. C) A 529 plan's assets must be used by age 30, an ESA does not. D) There are no earnings limits for those contributing to a 529 plan.

C) A 529 plan's assets must be used by age 30, an ESA does not.

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? A) A General partnership B) A C Corporation C) An LLC D) A Sole proprietorship

C) An LLC

Many investors like to put a transfer on death (TOD) designation on their brokerage accounts. Which of these are benefits of doing so? I. The TOD designation avoids estate taxes. II. The TOD designation avoids probate. III. The account holder is relieved of decision making in the account. IV. There is flexibility to change beneficiaries as conditions dictate. A) I and III B) I and IV C) II and IV D) II and III

C) II and IV

Your customer, Jim, wants to deposit money into a 529 College Savings plan for his great-niece Penelope. He states four reasons why he likes the 529 plan. Unfortunately, you need to tell him he is incorrect on one point. Which of his following points is not considered a feature of a 529 College Savings Plan? A) The money grows tax deferred. B) The growth can be tax free if used for qualified education expenses. C) She has to use the money by the time she turns 30, so she will not be able to put it off too long. D) If she gets into a good prep school the money can be used for that as well as college.

C) She has to use the money by the time she turns 30, so she will not be able to put it off too long.

Sam Malloy owns a small business and has built a substantial estate both with his business success and his early career as a pro athlete. He would like to begin to move assets out of his estate in a way that will allow him to benefit from the assets, but also allows for an easy transfer to his heirs when he dies. He needs to lower the size of his estate before he passes and hates the idea of a public hearing that is part of probate. Sam should A) create a last will and testament. B) place his assets in a transfer on death account. C) establish an irrevocable living trust. D) establish a revocable living trust.

C) establish an irrevocable living trust.

One difference between an UTMA account and an UGMA account is A) an UTMA account has a wider set of allowed investments. B) UTMA assets are considered an irrevocable gift, an UGMA account allows the custodian to reclaim the assets. C) an UGMA account is tax deferred and a UTMA account is not. D) an UTMA account transfers at the age of majority, an UGMA account can go until the beneficiary turns 30 year of age.

A) an UTMA account has a wider set of allowed investments.

Alan and Barbara Collins have three minor children; Dan, Ellen, and Frank. Which of the following UTMA accounts could be opened? A) Frank Collins as custodian for Dan Collins B) Alan and Barbara Collins as custodians for Ellen Collins C) Alan Collins as custodian for Dan and Frank Collins D) Barbara Collins as custodian for Ellen Collins

D) Barbara Collins as custodian for Ellen Collins

A client and his spouse own shares in the KAPCO Fund as tenants in common. He has a 60% ownership interest in the account and the spouse has the balance. If the client dies, what happens to the shares in the account? A) Ownership of the shares would be determined by probate court. B) 40% of the shares would belong to his spouse and the remaining balance would be distributed to his estate. C) 50% of the shares would belong to his spouse and the remaining half would be distributed to his estate. D) His interest would automatically be transferred to the spouse.

B) 40% of the shares would belong to his spouse and the remaining balance would be distributed to his estate.

Sam Malloy owns a small business and has built a substantial estate both with his business success and his early career as a pro athlete. He wants to set up his estate in a way that he will control the assets until he passes away or becomes incapacitated. Once that time comes, he wants control to transfer easily and he wants to avoid probate. Sam should A) place his assets in a transfer on death account. B) establish a revocable living trust. C) establish an irrevocable living trust. D) create a last will and testament.

B) establish a revocable living trust.

Marsha, Jane, Cynthia, Craig, Jim, and Robert are owners of an account JTWROS. If Craig, Jim, and Robert pass away then their interest in the account A) is distributed through the probate process. B) remains in the account and is now the property of the surviving tenants. C) is divided in half and one half of the account is distributed evenly to the decedent's beneficiaries. D) is identified and distributed with the decedent's estate.

B) remains in the account and is now the property of the surviving tenants.