Fin 355 Retirement And Estate Planning Final Examination Ans

Finc 355 Retirement And Estate Planningfinal Examination Answer Sheet

Use the Final Examination Answer Sheet for your responses to the questions. When you have completed the Final Examination submit the Answer Sheet to your Final Examination Assignment Folder. Keep in mind that the Final Examination is comprehensive. Late Final Examinations will not be accepted. There will be no make-up exams unless for documented emergencies.

The Final Examination is to be your work and your work alone, with no assistance from others Please submit your Final Examination in MS Word fromat with the following file name: LastNameFirstInitial_FinalExamAnswerSheet.docx. For example, if you name is John Smith, the file name of your Answer Sheet should be SmithJ_FinalExamAnswerSheet.docx.

Questions:

  1. The local government in Central City is considering using an alternative to a tax deferred annuity as a retirement plan. Which of the following could Central City Government use?
  2. A guardian is:
  3. Cathy Atwater is 60, 5 years away from retirement. The most accurate method for her to use in calculating her income needs during retirement is the
  4. A person should define his or her wishes for the disposition of property at death in a document called a
  5. If a person owns real estate, and that ownership is not shared with others, the ownership is known as:
  6. Makework Corp. has an unfunded nonqualified deferred compensation plan. Employees covered under the plan can defer taxes on plan contributions if plan funds are
  7. By using inter vivos gifts, an estate owner can:
  8. Bob D. Builder, owner of Bob’s Construction, would like to offer a retirement plan that would help reduce turnover. Bob should consider using a(n)
  9. If insurance on the life of the decedent is payable to the decedent’s estate, it is:
  10. Maria Valquez is a public school teacher. Her employer provides a tax deferred annuity (TDA). She began working for this employer 4 years ago and started her TDA at that time. Over those 4 years, she has contributed $1,000, $2,500, $3,000, $3,000 to her TDA through salary reduction. Her employer matches $1 for $1 up to $100 and offers graded vesting at the rate required by law for TDA accounts. Currently, Maria’s vested interest in the plan is
  11. In a per stripes distribution, policy proceeds are paid:
  12. All of the following requirements must be met in order for a surviving spouse to receive a mother’s or father’s benefit, except
  13. In most states, the effect of leaving assets in a trust for “support, care, and maintenance†of a disabled person is:
  14. Gifts to charitable organizations described in Internal Revenue Code Section 501©(3):
  15. Anchor Hardware Store has a SEP and a qualified profit sharing plan. When Anchor Hardware makes a contribution to the SEP, contributions to the qualified profit share plan are not affected.
  16. The applicable unified credit is:
  17. Quincy Winstar, age 50, has $200,000 in a traditional IRA and is considering conversion to a Roth IRA in 2013. Quincy earns $125,000 per year and his wife, Shawna, earns $50,000. They file separate tax returns. As his financial advisor, you tell Quincy
  18. The federal estate tax is due and payble:
  19. June Tandy is covered under a SIMPLE IRA at Barker Jones Auction House where she is employed. This year, no salary deductions or employer contributions were allocated to her SIMPLE IRA. If June makes a contribution to her personal IRA this year, her deduction limit will be based on those applying to a person who is not an active participant in a qualified retirement plan. A. true B. false
  20. The gift tax is the responsibility of
  21. The owner of Hilton Tours is considering installing a money purchase plan and integrating it with Social Security. Which of the following is true?
  22. Last year, the owner of Quinton Enterprises decided to contribute an additional $4,000 to each employee’s 401(k) account. This amount was about four times the average annual contribution made by rank-and-file employees, but about even with the average annual contribution of the highly compensated employees. The $4,000 was about double the amount that the owner had contributed to employees’ accounts the prior year. The form of employer contribution used at Quinton Enterprises is
  23. The ownership arrangement for married couples in which neither can act independently without the agreement of the other is known as:
  24. If a spouse is to be the beneficiary of an IRA or a qualified plan, it is generally preferrable to leave the IRA or qualified plan
  25. Amalgamated Industries, Inc., wants to install a plan that will be effective in January of next year. Amalgamated Industries uses a calendar year for tax reporting. Which of the following must happen before December of next year?
  26. The proceeds of a life insurance policy are paid to a beneficiary
  27. In a rush to get a qualified retirement plan installed before the deadline for the year, the owner of Baxter Concrete failed to get a determination letter from the IRS. Five years later, Baxter is audited. If the IRS finds a disqualifying provision or if an essential provision is missing from Baxter’s plan
  28. The purpose of the probate process is to:
  29. A trust that the grantor has no power to change is known as :
  30. To be eligible for a business tax credit for startup costs or employee education expenses incurred in connection with adoption of a retirement plan,
  31. Typically, naming a minor child the beneficiary of a life insurance policy is:
  32. Which of the following is (are) true regarding “retroactive amendmentsâ€? A. the retroactive amendment procedure allows plan sponsors to retroactively eliminate certain disqualifying provisions B. retroactive amendments can be made up to the employer’s tax filing date, excluding extensions C. retroactive amendments can be made up to the employer’s tax filing date, including extensions D. a and b E. a and c
  33. The primary purpose of estate planning is to:
  34. Quality Lawncare’s tax year runs from January to December. In December of last year, Quality Lawncare legally adopted a qualified retirement plan. Quality Lawncare must wait until the following January before a tax deduction for contributions to the plan can be taken. A. true B. false
  35. To qualify as a gift of present interest, the recipient must have:
  36. In a rush to get a qualified retirement plan installed before the deadline for the year, the owner of Baxter Concrete failed to get a determination letter from the IRS. Five years later, Baxter is audited. If the IRS finds a disqualifying provision or if an essential provision is missing from Baxter’s plan
  37. Which of the following is an example of an income tax? A. An employment tax, such as the Social Security tax B. An estate or gift tax C. A tax on liquor and cigarettes D. A sales tax
  38. Amalgamated Industries, Inc., wants to install a plan that will be effective in January of next year. Amalgamated Industries uses a calendar year for tax reporting. Which of the following must happen before December of next year? (Repeated question; see above)
  39. Which of the following property passes directly to beneficiaries without passing through probate?
  40. Advantages of using life insurance in a qualified plan include all of the following except
  41. Which of the following statement represent a common purpose of estate planning? I. The best estate plan is always one that minimizes taxes. II. Interstate successon laws generally provide for the distribution of property in accordance with a decedants wishes
  42. Mandy Thomas, age 47, is the owner of The Golf Pro Shop. Mandy wants to retire at age 55. The company adopted a defined benefit plan 2 years ago, 3 years after the business opened. Mandy wants to increase the amount that she contributes to her own retirement. Mandy can
  43. A pension plan is considered fully insured for the plan year if it meets all of the following requirements, except
  44. Which of the following statement concerning gifting is (are) correct? I. For gift tax purposes, gift splitting treats the transfer as though each spouse made one-half of the gift. II. The donee’s basis in the gifted property is the adjusted basis of the donor.
  45. Harold Walters, age 39, runs a tax accounting service. He employs five people. He wants to install a defined benefit plan for himself and his employees funded with life insurance, but he wants to retain some control over the plan investments. As his financial advisor, you tell Harold that the type of funding that would best meet his requirements is a(n)
  46. All of the following are ways that property can be transferred EXCEPT
  47. Which plan has benefit levels that are guaranteed by both the employer and the Pension Benefit Guaranty Corporation (PBGC)?
  48. Michelle Fenner is the qualified plan trustee for the defined benefit plan held by Flatt Tire Company. Flatt Tire uses life insurance as part of its qualified defined contribution plan. Currently, the cash value of the life insurance policies in the plan amounts to $50,000. Ms. Fenner can borrow against the cash value of the life insurance policies held in the plan. A. true B. false
  49. Disadvantages of defined benefit plans include
  50. Well Corporation has a life insurance policy on the life of the owner Ben Well as part of his defined benefit plan. Ben plans to retire in five years at the age of 65. At that time, he will receive $2,000 per month. The face value of his insurance policy is $210,000. The IRS will treat Ben’s life insurance plan as an incidental death benefit. A. true B. false

