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CFP Exam Questions and Answers: A Comprehensive Guide to Financial Planning, Exams of Nursing

DeVry University - Florida Nursing

This document offers a valuable resource for students preparing for the cfp exam. it provides a series of questions and answers covering key topics in financial planning, including investment regulation, monetary and fiscal policy, college funding strategies, student loan management, and estate planning. The detailed explanations make it an excellent study tool.

Typology: Exams

2024/2025

Available from 04/29/2025

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CFP Exam Questions with 100% Correct

Answers Latest Versions 2025 Graded A+

Who regulates mutual funds? Correct Answer: SEC (Securities and Exchange Commision)

Who regulates securities brokers? Correct Answer: FINRA (Financial INdustry Regulatory

Authority)

Investment Advisers Act of 1940 Correct Answer: Legislation governing who must register with

the SEC as an investment adviser. Defines "investment advice."

Securities Act of 1933 and Securities Exchange Act of 1934 Correct Answer: 1933: Regulates

IPOs

1934: Created SEC to enforce laws, regulates secondary market, defines stock "sales"

Securities Investors Protection Act of 1970 Correct Answer: - Established the SIPC to protect

investors for losses resulting from brokerage firm failures.

- Does not protect investors from incompetence or bad investment decisions

Emergency Fund guidelines Correct Answer: 3 or 6 months' expenses

3 months if there are two sources of income (e.g. 2 wages, alimony, trust income, investment

income)

Monetary Policy Who, Why, and What (3) Correct Answer: Who: Federal Reserve Board

Why: The Fed increases liquidity to create economic growth. It reduces liquidity to prevent

inflation.

What:

1. Set the discount rate: lower rate = increased liquidity

2. Set reserve (margin) requirements: lower req. = increased liquidity

3. Open market operations: buy bonds (short term US Treasuries) = increased liquidity

Living expenses rule of thumb Correct Answer: PITI or Rent =< 28% of Gross Income

Trust Companies Correct Answer: financial institutions that specialize in managing the money

and property of others

- They act as "trustee", fiduciary, executor

- For someone incapable of doing it themselves (minors, cognitively impaired)

Fiscal Policy Who, Why, and What Correct Answer: Who: Office of Debt Management

Why: stabilize the economy

What: government spending and taxes

Federal Funds Rate (FFR) Correct Answer: The interest rate that a bank must pay on an

overnight loan from another bank. Set by auction.

Partial preview of the text

Download CFP Exam Questions and Answers: A Comprehensive Guide to Financial Planning and more Exams Nursing in PDF only on Docsity!

CFP Exam Questions with 100% Correct

Answers Latest Versions 2025 Graded A+

Who regulates mutual funds? Correct Answer: SEC (Securities and Exchange Commision) Who regulates securities brokers? Correct Answer: FINRA (Financial INdustry Regulatory Authority) Investment Advisers Act of 1940 Correct Answer: Legislation governing who must register with the SEC as an investment adviser. Defines "investment advice." Securities Act of 1933 and Securities Exchange Act of 1934 Correct Answer: 1933: Regulates IPOs 1934: Created SEC to enforce laws, regulates secondary market, defines stock "sales" Securities Investors Protection Act of 1970 Correct Answer: - Established the SIPC to protect investors for losses resulting from brokerage firm failures.

Does not protect investors from incompetence or bad investment decisions Emergency Fund guidelines Correct Answer: 3 or 6 months' expenses 3 months if there are two sources of income (e.g. 2 wages, alimony, trust income, investment income) Monetary Policy Who, Why, and What (3) Correct Answer: Who: Federal Reserve Board Why: The Fed increases liquidity to create economic growth. It reduces liquidity to prevent inflation. What:

Set the discount rate: lower rate = increased liquidity
Set reserve (margin) requirements: lower req. = increased liquidity
Open market operations: buy bonds (short term US Treasuries) = increased liquidity Living expenses rule of thumb Correct Answer: PITI or Rent =< 28% of Gross Income Trust Companies Correct Answer: financial institutions that specialize in managing the money and property of others

They act as "trustee", fiduciary, executor
For someone incapable of doing it themselves (minors, cognitively impaired) Fiscal Policy Who, Why, and What Correct Answer: Who: Office of Debt Management Why: stabilize the economy What: government spending and taxes Federal Funds Rate (FFR) Correct Answer: The interest rate that a bank must pay on an overnight loan from another bank. Set by auction.

