When the annuitization option is selected, each payment represents both capital and earnings. A) be paid to a designated beneficiary. If your client, who is in the 28% tax bracket, makes a lump-sum withdrawal of $15,000, what tax liability results from the withdrawal? A variable annuity is a security and must be registered with the SEC, not FINRA. C) III and IV. *As contributions are made with after-tax dollars, only the earnings generated are taxed on withdrawal. Your customer is interested in a variable annuity but is unclear on some of the details regarding different specifications and riders that can be attached to the contract. This compensation may impact how and where listings appear. . Question #17 of 48Question ID: 606802 A client has purchased a nonqualified variable annuity from a commercial insurance company. View full document. D)Joint and last survivor annuity. A) complete all paper work to purchase the annuity contract and obtain the clients signature immediately. 5 Q All of the following are characteristics of variable whole life EXCEPT the premium is level there is no guaranteed cash value there is no guaranteed minimum death benefit. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. Question #20 of 48Question ID: 606808 The tax on this is $2,800 ($10,000 x 28%). B) the number of annuity units is fixed, and their value remains fixed. This factor is used to establish the dollar amount of the first annuity payment. Dividing the funds available so as to fund 2 separate contracts, whether they be joint with last survivor or life income, would not be cost efficient for spouses. A)Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis. Refinancing a home to draw out equity has been identified by FINRA as an abusive sales tactic regarding the sales of VAs. D) II and IV. Her agent recommended she choose a variable annuity as a safe haven for the funds. An annuity is a continuous stream of equal periodic payments from one party to another for a specified period of time to fulfill a financial obligation. When the annuitization option is selected, each payment represents both capital and earnings. Reference: 12.3.3 in the License Exam. (Check all that apply.) \hspace{10pt} \text{Sales salaries} & \$\hspace{5pt} 670,000 & \hspace{10pt} \text{Income tax withheld} & \$198,744\\ Question #27 of 48Question ID: 606818 The client agrees to purchase the contract and informs the RR that he will be cashing out a VA he purchased 2 years ago to fund the new contract and will forward the check as soon as he receives it. A)variable annuities will protect an investor against capital loss. Universal variable life policies Before buying a variable annuity, investors should carefully read the prospectus to try to understand the expenses, risks, and formulas for calculating investment gains or losses. The largest monthly check an annuitant can receive for the rest of his life is generated by a straight life (life income or life only) payout option. However, if you take a withdrawal during the contractssurrender period, which can be as long as 15 years, youll generally have to pay a surrender fee. They offer broad diversification in the securities market and potential growth, all while using the power of tax deferral. A)II and IV. B) Age 78, retired for 20 years, lives comfortably and wants to leave all liquid assets to children Only variable annuities have payout plans that provide the client income for life. Her intent was to use the funds for the down payment on a house after graduation. B)unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. Essential Characteristics: B)IRAs. D) value of accumulation units. P=525p2+65,326p185,000E=326p+185,000P=-525 p^{2}+65,326 p-185,000 \quad E=-326 p+185,000P=525p2+65,326p185,000E=326p+185,000. Reference: 12.1.4 in the License Exam. Life Insurance vs. Annuity: What's the Difference? D)II and IV. A) 4000. IV. C)II and IV. &&& \underline{\underline{\$341,718}} "Variable Annuities: What You Should Know," Page 6. II. Your 55-year-old client invested $50,000 four years ago in a nonqualified variable annuity. It may be used by nongovernmental . Because this is not guaranteed, the policyowner bears the investment risk. Variable annuities are designed to combat inflation risk. C)100% tax deferred. *Distributions from a nonqualified plan represent both a return of the original investment made in the plan with after-tax dollars (a nontaxable return of capital) and the income from that investment. C) none of these. The annuitant may not contribute and withdraw simultaneously. A demonstrated ability to quickly learn and continuously develop functional knowledge and an understanding of company products as well as administrative, claims, underwriting and marketing functions. B)value of annuity units. C) II and III. Question #28 of 48Question ID: 606821 An investor who has purchased a nonqualified variable annuity has the right to: Variable annuities must be registered with: All of the following statements concerning a variable annuity are correct EXCEPT: D) variable annuities will protect an investor against capital loss. An accumulation unit in a variable annuity contract is: A)an accounting measure used to determine the contract owner's interest in the separate account. Reference: 12.3.3 in the License Exam, Question #34 of 48Question ID: 606834 Life annuity has the largest payout because less risk is assumed by the insurance company; there is no beneficiary in the event the annuitant dies. C) 10% penalty plus payment of ordinary income tax on all funds withdrawn