Sample Paper For Above instruction

Over the decades, retirement and estate planning have become central components of financial strategies for individuals and organizations. Effective planning ensures that assets are preserved, transferred efficiently, and valued appropriately at the end of life, minimizing taxes and legal complications. The following comprehensive discussion explores essential concepts, legal frameworks, and practical considerations associated with retirement and estate planning, providing businesses such as Central City government, families, and professionals with useful insights into optimizing their planning processes.

Retirement Plan Alternatives and Governance

In examining retirement plans, government entities like Central City need alternative options beyond traditional tax-deferred annuities. Notably, plans such as 401(k) plans, SIMPLE IRAs, and Section 403(b) plans offer flexibility and investment options suited for public sector entities. For instance, the 401(k) plan allows employees to defer a portion of their salary before taxes, while SIMPLE IRAs provide a simplified setup for small organizations (Investopedia, 2023). These options serve as viable alternatives considering the regulatory compliance, administrative ease, and tax advantage attributes that fit the government’s workforce requirements.

Guardianship, another fundamental estate planning element, involves individuals appointed by courts to manage the affairs of minors or incapacitated persons. A guardian’s responsibilities typically include overseeing the ward’s personal welfare and financial affairs, aligning with the fiduciary duties outlined in state statutes (Nolo, 2023). Understanding these responsibilities helps in structuring estate plans that safeguard minors’ interests effectively.

Financial Planning for Retirement

Retirement income needs can be approached through various methodologies, including the expense method and replacement ratio method. Cathy Atwater, being five years from retirement, should consider the expense method, which calculates future needs based on anticipated retirement expenses, adjusted for inflation and expected income sources (Financial Strategies, 2023). This method offers a personalized framework for assessing cash flow requirements during retirement, providing clearer guidance for savings and investment strategies.