Federal Funds Correct Answer: Deposits that private banks hold on reserve at the Federal Reserve Bank. Pre-College Funding Years Strategies (4) Correct Answer: 1. UGMA/UTMA

EE Educational Bonds
Coverdell ESA ($2k/year per child)
529 Savings/ Prepaid tuition ($15k/year per child) During College Funding Strategies (2) Correct Answer: Pick One: [Rich] - Parent Loan to Undergraduate Student (PLUS) [PooriSh <$60k AGI] - Pell grants, Subsidized Stafford Student Loans, Supplemental Educational Opportunity Grant Pell Grant rules Correct Answer: A grant (up to $6,345) awarded based on financial need by the U.S. federal government to help students pay for higher education. Does not have to be repaid. Students must carry 12 credit hours and be full-time, or grant will be prorated down. Educational Credits (2) Correct Answer: American Opportunity Credit, Lifetime Learning Credit American Opportunity Tax Credit Correct Answer: Up to $2500 per year per student for tuition expenses incurred in the first 4 years of post-secondary education. 100% of the first $2000, and 25% of the next $2000, subject to AGI phaseouts. Expenses cannot be for room, board, or textbooks. The student must be enrolled at least half time in a program that leads to a degree or certificate. Lifetime Learning Credit Correct Answer: A nonrefundable credit equal to 20% of the first $10,000 of qualified higher education tuition and fees or job training paid during the year on behalf of the taxpayer, his spouse, or his dependents. Undergrad and grad school, can be part time. Educational Funding Coordination: Pick one of (4) Correct Answer: 1. American Opportunity Credit
Lifetime Learning Credit
Coverdell withdrawal
Qualified 529 distribution/UTMA/UGMA Graduate School Funding (6) Correct Answer: 1. Fulbright Scholarship
Graduate PLUS Loans
Stafford Loans
Lifetime Learning Credit
529 withdrawal

higher the financial aid award from the college may be. 20% of child's assets and 5.64% of parents' assets (excluding primary residence or retirement savings). Coverdell Education Savings Account (ESA) Correct Answer: A savings account that allows you to make an annual non-deductible contribution of up to $2,000 per year/per person to a specially designated investment trust account. Earnings are tax free if used for qualified educational expenses: El-Hi, college, grad, room & board, transport, extended day programs, tutoring, any charges by the school. Use before age 30 or roll over to a family member. Subsidized Stafford Loan Correct Answer: Need-based; interest paid by govt. until student leaves school. Available aid calculated after EFC, Pell Grant, other aid. Unsubsidized Stafford Loan Correct Answer: Not need-based; govt. does not pay interest for you while in school; can be undergrad or grad, must fill out FAFSA. 529 Rules (5) Correct Answer: 1. Can change beneficiary to family of original beneficiary.

$15k/yr or $75k bunching
Rollover to same generation - > no taxable gift; Rollover to skip generation - > taxable gift
Treated as a parental asset
Can use $10k max to pay off student loans CRAT vs CRUT Correct Answer: CRAT: Annuity trust, no additions, payment fixed (lifetime or term certain), remainder interest to charity (must be >10%) CRUT: Unitrust, additions allowed, payments variable (revalued annually) CRAT and CRUT similarities Correct Answer: Both must pay out >=5% of corpus annually Max term of 20 years allowed if it's not a lifetime trust. Bypass Trust Correct Answer: AKA "Nonmarital" "B" "Family" trust

Allows postmortem control over trust property
Can give stream of income to surviving spouse AND/OR others (unlike a QTIP)
As long as spouse is not given more than 5 by 5 or HEMS, the trust will not be included in surviving spouse's estate Simple Trusts vs Complex Trusts Correct Answer: - simple trusts MUST distribute all income earned during the year received
complex trusts may accumulate income, permitted deductions for distributions Simple Trust Correct Answer: A separate tax entity that uses conduit principle for distributions. Trust gets a deduction for distributions: the lower of what is actually distributed or the Distributable Net Income Limits the portion of distribution that is taxable to the beneficiary. Keeps the same character (ord. income vs cap gains) as was in the trust. No double taxation of trust income.

