AAMS Tax Planning & Wealth Transfer Flashcards
6 cards from real AAMS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 AAMS Tax Planning & Wealth Transfer flashcards as text
Which account type allows investment gains to grow tax-deferred and be withdrawn tax-free in retirement, provided certain conditions are met?
Answer: Roth IRA
Roth IRA contributions are made with after-tax dollars, and qualified withdrawals of both principal and earnings are tax-free in retirement.
The annual gift tax exclusion for 2024 allows an individual to give up to what amount per recipient without triggering a gift tax return?
Answer: $18,000
The 2024 annual gift tax exclusion is $18,000 per recipient, allowing tax-free gifting up to that amount without filing a Form 709.
Which estate planning tool allows assets to pass directly to beneficiaries outside of probate while retaining the grantor's control during their lifetime?
Answer: Revocable living trust
A revocable living trust allows the grantor to maintain control over assets during their lifetime while ensuring a smooth, probate-free transfer to beneficiaries at death.
Tax-loss harvesting is a strategy that involves:
Answer: Selling depreciated assets to offset capital gains and reduce tax liability
Tax-loss harvesting involves selling securities at a loss to offset capital gains realized elsewhere in the portfolio, thereby reducing current tax liability.
The 'step-up in cost basis' at death means that:
Answer: Inherited assets receive a new basis equal to fair market value at the date of death
A stepped-up basis resets the cost basis of inherited assets to their fair market value at the date of death, eliminating capital gains tax on pre-death appreciation.
Which strategy involves converting a portion of a traditional IRA to a Roth IRA during a year when the client is in a temporarily lower tax bracket?
Answer: Roth conversion strategy
A Roth conversion strategy leverages low-income years to convert traditional IRA funds to Roth at a lower tax rate, reducing future required minimum distributions.