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Umbrella Liability Insurance
A client has the following insurance coverage: Auto liability: $500,000 Homeowners liability: $500,000 Personal umbrella liability: $2,000,000 If the client is found legally liable for an automobile accident resulting in a $1,800,000 judgment, assuming no policy exclusions apply, approximately how much of the judgment would the umbrella policy cover? $500,000 $1,300,000 $1,800,000 $2,000,000 CLICK TO…
Real Estate Income and IRA Contributions
Course: Retirement PlanningLesson 1: Using IRAs to Build and Distribute More Retirement Income Student Question: Hi, This page states that rental income is not included in the definition of earned income. If the client is a professional real estate developer whose income is derived mainly from rental income, would they be able to contribute to…
Asset Allocation and Portfolio Development
A client owns a large position in the common stock of her employer. The stock has appreciated substantially and now represents nearly 60% of her investment portfolio. What is the CFP® professional’s BEST recommendation? Continue holding the stock because selling would trigger capital gains tax. Increase purchases of the employer’s stock because of its strong…
Annual Return and 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 rate of return on Investment 2 using daily compounding?” What is the annual…
Annual Exclusion Gifts
In 2026, Robert wishes to maximize annual exclusion gifts without using any of his lifetime gift and estate tax exemption. He gives: $19,000 to his son $19,000 to his daughter $19,000 to each of his three grandchildren How much has Robert transferred free of gift tax and without using any of his lifetime exemption? $57,000…
Value of Life Insurance in Buy-Sell Agreements
Course: Insurance PlanningLesson 17: Business Uses of Life Insurance Student Question: Hi, Do buy sell agreements accounts for projected growth of the company? Do the life insurance benefits increase over time to account for projected growth, or perhaps can they invest and grow conservatively to keep up with inflation (or COLA on the plan)? Thank…
Portfolio Development and Analysis
A CFP® professional is reviewing a client’s investment portfolio. The client has the following accounts: Traditional IRA Roth IRA Taxable brokerage account Which of the following assets is generally MOST appropriate to hold in the Roth IRA? Municipal bonds A money market fund A diversified stock mutual fund expected to experience significant long-term appreciation Short-term…
Deductible Mortgage Interest
Course: Income Tax PlanningLesson 8: Arriving at Taxable Income Student Question: Hi, If a client has a $250k mortgage on a home worth $500k and they refinance to take equity out of their home, say $100k. Then they use that $100k to purchase a vacation home worth $300k (so they now have $450k in mortgage…
RMD Strategy
Evelyn, age 76, must take a required minimum distribution (RMD) of $40,000 from her traditional IRA in 2026. She does not need the income and plans to donate $25,000 to a qualified charity. Which of the following strategies would MOST effectively reduce Evelyn’s adjusted gross income (AGI)? Take the full RMD and then claim a…