Complex Trust Correct Answer: A trust that accumulates income over time and is not required to make scheduled distributions to its beneficiaries. Section 303 Correct Answer: Used for estate liquidity. Allows a corporation to make a distribution of a portion of the stock of a decedent that will not be taxed as a dividend.

The business must be a regular corporation or an S corporation (closely held)
The value must be more than 35% of the adjusted gross estate
Only an amount of stock equal to a total of all estate taxes and administration expenses can be redeemed Section 6166 Installment Payments Correct Answer: If the value of an interest in a closely held business which is included in determining the gross estate exceeds 35% of the adjusted gross estate, the executor may elect to pay part or all of the tax imposed in 2 or more (but not exceeding 10) equal installments, beginning 4 years after death.
2% interest rate on first $1M of tax deferred
Only tax attributable to business can be deferred. Special Use Valuation (Section 2032A) Correct Answer: An executor may elect to value real estate used in a closely held business or for farming for its actual use rather than its highest and best use
Max reduction in value is $1,180,000 in 2020
Real estate must be at least 25% of the gross estate
Farm or closely held business must be at least 50% of the gross estate
The property must pass to qualifying heirs (immediate family members)
Qualified use of the property required for 5 out of 8 years before death and continued use during a 10 year period after death Estate Planning for Nontraditional Relationships Correct Answer: You should suggest using different planners - conflict of interest in repping both parties.
Unmarried partners have fewer rights (no elective share of will)
They do not get unlimited marital deduction
Previous partners' children may present a guardianship problem Best plans include: revocable trust; tenancy in common; GRIT Disclaimer of an Interest (5) Correct Answer: 1. Irrevocable refusal to accept the interest.

Must be in writing.
Must be no later than 9 months after the later of: the transfer happening / you turning 21
You can't have any accepted interest in the benefit
Then the interest will pass to someone else. AVD Correct Answer: Alternate Valuation Date - the executor can elect to use FMV up to 6 months after death only if:
It would reduce the gross estate
It would reduce the federal tax liability
It is applied to ALL estate property
It isn't depreciating property (like an annuity payout)

No discount on the taxable gift like a GRAT has (remember, the GRAT is valued minus the present value of the annuity)
GRITs are only useful for non-related parties or for QPRTs. GRUT Correct Answer: Grantor Retained Unitrust Fixed PERCENTAGE of assets (revalued annually) paid to grantor for a term of years Remainder passes to the named beneficiary Additional Contributions Allowed Use if
Grantor wants inflation protection
Have easy to value assets
Assets are expected to fluctuate/appreciate in value
Grantor wants to share in the appreciation of the trust assets rather than having it go to the remainder beneficiary Grantor Retained Annuity Trust (GRAT) Correct Answer: A grantor irrevocably transfers assets to a trust and retains a specified annuity income for a stated number of years. The value of the taxable gift is the remainder interest. If the grantor survives the annuity period the assets will be completely removed from his or her estate and no additional taxes will be due. If the grantor dies during the annuity period the trust assets will be included in the grantor's gross estate, but the adjusted taxable gift will be removed from the estate tax calculation -- so there is little downside risk. This is a gift of FUTURE interest, no $15k exclusion. Gift Leasebacks and Sale Leasebacks Correct Answer: Gifting or sale of business or trade property to a lower-income family member. Following the property transfer, lease payments in proper amounts are made by the former owner to the new owner. The payment is deductible by the former owner as a business expense, and taxable to the new owner as unearned income. The transfer of fully depreciated property is particularly advantageous because the new owner may claim depreciation on the acquired property. The lease payments and selling price must be realistic to avoid challenges by the IRS. To avoid the kiddie tax, gifts should be to people >=23 years old. Qualified Personal Residence Trust (QPRT) Correct Answer: A special form of a GRIT in which the grantor transfers his home to the QPRT and receives "use" of the personal residence as the annuity. The remainder interest of the trust passes to a non-charitable beneficiary.
Can do primary home, vacation home, or primary + one vacation home
Gift of future interest (no $15k exclusion)

