Unit 22- Nonqualified Accounts

John and Tara Bourne have two children, Henry and Avery, who they want to set up custodial accounts for. Which of the registrations of the accounts are allowed? A)John Bourne custodian for Henry and Avery Bourne B)John Bourne custodian for Henry Bourne C)John and Tara Bourne custodians for Henry and Avery Bourne D)John and Tara Bourne custodians for Avery Bourne

B

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)establish a revocable living trust. B)establish an irrevocable living trust. C)create a last will and testament. D)place his assets in a transfer on death account.

B

The primary use for a revocable living trust is to A)avoid tax consequences for the grantor. B)use as a substitute for a will. C)prevent the grantor from liquidating their estate prior to death. D)limit the grantor access to items in the estate.

B

All of the following accounts are for unincorporated businesses except A)sole proprietorship accounts. B)partnership accounts. C)corporate accounts. D)limited liability company accounts.

C

Which of the following is a benefit of 529 plans but not Coverdale Education Saving Accounts? A)Can be transferred to a sibling if not used by the original beneficiary B)Available for use for K-12 C)No income restrictions on income restrictions D)Withdrawals are tax free if used for qualified education expenses

C

Accounts set up for minors through UGMA or UTMA

Custodial accounts

If a customer wishes to open a cash account in his name only and allow a third party to make trading decisions, but not withdraw cash and securities, he must instruct his broker-dealer to open A)a cash account. B)a margin account. C)a cash account with full power of attorney. D)a cash account with limited power of attorney.

D

If three individuals have a tenants in common account with your firm and one individual dies, then A) trading is discontinued until the executor names a replacement for the deceased B) account is converted to joint tenants with rights of survivorship C) the account must be liquidated and the proceeds split evenly between the two survivors and the decedent's estate D) the two survivors continue as co-tenants with the decedent's estate

D

ownership stipulates that a deceased tenant's interest in the account passes to the surviving tenants. All tenants owns all of the account equally

JTWROS

2 types of joint accounts

TIC JTWROS

designation that an owner(s) may add to an account that allows the owner to pass all or a portion of the account to a named beneficiary or beneficiaries at death. estate is taxable

Transfer on death (TOD)

no real estate allowed to be titled in custodial name available til minor age at the majority for the state

UGMA

accounts allow for real estate to be titled in custodial name may be held in custodial name til 25

UTMA

custodial accounts may be opened and managed as __ accounts only

cash

allows donors to save money to be used later for edu expenses more popular Separate accounts

college savings plans

when opening an account for a corporation, a firm must obtain a copy of

corporate charter corporate resolution

allow after tax contributions up to 2000 per student per year for children under the age of 18.

coverdell education savings account (Edu IRA)

POA ends with

death of either party

funded by a will or some other real estate process where the assets are placed in the trust after the owner has passed away

decedents trust

have language that allows the power to continue if the owner is incapacitated

durable POA

grants the appointed person to deposit or withdraw cash or securities and make investment decisions for the account (usually not an RR)

full power of attorney

cannot be modified. Grantor gives up control of the assets. Grantor may not serve as the trustee and beneficiary

irrevocable trust

two or more adults are named on the account as co owners, with each allowed some form of control over the account.

joint account

allows the appointed person to have some but not total control over the account

limited power of attorney

created and funded by the grantor during the grantor's lifetime. V common

living trusts

what type of security is a section 529 plan

municipal fund security bc they are state sponsored

is documentation for custodians recquired?

no

those accounts not apart of a retirement plan

nonqualified accounts

allow residents to lock in current tuition rates to hedge inflation and edu costs

prepaid tuition plans

may be modified or revoked by grantor common for the grantor to also be the trustee and beneficiary

revocable trust

Allows money to be used for qualified expenses for K-12 and postsecondary edu. No age limit Limit does not pertain to postsecondary Contribution up to 10,000 per year

section 529 plans

Ownership provides that a deceased tenants fractional interest in the account is retained by that tenants estate and is not passed to surviving tenants. Should have agreement as to what percentage of the account is owned by each tenant.

tenants in common (TIC)

way to hold assets that allows for greater flexibility in assigning the different aspects of ownership

trust accounts

Rollovers are permitted from one states plan to another states plan, but no more than once every __

year