AFC Retirement and Estate Planning 4

Question 1

A client inherits a Roth IRA from a non-spouse. Under the SECURE Act, what rule governs distributions?

Accepted Answer

All assets must be distributed within 10 years, but no annual RMDs are required

Answer

Distributions must begin by December 31 of the year following death

Answer

Distributions can be stretched over the beneficiary's life expectancy

Answer

The inherited Roth IRA must be converted to a traditional IRA

Question 2

What is the annual gift tax exclusion for 2024 that allows individuals to give gifts without filing a gift tax return?

Accepted Answer

$18,000 per recipient

Answer

$15,000 per recipient

Answer

$17,000 per recipient

Answer

$20,000 per recipient

Question 3

A defined benefit pension plan provides monthly income based on years of service and final salary. What is the key risk this plan transfers to the employer?

Accepted Answer

Investment/longevity risk

Answer

Inflation risk

Answer

Legislative risk

Answer

Sequence of returns risk

Question 4

Which document specifically outlines an individual's wishes regarding end-of-life medical treatment and is legally distinct from a healthcare proxy?

Accepted Answer

Living will (advance directive)

Answer

Durable power of attorney

Answer

POLST form

Answer

Letter of instruction

Question 5

Under what circumstance can a surviving spouse roll over an inherited IRA into their own IRA, and what is the key benefit?

Accepted Answer

At any time; RMDs are based on the surviving spouse's own age and life expectancy

Answer

Only if the deceased was younger than 59½; avoids immediate taxation

Answer

Only if the surviving spouse is over age 70½; avoids penalty

Answer

Only if the IRA is a Roth; avoids future RMDs

Question 6

A client establishes an irrevocable life insurance trust (ILIT). What is the primary estate planning benefit?

Accepted Answer

The death benefit is excluded from the insured's taxable estate while providing liquidity for estate taxes

Answer

Life insurance proceeds avoid income tax when paid to a trust

Answer

Premiums paid into the trust are income tax deductible

Answer

The trust can be amended to change beneficiaries at any time

Question 7

What is the 'four percent rule' in retirement planning, and what was it originally based on?

Accepted Answer

Withdraw 4% of initial portfolio value annually, inflation-adjusted, based on historical 30-year retirement simulations

Answer

Withdraw 4% of portfolio value each year, adjusted for inflation, based on Monte Carlo projections for a 40-year retirement

Answer

Invest 4% of income in a Roth IRA annually to fund a 30-year retirement

Answer

Keep 4% of retirement assets in cash to cover short-term expenses