If grantor dies before term is up, the property goes back into estate and the taxable gift (the present value of the remainder interest) is voided. Family Limited Partnership Correct Answer: Technique to shift income from parents to children. Allows business owners to pass assets to heirs with a minimum of income and estate tax costs while retaining control of assets during their lifetime.
Income must be distributed pro rate by ownership
GPs may be paid for service to partnership
must be CAPITAL-SENSITIVE - not a service business
Can have a 50% valuation discount for gifts due to lack of control/marketability
Basis for gifts remains the same (no step-up) SCIN Correct Answer: Self-Cancelling Installment Note - installment sale but the balance of payments is cancelled if the seller dies.
An owner can accept an SCIN installment note in a sale of assets when seeking an income stream, income tax deferral, and estate tax deduction
The buyer can depreciate assets based on the purchase price
The buyer can deduct the interest paid on the SCIN installment sale (unlike a private annuity)
The value of the installments canceled at the note holder's death is not included in the gross estate
The buyer pays a premium and the seller pays more income tax while living (increases the installment payment)
Only for family or loved ones when family member is in poor health
Payments cancelled will trigger capital gain on the estate's income tax return (which is a lower rate than the estate tax) Who is a skip person? (2) Correct Answer: 1. A related person 2 generations below the transferor

Unrelated person who is >37.5 years younger than the transferor NOTE: If a generation dies, succeeding generations move UP one generation (e.g. a grandson whose parents are both dead is NOT a skip person) What is the GSTT rate? Correct Answer: A flat 40% Can GSTT paid be added back into the estate? Correct Answer: No - unlike the gift tax, there is no 3 year rule for GSTT Pooled Income Fund Correct Answer: Donor places property into a common trust fund, the assets are commingled with other donor's property. The assets are controlled by the public charity. After the income distributions terminate, the charity gets the remainder. Donor can't change their mind on who gets the remainder.

commingled
cant invest in tax exempt securities
upon death, the remainder interest vests with the charity

Basic parts of a Trust (4) Correct Answer: 1. Trust property - "principal" or "corpus"

Grantor - "trustor" is the person who makes and funds the trust
Trustee - The grantor give the property to the trustee along with rules (the trust "instrument") for how to deal with trust. Holds legal title.
Beneficiary - holds equitable title and receives income and/or principal. NOTE: Only grantor and trustee must be legally competent Dynasty Trust Correct Answer: Can last for the lives in being plus 21 years and 9 months or as long as local law allows. Beneficiary interests are limited to life estates. The rule of perpetuities would be violated if a number of years is stated. Free of estate, gift, or GST taxes QDOT (Qualified Domestic Trust) Correct Answer: Similar to QTIP, but for when one spouse is not a US citizen:

there is no unlimited marital deduction
jointly held property between the spouses is not considered one half owned
limited gift amount between spouses ($157k in 2020)
The tax exemption ($11.58M in 2020) is available UNLESS the spouse is a non resident alien
Use the QDOT to get the marital deduciton to the non US citizen spouse by passing property into the trust. Power of Appointment Correct Answer: A power of appointment is the power to decide who will receive certain property at a given point in time. General vs. Special Power of Appointment Correct Answer: General:
No conditions or restrictions
Included in gross estate Special:
Under certain conditions
Only for a certain group of beneficiaries
Only for a limited period of time
Not included in gross estate 5 By 5 Power In Trust Correct Answer: A common clause included in many trusts allowing for beneficiary withdrawals from the trust. Specifically, '5 by 5 Power' or the '5 by 5 clause', gives the beneficiary power to withdraw the greater of: a) $5,000 or b) 5% of the trust's FMV from the trust each year. For income tax purposes, should the beneficiary not exercise the '5 by 5 Powers', the greater of the "5 or 5" would be included in their gross estate (although it remains in the trust). Over time the beneficiary could become the owner of the trust and become liable for taxes on the trust's capital gains, deductions and income.

