CDA Financial Planning & Property Division 2

Question 1

When a divorcing couple owns a closely held business, which valuation method focuses on the business's ability to generate future income?

Accepted Answer

Income capitalization approach

Answer

The income capitalization approach values a business based on its projected future earnings, making it especially relevant for ongoing enterprises in divorce proceedings.

Question 2

Which type of pension plan guarantees a specific monthly benefit at retirement, often based on years of service and salary history?

Accepted Answer

Defined benefit plan

Answer

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.

Question 3

A QDRO (Qualified Domestic Relations Order) that awards an alternate payee a percentage of the participant's retirement benefit is called which type?

Accepted Answer

Separate interest approach

Answer

The separate interest approach creates an independent benefit for the alternate payee based on a percentage of the participant's accrued benefit at divorce.

Question 4

In divorce, what term describes the increase in value of a separate property asset that results from market forces rather than marital effort?

Accepted Answer

Passive appreciation

Answer

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.

Question 5

Which financial document is most useful for a CDA to establish a divorcing client's ongoing living expenses for purposes of spousal support analysis?

Accepted Answer

Monthly budget worksheet

Answer

A monthly budget worksheet details current and projected living expenses, forming the basis for determining the amount of spousal support needed.

(CDA) Certified Divorce Advisor Practice Test

(CDA) Certified Divorce Advisor Practice Test

CDA Financial Planning & Property Division 2