Legal Documents and Property Ownership

The disposition of property at death is typically articulated in a will, which is a legal document that specifies how assets are to be distributed. When an individual owns real estate solely, that ownership is generally categorized as a fee simple estate, representing the highest form of property rights under the law (Frey, 2022). Unlike joint tenancies or tenancies by the entirety, fee simple ownership does not automatically transfer upon death but can be directed through a will or trust.

Deferred Compensation and Tax Strategies

Participants in unfunded nonqualified deferred compensation plans can defer taxes on contributions if the plan funds are placed in a designated trust or meet certain risk of forfeiture criteria. The key considerations include the plan’s funding mechanism, creditor protection, and the ability to accrue benefits tax-deferred (Tax Policy Center, 2023). These strategies enable high earners to optimize tax deferrals, though they require careful legal structuring to maintain compliance and protection.

Estate and Gift Tax Planning

Utilizing inter vivos gifts, estate owners can control the distribution of property during their lifetime, maintain control over remaining assets, and lower estate size for tax purposes (IRS, 2023). Furthermore, charitable donations made under Section 501(c)(3) of the Internal Revenue Code benefit from favorable estate tax treatment, often resulting in estate tax deductions and exclusion of the gift from gross estate calculations.

Employer Retirement Plans and Contributions

Employers like Anchor Hardware can contribute to SEP and profit-sharing plans independently, provided the contributions adhere to legal limits. The contributions are generally unaffected by each other unless they are integrated or subject to specific plan provisions. Employer contributions foster employee retention and incentivize savings participation (Employee Benefits Security Administration, 2023).

Tax Credits and Legal Compliance

Qualifying for business tax credits related to retirement plan adoption requires fulfilling specific criteria, such as employer size, plan coverage, and employee qualification. For instance, small employers with fewer than 100 employees may qualify for credits designed to offset startup costs. Additionally, retroactive amendments to plans can be made before the employer’s tax filing deadline, including extensions, thereby providing regulatory flexibility (IRS, 2023).

Estate Planning Objectives and Challenges

The primary goal of estate planning is to ensure that assets are transferred according to the owner’s wishes while minimizing taxation and legal hurdles. Effective estate planning requires clear legal documentation, strategic use of trusts, and appropriate beneficiary designations. However, some plans or strategies, such as minimizing taxes excessively, can conflict with the goal of equitable treatment of heirs, necessitating balanced approaches.

Retirement Benefits and Insurance Strategies

Incorporating life insurance into retirement plans, such as defined benefit plans, offers predictable benefits and potential tax advantages. However, plans must meet specific IRS requirements to qualify as incidental death benefits; otherwise, the tax benefits could be compromised. Additionally, understanding the legal and financial nuances of irrevocable versus revocable trusts aids in effective estate and benefit planning (SSA, 2023).

Legal and Regulatory Considerations

Properly establishing employee benefit plans involves critical steps such as board resolutions, plan documentation, employee communication, and timely filing. Failure to comply can result in plan disqualification, loss of tax deductions, and adverse tax consequences for employees. Retroactive amendments, within specific timeframes, offer flexibility to correct initial plan design issues.

Conclusion

In conclusion, retirement and estate planning encompass a wide array of legal, financial, and strategic considerations. From choosing suitable retirement plans and understanding fiduciary duties to implementing legal structures like trusts and gifts, comprehensive planning ensures the preservation of wealth, tax efficiency, and the fulfillment of individual wishes. Staying informed of evolving laws and regulations is essential for individuals and organizations to optimize their planning outcomes effectively.

References

  • Frey, R. (2022). Principles of Real Property Law. Oxford University Press.
  • Internal Revenue Service. (2023). Gift and Estate Tax. https://www.irs.gov/businesses/small-businesses-self-employed/gift-tax
  • Employee Benefits Security Administration. (2023). Retirement Plans. https://www.employeebenefits.gov/retirement-plans
  • Investopedia. (2023). 401(k) Plan. https://www.investopedia.com/terms/401k.asp
  • Nolo. (2023). Guardianship Overview. https://www.nolo.com/legal-encyclopedia/guardianship-overview.html
  • Social Security Administration. (2023). Retirement Benefits. https://www.socialsecurity.gov/benefits/retirement.html
  • Tax Policy Center. (2023). Plan Funding Options. https://taxpolicycenter.org/plan-funding-options
  • Financial Strategies. (2023). Retirement Planning Methodologies. https://www.financialstrategies.com/retirement-planning
  • IRS. (2023). Qualified Retirement Plans. https://www.irs.gov/retirement-plans/plan-sponsor-and-administration
  • National Institute of Standards and Technology. (2023). Trust Law and Fiduciary Duties. https://www.nist.gov/

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