Group Life Insurance Correct Answer: Provides lower rates for the employer or employee and includes all employees, including new employees, regardless of health or physical condition. Can you continue group life insurance after leaving an employer? Correct Answer: You can convert to individual life insurance when coverage stops. Must convert to permanent life insurance, not term. Taxation of Group Life Insurance Correct Answer: If total coverage exceeds $50k, the employee is taxed on the cost of coverage over $50k, minus what they pay in. If it's a discriminatory plan, there's no $50k exclusion for key employees. They must include the actual cost or table cost, whatever is greater. Dependent Life Insurance Correct Answer: - Not included in $50k exclusion for taxability

Tax free up to $ Carve Out Plan types (3) Correct Answer: Employer can "carve out" highly paid employees from group life insurance and give them their own individual plan (not deductible by the employer).

Split dollar plan
Section 162 bonus plan
DBO (death benefit only) VEBA Correct Answer: Voluntary Employee Beneficiary Association Contributions are deductible for employee. Could include:

Death benefits
Medical expense benefits
Disability
Childcare
Legal expenses
Unemployment/severance
Education Period Certain Annuity Correct Answer: An annuity income option that guarantees a definite minimum period of payments, even if the person dies early. Refund Annuity Correct Answer: A guaranteed-minimum annuity that, on the annuitant's death, pays the beneficiary back the total price of the annuity (purchase price - monthly payments already paid out). Can be refunded in lump sum or installments. Refund is tax-free up to basis. Joint Life vs. Joint-and-Survivor Annuities Correct Answer: Joint life: Payments stop at 1st death. BAD! Joint-and-survivor: Keeps paying after 1st death.

Property Loss Calculation when Underinsured Correct Answer: First, the required insurance = replacement cost x coinsurance percentage (80% for homes, sometimes 90% for commercial property) Then the amount paid out is the fraction of the loss that was insured minus the deductible. Amt paid = Loss x (Insurance carried/Insurance required) - Deductible Covered Perils: Broad (4) Correct Answer: Everything in basic plus RAFF:

Ruptured pipes
Artificially generated electricity
Falling objects
Frozen pipes Covered Perils: Open Correct Answer: "All risk" - the insurer pays for all damage EXCEPT specific exclusions Covered Perils: Basic (10) Correct Answer: WHLF STARVE: Windstorm Lightning Fire Hail Smoke Theft Aircraft Riot Vehicles Explosion Homeowners Insurance Exclusions (8) Correct Answer: OPENN WIF Ordinance or law Power failure Earthquake Neglect (NOT carelessness) Nuclear hazard War Intentional Loss Flood Which autos are covered by insurance? (4) Correct Answer: 1. Any vehicle listed in policy declarations

Newly acquired autos that replace existing autos.
Trailers- including farm wagons and equipment being towed
Temporary substitute vehicles - "loaners". Only insured for parts A,B,C Are newly acquired cars insured automatically? Correct Answer: Yes for parts A,B,C when replacing an old vehicle in a policy. You must notify the insurance within 14 days to get Part D coverage.

Are loaner cars automatically insured? Correct Answer: Yes, but only for parts A,B,C. Who is covered by auto insurance? (3) Correct Answer: 1. Insured + spouse (living together)

Family members living with you
Anyone using your car with your permission Is your spouse covered by auto insurance if they leave you? Correct Answer: Yes, they are covered until:

90 days
they get their own insurance
the end of the original insurance policy, whichever is earliest. Auto Insurance Part D Correct Answer: Damage to Auto

