Quiz Show
Donna M. Kesot, CPCUCPCU 556 Annuities
April 17, 2012
Investments
Match the tax section
Section 1031
Section 1041
Section 721
Section 351
Section 354
Mergers
Partnerships
Like-Kind Exchanges
Between Spouses\Divorce
Corporations
Tax Avoidance Strategies(3):Step Up in Basis at Death
Gifts to charity
Use of exclusion provisions in the tax law, e.g. sale of primary home, corp exclusion of up to 50% gain on QUALIFIED small business stock from start up
Tax Deferral Strategies(3):Like Kind Exchanges
Tax free corporate reorganizations
Equity Collars with monetizing the hedged stock, e.g. puts on hedged stocks from employee stock options (other examples p. 294)Exchange Funds
The parties to an annuity?
Insurer, Contract Owner & Annuitant
•Insurer
•Contract Owner: the party who purchases the annuity from the insurer and who makes premium payments. May be the annuitant.
•Annuitant: the person insured under the annuity
Qualified Retirement Plan
A retirement plan that meets the requirements established by the IRS for favorable tax treatment
A 403(B) is a qualified retirement plan that for employees of local, state, or federal governments and agencies.
TRUE or FALSE?FALSE
Real Answer:A 403(b) PLAN IS A TAX FAVORED RETIREMENT PLAN FOR EMPLOYEES OR CERTAIN NONPROFIT ORGANIZATIONS
Traditional IRAA retirement savings plan
By which an individual can use tax-deductible
And tax deferred methods
For accumulating wealth.
4 Retirement funding vehicles:
Both tax deductible and tax deferred
Tax Free
Tax deferred
Currently taxable
TRUE or FALSE?TRUE or FALSE?These plans allow individuals to invest pre-tax and provide tax-deferred earningsTraditional IRA401(k) plans, other than Roth403(b) plans, other than Roth457 deferred compensation plans
Match the tax section
Section 1035
Section 1036
Section 1042
Section 351
Section 1031
Like-Kind
Emp Stock Option Plan
Life to Annuity
Corporate Stock Options
Corporation Formation
Highly secure, liquid, and convenient investment that pays a fixed rate of interest and can be FDIC insured
Regular Savings Account
Qualified Annuity
• An annuity that is used as a funding vehicle in a qualified plan, such as an individual retirement account, a tax-sheltered annuity, or a 401(k) plan.
• 10% tax penalty for early withdrawal (age 70.5)
TRUE or FALSE?TRUE or FALSE?
A Qualified 401(k) plan meets the IRS rules in section 401(k) & participants may choose to contribute to the plan with before-tax dollars
A.
B.
C.
D.
E.
Tax free funding vehicles:
A, B & C
Nonqualified Annuity
Municipal Bonds
Roth IRAs for qualified distributions
A & B only
Right Answer: Tax free funding vehicles are (d) A& B. Muni’s and Roth IRAs for qualified distributions
Highly secure, liquid investment that investors commonly use for the liquid portion of their investment portfolios
Money Market Mutual Fund
2 features & examples for Money Market Account
Relatively safe
Liquid investment
Such as securities issued or guaranteed by the federal government, certificates of deposit, banker’s acceptances, euro dollars, and commercial paper
Method used to estimate needed retirement income based on a percentage of expected final average earned income.
Regular Savings Account
60-80% because1. Taxes usually decline2. Certain work related expenses may end or reduce3. Home-ownership expenses may decline if mortgage
debt is eliminated4. Support for dependent children may have ended5. Senior discounts (Go AARP)6. General expenses may decline as the aging individual
become less active/more sedentary
Generally, creation of a formal irrevocable trust into which the donor (as grantor of the trust) places property that is subject to the trust
Charitable Remainder Trust
Aka CRT2 types:1. CRUT Charitable Remainder Unitrust2. CRAT Charitable Remainder Annuity Trust
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