exceeding basis. A)III and IV. Determine whether the following events are independent or dependent. As the name implies, the investment performance of a variable annuity's portfolio (separate account) can vary, and the investor bears the risk of any potential decline in its value. The work environment characteristics are normal office conditions. C) suitable regardless of funding sources If an insurance holder dies sooner than expected, the insurance company will have to pay the death benefit sooner. *The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. D)I and IV. Assuming that the payroll for the last week of the year is to be paid on December 313131, journalize the following entries: C) It will stay the same. By clicking Accept All Cookies, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. A) It will be higher. One of the following would achieve that objective but a suitability discussion regarding it's risk should also occur. However, it does guarantee payments for life (mortality). Therefore, ordinary income taxes will apply to the entire $10,000. Suggesting that loans or drawing equity from a home to fund VA contracts have also been targeted as abusive sales practices. For example, when paying rent, the rent payment (PMT) . He originally invested $29,000 4 years ago; it now has a value of $39,000. must provide full and fair disclosure. The paper publication will not be rereleased. D)variable annuities. The value of the annuity units varies. Upon John's death during the accumulation period, Sue takes a lump-sum payment. And, unlike a fixed annuity, variable annuities do not provide any guarantee that you will earn a return on your investment. 10.1 This chapter addresses a number of ABS statistics relating to the economically active population which were not discussed elsewhere. Do homework Doing homework can help you learn and understand the material covered in class. Income that cannot be outlived by the owner A) a minimum rate of return is guaranteed. variable An immediate annuity consists of a Single Premium T has an annuity that guarantees an income payment for the rest of his life. A single lump-sum investment is made, and payments begin immediately, since the investor has purchased annuity units. A) II and IV. A)contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. B)Value of each annuity unit each month. D) the number of annuity units becomes fixed when the contract is annuitized. If a 42-year-old customer has been depositing money in a variable annuity for 5 years, and he plans to stop investing but has no intention of withdrawing any funds for at least 20 years, he is holding: D) I and III. An ordinary simple annuity has the following characteristics: For example, most car loans are ordinary simple annuities where payments are. The following are the characteristics or the hierarchy of a trend except A. Gigatrends C. Megatrends B. Macrotrends D. Nanotrends _____11. B)FINRA. B) prime rate. Variable annuity salespeople must register with all of the following EXCEPT: Which of the following are defined as securities? A) II and IV. Travel Times Journal found that the average per person cost of a 10-day trip along the Pacific coast, per person, is $1,015. vote for the investment adviser. Once annuitized, the number of annuity units does not vary. D)with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed, With guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is not guaranteed because payments stop when the annuitant has received an amount equal to the principal account value or the contract term ends. Based only on these facts, the variable annuity recommendation is D)accumulation units. When a variable annuity contract is annuitized, the number of annuity units is fixed. The tax on this is $2,800 ($10,000 x 28%). C) A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. A variable annuity is a tax-deferred retirement vehicle that allows you to choose from a selection of investments and then pays you a level of income in retirement that is determined by the performance of the investments you choose. When money is deposited into the annuity, it is purchasing accumulation units. Over the following year, the stock fund has a 10% return, and the bond fund has a 5% return. Reference: 12.2.1 in the License Exam. D)Any tax due is deferred. B)100% taxable. B) I and IV. Once the contract is annuitized, monthly payments to the customer are: C) II and IV. Question #37 of 48Question ID: 606817 D) payments continue until age 70-. If your client, who is in the 28% tax bracket, makes a lump-sum withdrawal of $15,000, what tax liability results from the withdrawal? B) IPO. The funds are not liquid due to the surrender fees, and there is also a 10% penalty on withdrawals before age 59-. C)the invested money will be professionally managed according to the issuers' investment objectives. D) 4200. The client's investment objectives, tax bracket, investment experience and risk tolerance all align well with a VA recommendation. must provide full and fair disclosure. B)II and III. The investor has already paid tax on the contributions but the earnings have grown tax-deferred. Consequently, the client pays taxes only on the growth portion of the withdrawal ($10,000). The fixed annuities, indexed annuities, and variable annuities are some of the major types of annuities, of which one may find immediate annuities and deferred annuities. Question #22 of 48Question ID: 606803 The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. D)I and III. C. Reference: 12.1.2 in the License Exam. To comply with Regulation SP, a brokerage firm is required to do all of the following EXCEPT: A) deliver an annual notice of its information collecting and sharing policies to all customers. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. A) Any tax due is deferred. Of the four client profiles below which might be the best suited for a variable annuity recommendation? A trend makes considerable influence or impact. C) A 25year old public school teacher who would like to save enough for the purchase of her first home within the next 3 to 5 years. Uses in Investing, Pros, and Cons, Indexed Annuity: Definition, How It Works, Yields, and Caps. are purchased primarily for their insurance features C)Keogh plans. All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: There are two interest rates under fixed annuities. D)A 10% penalty plus the payment of ordinary income tax on funds withdrawn in excess of the owner's basis. III. B)4200. With regard to a variable annuity, all of the following may vary EXCEPT: The annuitized payments are viewed for tax purposes as A 32-year-old with a company-sponsored 401k plan who will need a lump sum soon to finance graduate school tuition D)value of accumulation units. D) Variable annuity. Can I Borrow from My Annuity for a House Down Payment? B) 100% taxable. A variable annuity has two phases: an accumulation phase and a payout (annuitization) phase. \end{array} C) the client assumes the investment risk. She will receive the annuity's entire value in a lump-sum payment. Question #24 of 48Question ID: 606806 The client agrees to purchase the contract and informs the RR that he will be cashing out a VA he purchased 2 years ago to fund the new contract and will forward the check as soon as he receives it. B) variable annuities. I. Explain what is meant by positive and negative B) The entire $10,000 is taxable as ordinary income. He wants to ensure that the client, in addition to meeting suitability requirements, is aware of certain variable annuity contract characteristics. is required by the Securities Act of 1933. Distributions to the annuitant will fluctuate during the payout period. B)Universal variable life policy. D) the payout plans provide the client income for life. If the annuitant dies during the accumulation period, his/her beneficiary will receive the promised annuity payments. C) The investor's concerns about taxes. B)I and IV. No, annuities are not FDIC-insured as they are not bank products. Annuities due are a type of annuity where payments are made at the beginning of each payment period. Changes in payments on a variable annuity correspond most closely to fluctuations in the: C)It will be higher. the state banking commission. An example would be if a life annuity with 10-year period certain contract holder died after 5 years, payments would continue for 5 more years to the beneficiary and then stop. A) I and II D) I and IV. A)Fixed annuities. covers more than one person. The separate account performance compared to an assumed interest rate. D) II and IV. B)suitable regardless of funding sources Classifying annuities There are many categories of annuities. an annuitant lives longer than expected. If the client, who is in a 30% tax bracket, makes a random withdrawal of $15,000, what will the tax liability to the IRS be? In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. This makes a total of $4,000 tax and penalty paid on the random withdrawal. a variable annuity does not guarantee payments for life. C)the SEC. C) a variable annuity contract does not guarantee any type of return continues payments as long as one annuitant is alive. B)Fixed annuity contract with a discussion regarding timing risk Reference: 12.1.4.1 in the License Exam. Once a variable annuity has been annuitized: C) III and IV A) a minimum rate of return is guaranteed. Among annuities, variable annuities differ from fixed annuities, which provide a specific and guaranteed return. *Of the four customer profiles the individual already making the maximum retirement account contributions available to him and wanting to minimize the tax consequences of being in a high income tax bracket would be most suitable for a VA recommendation. B) Life annuity. C) insurance guarantee. A)each annuity unit's value and the number of annuity units vary with time. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed None of the other investments listed here offer tax-deferred growth. C) insurance companies keep variable annuity funds in separate accounts from other insurance products. *Annuity death benefits are generally paid in a lump sum. For a retired person, which of the following investments would provide the greatest protection against inflation? The amount taxed is the amount of the lump-sum payment minus the deceased's cost basis in the investment. Prudential's businesses offer a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, asset management, and real estate services. During the accumulation phase, you make purchase payments. The noble relatives of the Count d'Horn absolutely blocked up the ante-chambers of the regent, praying for mercy on the misguided youth, and alleging that he was insane . If the customer takes a withdrawal of $10,000, what are the tax consequences? A customer has a nonqualified variable annuity. The payout of an annuitized variable annuity account changes from month to month in a manner determined by which of the following? The figure below illustrates a six-month annuity with monthly payments.
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