Collision
Other than collision ("Comprehensive") covers open perils such as:

glass
missiles
falling things
fire, theft, larceny
flood
earthquake
windstorm, hail
vandalism, riot
hitting an animal (this is NOT collision)
explosion NOTE: Towing IS included Auto Policy Part C Correct Answer: Uninsured Motorist
pays for bodily injury when the other (uninsured) driver is at fault
covers medical expenses, lost wages, pain & suffering Anybody in a covered vehicle is insured. Auto Policy Part B Correct Answer: Medical Payments
pays for reasonable and necessary medical expenses of the insured (only expenses within 3 years of accident) Who is covered?
insured + family while in a car or struck by a car as a pedestrian
any other person injured while in a covered vehicle Auto Policy Part A Correct Answer: Liability
Protects against bodily injury/property damage (BI/PD) caused by the insured

Endorsement Method Correct Answer: Requires that the beneficiary change (from employer to another beneficiary) be typed or affixed directly to the policy - insured must make a written request and mail the request along with the policy to the insurance company. Homeowners Insurance Forms Correct Answer: HO-1: Basic coverage for all parts HO-2: Broad coverage for all parts HO-3: (Most common) Open coverage except C HO-4: Renters'. Covers C and D HO-5 or HO 3-15: Open coverage for all HO-6: Condo HO-7: Mobile home HO-8: Basic coverage for older homes Coverage for HO-6 Parts Correct Answer: A: Some coverage for installed carpet/cabinets, plus $5k loss assessment coverage (can buy more if needed) B: none C: Open D: Broad 50% of C Coverage for HO-4 Parts Correct Answer: A: none B: none C: Broad D: Broad 30% of C HO-3 Policy Outline Correct Answer: Declaration Page - name, address Section I: A-Dwelling, B-Other structures, C-Personal Property, D-Loss of Use Section II: E-Personal Liability, F-Medical Payments Coverage for HO-3 Part A (5) Correct Answer: Dwelling: open perils

House
Attached garage
Decks
Fences for construction
Building materials intended for house Does homeowner's insurance cover land? Correct Answer: No Coverage for HO-3 Part B (5) Correct Answer: Other structures:
Pools
Detached garages
Fences
Patios
Detached ADUs Coverage for HO-3 Part C inclusions/exclusions Correct Answer: Personal Property: has internal limits of liability

$1k for boats
$1500 for jewelry/furs
$2500 for silverware Excludes:
animals
cars/planes
renter's property
property in the room of the renter (furniture) Coverage for HO-3 Part D Correct Answer: Loss of Use: pays for additional living expenses arising from house damage, such as temporary housing, eating out, etc. Umbrella policy coverage when the underlying insurance is insufficient Correct Answer: Insurer will only pay the amount it WOULD HAVE been required to pay if the underlying insurance had been in force. Example of umbrella coverage: You have $1M umbrella that requires $300k underlying, but you only have $100k underlying coverage. If you get sued for $1M, what happens? Correct Answer: The umbrella insurer treats it as though you had $300k in coverage - only pays $700k out. Underlying will pay $100k. You will have to cover the gap in coverage ($200k) yourself. Endorsement vs Collateral Split Dollar Policy Correct Answer: EndoRsement: EmployeR owns policy, employee chooses beneficiary. Employee must pay income taxes on premiums since employer is paying them. Collateral: Employee owns the policy and the employer pays the premiums as an "interest-free loan". If the employee dies, they take the loan amount out of the face value, and pay any remaining proceeds to the beneficiary. Buy-Sell Agreement Stock Redemption (Entity Purchase) Correct Answer: Company (entity) is the owner and beneficiary of life insurance for each shareholder. Can't deduct premiums, so DB is tax-free. When a person dies, the company gets the life insurance money and buys the dead person's stock to reallocate among the other shareholders. Pros: Simpler than cross purchase if there are many shareholders. Cons: Creditors can go after this life insurance. Also, there is no step up in basis this way (dead person's stock retains same basis). Buy-Sell Agreement Cross Purchase Correct Answer: Each shareholder buys life insurance on each other shareholder. When someone dies, the others get life insurance money to buy back the dead person's stock.

single premium policies and converted SPPs are MECs MEC Taxation Rules (4) Correct Answer: 1. Distributions and loans taxed as income

