D363 Personal Finance (CFC1)

70. Michael and Sara, a married couple, have purchased a vacation home together. If one of them were to die, they want to make sure that the surviving spouse would inherit the property with ease. As a result, they have an ownership agreement whereby the property passes to the surviving owners by operation of law rather than by the terms of a will in the event of the death of one owner.
What does this scenario exemplify?

• Joint tenancy with right of survivorship
• Payable-on-death designation
• Testamentary trust
• Beneficiary designation

71. Nora is leaving her job to start a small business. Currently, she contributes to a 401(k) with employer matching. Once self-employed, she will no longer receive employer contributions.
What should Nora do to continue building toward her postretirement goals?

• Transfer her 401(k) balance to a savings account for easier access
• Delay retirement contributions until her business is consistently profitable
• Rely on Social Security benefits to replace her previous employer plan
• Open a solo 401(k) or SEP IRA and contribute regularly based on her income

72. Sophia, who is 35 years old, wants to withdraw $30,000 from her 401(k) retirement account for a non-qualified expense.
What is the IRS penalty percentage she will have to pay for an early withdrawal?

• 8%
• 10%
• 15%
• 20%

73. Ahmed has reached the age of 65 and has $1.2 million in his retirement fund.
What is the most important factor in determining how long his retirement savings will last?

• The rate at which Ahmed withdraws from the fund
• The rate of return on investments in the fund
• The income tax rate during retirement
• The interest rates on loans taken during retirement

74. Maya has probate property but has not prepared a will.
How will her probate property be distributed when she dies?

• Her probate property will be distributed according to state law.
• Her entire probate property will be inherited by her spouse.
• Her probate property will be distributed between her spouse and her mother.
• Her entire probate property will be inherited by her children.

75. Anika’s husband, Kamal, passed away recently, and he has no valid will. He has some probate property and some nonprobate property.
What is the main difference in the distribution of these properties?

• Nonprobate properties are subject to estate taxes, whereas probate properties are not.
• Nonprobate property passes directly to beneficiaries, while probate property must be distributed under court supervision.
• Nonprobate properties are distributed according to state law, whereas probate properties are distributed to named beneficiaries.
• The court handles nonprobate properties, whereas probate properties are distributed immediately.

76. Omar is a single father and has one child, who is currently 14. Omar is planning a wealth transfer strategy so that his assets can be easily transferred at the time of death. He is aware that his relatives and friends are not reliable. He wants a certain amount of his corpus to go specifically toward his child’s education and financial assistance in his absence.
Which method will be the best for Omar for his wealth transfer strategy?

• Assigning payable-on-death designations to his assets
• Preparing a will
• Preparing a prenuptial agreement
• Creating a trust

77. Fatima and Oliver are live-in partners with one child. They plan to create a trust that funds their child’s education. While researching, they came across two types of trust: testamentary trusts and living trusts.
What is the main difference between testamentary trusts and living trusts that Fatima and Oliver should know?

• Living trusts require having a trustee, whereas testamentary trusts do not require a trustee.
• Living trusts operate while the grantor is still living, whereas testamentary trusts take effect when the grantor passes away.
• Living trusts are subject to income tax, whereas testamentary trusts are tax-exempt.
• Living trusts are irrevocable in nature, whereas testamentary trusts are revocable in nature.

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