AFC - Accredited Financial Counselor Accredited Financial Counselor Retirement and Estate Planning 1

Question 1

Which of the following best describes the 'stretch IRA' strategy that was significantly curtailed by the SECURE Act of 2019?

Accepted Answer

Allowing non-spouse beneficiaries to take RMDs over their own life expectancy, deferring taxes for decades

Answer

Converting a traditional IRA to a Roth IRA over multiple years to reduce tax liability

Answer

Combining multiple inherited IRAs into a single account to simplify distributions

Answer

Rolling an inherited IRA into the beneficiary's own IRA to restart the distribution clock

Question 2

A married couple has a combined estate of $28 million. Which estate planning tool allows both spouses' federal estate tax exemptions to be fully utilized even if one spouse leaves everything to the other?

Accepted Answer

A portability election filed on the deceased spouse's estate tax return

Answer

A qualified personal residence trust (QPRT)

Answer

A charitable remainder trust (CRT)

Answer

A generation-skipping trust (GST)

Question 3

What is the primary purpose of a durable power of attorney for finances in estate planning?

Accepted Answer

To authorize a named agent to manage financial affairs if the principal becomes incapacitated

Answer

To distribute assets to heirs immediately upon death, bypassing probate

Answer

To reduce the taxable estate by transferring assets to an irrevocable trust

Answer

To designate a guardian for minor children in the event of the principal's death

Question 4

A client converts $50,000 from a traditional IRA to a Roth IRA. Which of the following statements about this conversion is correct?

Accepted Answer

The converted amount is added to ordinary income in the year of conversion and taxed at the client's marginal rate

Answer

The converted amount is tax-free if the client has held the traditional IRA for more than five years

Answer

The conversion triggers a 10% early withdrawal penalty regardless of the client's age

Answer

The converted amount is subject to capital gains tax rates rather than ordinary income rates

Question 5

Which type of trust is specifically designed to reduce estate taxes by allowing a grantor to transfer assets to heirs at a discounted gift tax value, typically using assets expected to appreciate significantly?

Accepted Answer

Grantor retained annuity trust (GRAT)

Answer

Spendthrift trust

Answer

Testamentary trust

Answer

Blind trust

Question 6

A client is 72 years old and has not yet taken their required minimum distribution (RMD) for the current year. What is the penalty for failing to take the full RMD amount on time?

Accepted Answer

25% of the amount that should have been withdrawn (reduced to 10% if corrected promptly)

Answer

10% of the amount not withdrawn

Answer

50% of the amount that should have been withdrawn

Answer

The account loses its tax-deferred status entirely