Under 59.5 is 10% penalty tax
Dividends are taxable if used as cash (withdrawn, used to pay premiums, or used to pay back loan)
Death benefit is NOT taxed Grandfathered Life Insurance Rules Correct Answer: if the death benefit increases by more than $150k then the contract becomes subject to material change rules and may lose its grandfathered status (become a MEC) How do you find the cost basis for life insurance? Correct Answer: Premiums billed MINUS dividends (a return of unused premium) Are life insurance dividends taxable? Correct Answer: Usually no - they are generally a return of unused premium Whole life insurance (permanent insurance) Correct Answer: life insurance that continues to provide insurance as long as premiums are paid; not only provides benefits to the beneficiary but also has a cash value Code of Ethics (6) Correct Answer: 1. Honesty, Integrity, Competence, Diligence
Act in client's best interest
Due care
Avoid/disclose/manage conflicts of interest
Confidentiality/privacy
Act in a manner that reflects positively on CFP and financial planning Are IRAs split using QRDOs? Correct Answer: No - only qualified plans, pensions, etc are split using QRDOs. IRAs are split according to the divorce agreement or domestic order. Who can be the beneficiary on a pension plan? Correct Answer: Spouse only, unless they waive their right. What is the federal withholding for a retirement plan distribution? For an IRA distribution? Correct Answer: 401k withholding is 20% MANDATORY, IRA is 10% unless you elect otherwise How can retirement plan forfeitures be used? (4) Correct Answer: - Reduce future employer contributions

Pay reasonable plan expenses
Allocate among participants as additional contributions
Restore previously forfeited accounts

What qualified plan distribution is exempt from the 10% early withdrawal penalty? Correct Answer: Distribution due to separation from service at age 55+ Is there a early withdrawal penalty or mandatory withholding for a QRDO distribution from a qualified plan? Correct Answer: No early withdrawal penalty, Yes mandatory 20% withholding. What is a money purchase plan? Correct Answer: It's like a profit sharing plan, but the contributions are a fixed mandatory contribution from the company, not variable. What is a cash balance plan? Pros/cons? Correct Answer: It's a defined-benefit pension plan with an option of taking a lifetime annuity OR a lump sum rollover distribution. Pros: For older business owners to turbocharge their pretax retirement savings. Cons: Company takes on investment risk (must increase funding if market dips), requires actuary certification each year. What is the contribution to a cash balance plan? Correct Answer: From the employer: A set percentage of compensation plus interest. Limits are based on age and can be over $200k If you're still working, would you ever HAVE to take a RMD from a 401k before retiring? Correct Answer: Yes, if you own >5% of the company (no skirting RMDs with a solo 401k) What is the maximum loan limit from a qualified plan? Correct Answer: The lesser of $50k or 50% of your account balance, but you can always take out at least $10k Pension Protection Act of 2006 (rule for nonspouse beneficiaries) Correct Answer: Federal law that imposes additional funding and disclosure requirements on employers who have employee pension plans. Nonspouse beneficiaries of 401k/403b/457 can transfer to an IRA and withdraw:

over 5 years OR
over their life expectancy NOTE: must be a direct transfer to an INHERITED IRA - not a 60 day rollover indirectly transferred, or it will be all taxable Qualified plan rule: Benefits can't be touched by creditors EXCEPT: (2) Correct Answer: - QRDO (divorce order) - if the plan doesn't allow for an immediate cash transfer, then the funds will be segregated out into a subtrust until the transfer is possible
to collect federal taxes owed NUA taxation Correct Answer: Net Unrealized Appreciation - the difference between the stock basis and the FMV when the stock is distributed. Always taxed as LTCG no matter how long it's held. Tax must be paid immediately on the basis amount as ordinary income. The NUA will be taxed as LTCG only upon sale of the stock, and any extra earnings will be taxed just like normal capital gains.

CFP Exam Questions and Answers: A Comprehensive Guide to Financial Planning, Exams of Nursing

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Answers Latest Versions 2025 Graded A+