Posts by Dan Madden, CFP®
Spousal IRA Contributions and the Aggregation Rule
Course: Retirement PlanningLesson 1: Using IRAs to Build and Distribute More Retirement Income Student Question: Hi, In the review question with the couple where the husband has $84,000 of taxable compensation and the wife only has $1,000, the answer said the wife could contribute up to $7,500 total between her Traditional and Roth IRAs. I…
Read MoreAsset Titling and Probate
A married couple owns the following assets: Residence titled as joint tenants with right of survivorship Individual brokerage account owned solely by the husband Husband’s IRA naming his wife as primary beneficiary Revocable living trust funded only with investment real estate The husband dies unexpectedly. Which of the following assets would generally NOT pass through…
Read MoreCrummey Withdrawal Powers and the Annual Exclusion
Course: Estate PlanningLesson 5: Transfer Taxation II — Lifetime Transfers Student Question: Hi, I understand that a gift of a future interest normally does not qualify for the annual gift tax exclusion, but then the lesson says a Crummey withdrawal power turns it into a present interest gift. I’m confused because the whole point of…
Read MoreMarginal vs. Average Tax Rate
A client expects to recognize an additional $20,000 of ordinary income in 2026. She asks her CFP® professional how much additional federal income tax she will owe. Which tax rate is MOST relevant in estimating the tax on the additional income? Effective tax rate Average tax rate Marginal tax rate Capital gains tax rate CLICK…
Read MoreAnnual Return vs. Compounding
Course: Fundamentals of Financial PlanningLesson 5: Using the Calculator Student Question: Hi, My question relates to being able to clearly distinguish when the CFP Board exam will require an annual, or other period, for the answer. Question 5(b) asks: “What is the annual rate of return on Investment 2, made 3 years ago for $50,000…
Read MoreDistribution Rules and Taxation (RMDs)
David, age 74, has a traditional IRA with a December 31, 2025 balance of $1,000,000. His applicable IRS Uniform Lifetime Table distribution period for 2026 is 25.5. Approximately what is David’s required minimum distribution (RMD) for 2026? $25,500 $39,216 $40,000 $49,020 CLICK TO REVEAL ANSWERExpandB is the answer. An RMD is calculated by dividing the…
Read MoreStep-Up in Basis
Susan purchased stock many years ago for $80,000. At her death in 2026, the stock is worth $250,000. Her son inherits the shares and sells them three months later for $255,000. Ignoring any transaction costs, how much taxable capital gain must the son recognize? $5,000 $80,000 $170,000 $175,000 CLICK TO REVEAL ANSWERExpandA is the answer.…
Read MoreCoinsurance and the Required Insurance Penalty
Course: Insurance PlanningLesson 10: Social Security Student Question: Hi, On this review page, the correct answer for question 2 (below) indicates that insurance will only cover 97% of replacement cost. However, it says in the chapter that as long as the property is insured for more than 80% of replacement cost, the policy will pay…
Read MoreMaximum Family Benefit
Course: Insurance PlanningLesson 10: Social Security Student Question: Hi, Does the maximum family benefit apply to a husband and wife that are both fully insured if the combined total between the two exceeds the maximum family limit? If I understand correctly, the maximum family limit only applies if there are beneficiaries within the family receiving…
Read MoreBeta
A client owns a mutual fund with a beta of 1.4. If the overall stock market increases by approximately 10%, which of the following would be the best estimate of the fund’s return based solely on its beta? 4% 10% 14% 24% CLICK TO REVEAL ANSWERExpandC is the answer. Beta measures a portfolio’s sensitivity to…
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