AFC Retirement and Estate Planning 5

Question 1

A client over age 70½ wants to donate to charity directly from their IRA without triggering taxable income. Which strategy accomplishes this?

Accepted Answer

Qualified Charitable Distribution (QCD)

Answer

A Qualified Charitable Distribution (QCD) allows IRA owners age 70½ or older to transfer up to $105,000 (2024) directly to a qualified charity, satisfying RMD requirements without including the amount in taxable income.

Question 2

Which type of trust allows a grantor to transfer assets, receive an annuity payment for a fixed term, and pass remaining assets to beneficiaries at reduced gift tax cost?

Accepted Answer

Grantor retained annuity trust (GRAT)

Answer

A GRAT allows the grantor to receive fixed annuity payments for a set term; if assets outperform the IRS hurdle rate (Section 7520 rate), the excess passes to beneficiaries gift-tax-free.

Question 3

What distinguishes a 'safe harbor' 401(k) plan from a standard 401(k) plan?

Accepted Answer

Safe harbor plans automatically satisfy ADP/ACP nondiscrimination tests in exchange for mandatory employer contributions

Answer

Safe harbor 401(k) plans automatically pass ADP/ACP nondiscrimination tests if the employer makes required matching or nonelective contributions, which must be immediately 100% vested.

Question 4

A client is concerned about Medicaid spend-down rules for nursing home care. What is the Medicaid 'look-back period' for most asset transfers?

Accepted Answer

5 years

Answer

Medicaid reviews asset transfers made within the 5-year look-back period prior to application; transfers for less than fair market value can result in a penalty period of ineligibility.

Question 5

Which Social Security benefit is available to a divorced spouse who was married for at least 10 years, provided they are currently unmarried?

Accepted Answer

Spousal benefit up to 50% of the ex-spouse's PIA

Answer

A divorced spouse who was married at least 10 years and is currently unmarried may claim up to 50% of the ex-spouse's Primary Insurance Amount (PIA) as a spousal benefit.

AFC - Accredited Financial Counselor Practice Test

AFC - Accredited Financial Counselor Practice Test

AFC Retirement and Estate Planning 5