Questions of the Week

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…

Course: Insurance PlanningLesson 19: Immediate Annuities – A Tax-Advantaged Income Planning Tool Student Question: Hi- The text on this page says the annuities don’t hold mutual funds or ETFs.  What are they holding to provide an S&P “type return?” The text goes on to discuss components that sound a lot like ETFs (mid value, large…

Course: Retirement PlanningLesson 1: Using IRAs to Build and Distribute More Retirement Income Student Question: Good morning! 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…

Course: Estate PlanningLesson 9: Income Taxation of Trusts and Estates Student Question: Hi Bruce When a Trust has an income accumulation year, must the Trust pay taxes on that accumulation of DNI in the year of accumulation? If so, why do that – why would a Trust hold income at the confiscatory Trust income tax…

Course: Insurance PlanningLesson 15: Income Taxation of Life Insurance Student Question: Hello, Can you help me better understand the difference between policy basis in a normal policy and policy basis on a modified endowment contract. From the Coursework: But for MEC purposes, the basis is increased by any portion of loans that were considered taxable…

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: Retirement PlanningLesson 6: Matching Business Owner Needs to the Right Qualified Plan Student Question: How is “connection to the plan” defined in regards to a “party in interest” when talking about qualified plans?  Would a plan participant count as someone with a connection to the plan? From the Coursework: A party in interest is…

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: 1 – Lower coupon bonds are more sensitive to interest rates than high coupon bonds.2 – There is inverse relationship between bond prices and change in interest rates.3 – There is a…

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?  John Instructor Response: Hi John, Good questions here.  See below for my response to each. Yes…

Course: Retirement PlanningLesson 2: Qualified Plan Advantages and Disadvantages for Employees and Business Owners Student Question: Hello, If I understand correctly, the maximum an employer can contribute to a defined contribution plan is $58k over the life of the individual’s plan? Austin Instructor Response: Hi Austin, You are directionally correct. The maximum annual employer contribution to a…