Financial Planning & Property Division Flashcards
7 cards from real CDA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Planning & Property Division flashcards as text
When a divorcing couple owns a closely held business, which valuation method focuses on the business's ability to generate future income?
Answer: Income capitalization approach
The income capitalization approach values a business based on its projected future earnings, making it especially relevant for ongoing enterprises in divorce proceedings.
Which type of pension plan guarantees a specific monthly benefit at retirement, often based on years of service and salary history?
Answer: Defined benefit plan
A defined benefit plan promises a set monthly payment at retirement, calculated using formulas based on salary and tenure, and requires actuarial valuation in divorce.
A QDRO (Qualified Domestic Relations Order) that awards an alternate payee a percentage of the participant's retirement benefit is called which type?
Answer: Separate interest approach
The separate interest approach creates an independent benefit for the alternate payee based on a percentage of the participant's accrued benefit at divorce.
In divorce, what term describes the increase in value of a separate property asset that results from market forces rather than marital effort?
Answer: Passive appreciation
Passive appreciation is growth in separate property value due to market conditions or inflation, which many states treat as separate property not subject to division.
Which financial document is most useful for a CDA to establish a divorcing client's ongoing living expenses for purposes of spousal support analysis?
Answer: Monthly budget worksheet
A monthly budget worksheet details current and projected living expenses, forming the basis for determining the amount of spousal support needed.
Under ERISA, a plan administrator must act on a proposed QDRO within how many days of receiving it?
Answer: 60 days
ERISA requires plan administrators to notify participants and alternate payees of a received QDRO and determine its qualified status within 18 months; however, the standard review period is 18 months.
What is the primary disadvantage of keeping the marital home as part of a divorce settlement compared to selling it and splitting proceeds?
Answer: One spouse may become house-rich but cash-poor
Retaining the home may leave the receiving spouse with insufficient liquid assets to meet daily needs, creating a cash-flow imbalance despite apparent asset wealth.