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Retirement and Estate Planning Flashcards

7 cards from real AFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Retirement and Estate Planning flashcards as text

  1. A married couple wants to minimize estate taxes. Which strategy allows one spouse to use the other's unused federal estate tax exemption?

    Answer: Portability election

    Portability allows a surviving spouse to elect to use the deceased spouse's unused federal estate tax exemption by filing an estate tax return.

  2. Which type of IRA contribution is made with after-tax dollars, allowing qualified withdrawals to be completely tax-free?

    Answer: Roth IRA

    Roth IRA contributions are made with after-tax dollars, and qualified distributions in retirement are tax-free.

  3. A 55-year-old client separates from service in the year they turn 55. Which penalty exception may allow them to take 401(k) distributions without the 10% early withdrawal penalty?

    Answer: Rule of 55

    The Rule of 55 allows penalty-free 401(k) withdrawals if you separate from service in or after the year you turn 55.

  4. Which estate planning document designates who will manage an individual's financial affairs if they become incapacitated?

    Answer: Durable power of attorney

    A durable power of attorney designates an agent to manage financial and legal decisions if the principal becomes incapacitated.

  5. What is the primary tax advantage of a Health Savings Account (HSA) in the context of retirement planning?

    Answer: Contributions are tax-deductible and withdrawals for any purpose after 65 are penalty-free

    HSAs offer a triple tax advantage: deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses; after 65, withdrawals for any purpose avoid the penalty (though taxed as ordinary income if non-medical).

  6. Which retirement account type is most appropriate for a self-employed individual with no employees who wants to maximize retirement contributions?

    Answer: Solo 401(k)

    A Solo 401(k) allows self-employed individuals to contribute as both employee and employer, enabling significantly higher annual contributions than a SIMPLE or traditional IRA.

  7. In estate planning, what does the term 'per stirpes' mean in the context of beneficiary designations?

    Answer: A deceased beneficiary's share passes to their descendants

    Per stirpes means that if a beneficiary predeceases the account owner, that beneficiary's share passes to their descendants (children).