CFP® Practice Question

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…

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…

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…

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.…

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…

Which of the following statements regarding a Health Savings Account (HSA) is correct?  Contributions are made with after-tax dollars, but qualified distributions are tax-free.  Contributions are deductible (or excluded from income if made through payroll), earnings grow tax-deferred, and qualified distributions are tax-free.  Contributions are deductible, but earnings are taxable annually.  Qualified distributions are taxable…

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…

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…

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…

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…