Questions of the Week

Course: Fundamentals of Financial PlanningLesson 7: Educational Aid and Funding Calculation Student Question: So is there ever any benefit to choosing a Coverdell ESA over a 529 Plan? It seems the big difference in the two is that the Coverdell has an AGI limit, so why would you just not always steer clients towards 529 Plans since…

Course: Insurance PlanningLesson 12: Types of Life Insurance Student Question: Am I correct in thinking that, as a rule, if a life insurance policy is paid for with after-tax dollars (non-deductible) that death benefit proceeds are always received tax free? Instructor Response: You are directionally correct but let’s dig a little deeper. Generally, death benefits…

Course: Retirement PlanningLesson 7: Income Distribution Planning for Qualified Plans Student Question: Regarding net unrealized appreciation, the value of company shares at the time of distribution would be considered the client’s cost basis in that any earnings in excess of that amount could be subject to short-term cap gains if sold within a year of…

Course: Insurance PlanningLesson 17: Business Uses of Life Insurance Student Question: 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)? Instructor Response:…

Course: Income Tax PlanningLesson 15: Property Transactions Student Question: I have a question from this question below regarding the 1033 election for involuntary conversions.  “Sparky’s office building was destroyed by fire on January 2nd of last year. The building had an adjusted basis of $620,000. On January 15th of this year, the insurance company paid…

Course: Estate PlanningLesson 9: Income Taxation of Trusts and Estates Student Question: Can you refer me to a comparison (or just write a few notes) on how a grantor trust differs from a revocable trust and how a non-grantor trust differs from an irrevocable trust? They seem synonymous respectively to each other. Thank you! Instructor…

Course: Investment PlanningLesson 9: Fixed Income Securities Student Question: There is a question regarding duration that I continue to struggle with. Which of the following are true: Can you explain #1 and #3? Instructor Response: Thank you for your question.  This can become a bit convoluted. Let’s unpack the word “duration” first.  Duration is nothing more…

Course: Retirement PlanningLesson 2: Qualified Plan Advantages and Disadvantages for Employees and Business Owners Student Question: Hi- I have a few questions regarding tort liability. Negligence is Tort Liability?  Why isn’t it contractual?  Are all torts criminal in nature? Instructor Response: Good questions here. See below for my response to each. Yes Tort law and…

Course: Fundamentals of Financial PlanningLesson 5: Using the Calculator Student Question: 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 rate…

Course: Insurance PlanningLesson 10: Social Security Student Question: When it comes to social security widower’s benefit’s, is the widow eligible to take his/her SS benefit early  (age 62) and then switch over to the deceased spouse’s full benefit at 67? Or would the widow only be eligible for one of the two benefits? Instructor Response: You are directionally correct. Note that a qualifying surviving spouse can generally receive widow or widower’s benefits beginning at age 60, age 50 if disabled, or before age 60 if caring for an eligible child of the deceased worker. Specific to your question, here’s general guidance straight from Social Security: If you [the surviving spouse] are also eligible for retirement benefits (but haven’t applied yet), you have an additional option. You can apply for retirement or survivors benefits now and switch to the other (higher) benefit later. Caveat – like any general guidance, there are exceptions.