If the owner of a variable annuity dies during the accumulation period, any death benefit will: What is the taxable consequence of this withdrawal to your client? A) I and II With a fixed annuity, by contrast, the insurance company assumes the risk of delivering whatever return it has promised. C) 10 years of variable payments. A)II and IV. Reference: 12.3.4 in the License Exam. B)value of annuity units. He makes several statements regarding the contract. Many variable annuities invest the separate account in mutual funds. Upon John's death during the accumulation period, Sue takes a lump-sum payment. covers more than one person. C) 100% tax free. A variable annuity is just a tax-deferred annuity in which you get to choose how the value of the annuity is invested. A customer has a nonqualified variable annuity. B) The investor's marital status. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: Flashcards - Securities and Tax - FreezingBlue If your 60-year-old customer purchases a nonqualified variable annuity and withdraws some of her funds before the contract is annuitized, what are the consequences of this action? externalities. This guideline has been prepared for use by Federal agencies. And, unlike a fixed annuity, variable annuities do not provide any guarantee that you will earn a return on your investment. Future annuity payments will vary according to the separate account's performance. Deal with mathematic Math is all about solving equations and finding the right answer. D) Variable annuities. D) I and IV For a nonqualified variable annuity, cost basis for the annuitant would use the after-tax dollars contributed. When a partial withdrawal is made from an annuity, the earnings are considered to be taken out first for tax purposes (or LIFO). You can tailor the income stream to suit your needs. Post navigation Variable annuity salespeople must register with all of the following EXCEPT: D) reevaluate whether the recommendation for the VA contract is still suitable based on the clients proposed funding of the investment. C) I and III. The tax on this is $2,800 ($10,000 x 28%). C) the client assumes the investment risk. This chapter was updated on 15 December, 2005. Chapter 7: Annuities Flashcards | Quizlet D)partially a tax-free return of capital and partially taxable. Life income riders are best suited for those who anticipate a lengthy retirement and are generally not yet retired when making the VA purchase. Who assumes the investment risk in a variable annuity contract? During the accumulation phase, you make purchase payments. Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. A. Distribution can take place before or during any solicitation for sale. These contracts cover both lives and will continue to make payments until the last spouse dies. Question #44 of 48Question ID: 606797 B) be paid to any legal heirs as recognized by the annuitant's state of domicile. This includes transportation, food, lodging, and entertainment. While variable annuities have greater potential for earnings, since their interest rate rises and falls with their underlying investments, they can lose money. required to be located off of the company's premises. When money is deposited into the annuity, it is purchasing accumulation units. Portfolio Compliance Risk Analyst Job in Newark, NJ at Prudential The value of accumulation and annuity units varies with the investment performance of the separate account. The paper publication will not be rereleased. 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? D) A 50 year old individual with $50,000 cash to invest who has already made the maximum contributions to an IRA and the 401(k) plan at his place of employment and would like to minimize some of the tax consequences of his currently high tax bracket. vote for the investment adviser. When may a variable annuity account be surrendered? D) each annuity unit's value varies with time, but the number of annuity units is fixed. have investment risk that is assumed by the investor C)none of these. a. III. Determine the revenue equation given the profit and expense equations. B)each annuity unit's value varies with time, but the number of annuity units is fixed. vote on proposed changes in investment policy. 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. Which of the following is not a characteristic of a program module? C) Mutual fund portfolio consisting of blue chip stocks C)such an annuity is designed to combat inflation risk. All of the following are accurate statements to make to the client EXCEPT A) Age 56, available cash to invest, makes the maximum retirement plan contributions to an existing IRA and 401(k) plan Drives - are hardwired characteristics of the brain that correct deficiencies or maintain an internal equilibrium by producing emotions to energize individuals. VAs, blue chip mutual fund portfolios, ETFs and ETNs are all tied to market performance in some way and have risk characteristics that would not align in terms of suitability for this client. A)II and III. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. approve changes in the plan portfolio. *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. Policyholders . D) 100% tax deferred. As part of the registration requirements, a prospectus must be filed and distributed to prospective investors. Senior Customer Care Advocate Annuities ($22 per hour) in Warwick C) There is no tax as the withdrawal is considered return of capital. a variable annuity has which of the following characteristics The Project Gutenberg eBook of Memoirs of Extraordinary Popular B) the number of annuity units is fixed, and their value remains fixed. C)the number of annuity units is fixed, and their value remains fixed. Reference: 12.1.2.1.1 in the License Exam. The fees on variable annuities can be quite hefty. She may choose to receive monthly payments for the rest of her life. Question #12 of 48Question ID: 606814 Annuities are similar to other forms of investing in that the owner invests money with the hope that it will gain in value, but annuities also come with higher fees than most mutual funds. the state banking commission. However, the web version (cat. John is the annuitant in a variable plan, and Sue is the beneficiary. do not have a separate account PDF Prudential IncomeFlex Target Vanguard Balanced Index Fund A) two people are covered and payments continue until the second death. b) What probability is the 20%20 \%20% mentioned above? D) I and II. *Payments from a variable annuity depend on the securities' value in the separate account's underlying investment portfolio. B) single payment deferred annuity. The company's well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. *Funding a VA contract by cashing out either life insurance policies or existing VA contracts, especially those held for a short period of time is not suitable. continues payments as long as one annuitant is alive. D) Growth mutual funds. 7 - Annuities Flashcards | Quizlet Based on the information given in the question, the VA recommendation would not be suitable. IV. Which of the following is NOT an accurate statement concerning a variable life insurance contract? B) II and III. 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. *This annuity is nonqualified, which means the client has paid for it with after-tax dollars and has a basis equal to the original $29,000 investment. A rider or statement of condition that allows a variable life insured to maintain policy coverage after becoming disabled is a benefit known as \hspace{10pt} \text{Sales salaries} & \$\hspace{5pt} 670,000 & \hspace{10pt} \text{Income tax withheld} & \$198,744\\ A) Only during the payout period. regulated under both securities and insurance laws. For a retired person, which of the following investments would provide the greatest protection against inflation? For a retired person, which of the following investments would provide the greatest protection against inflation? The customer, in the accumulation stage of the annuity, is holding accumulation units. A) Life-only annuity Question #27 of 48Question ID: 606818 *When money is deposited into the annuity, it is purchasing accumulation units. However, they are protected by state guaranty associations in the event that the insurance company providing the product goes out of business. Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. A) I and II A)exempt from taxes If you need to withdraw money from the account because of a financial emergency, you may face surrender fees. As of March 03, 2023, had a relative dividend yield of % compared to the industry median of %. All of the following are characteristics of variable annuity contracts Which of the following recommendations would best meet the customer profile? Listing tax-deferred growth as an objective for retirement income, which of the following investments is most suitable? a variable annuity guarantees payments for life. && \hspace{10pt}\text{Group insurance} & \underline{45,630}\\ Underlying equity investments T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. Ideally they should be funded with readily available cash rather than using funds liquidated from existing investments. Francisco R. - Financial Professional - Prudential Financial | LinkedIn Variable annuities involve underlying equity investments in a separate account. Investopedia does not include all offers available in the marketplace. Is F&G Annuities & Life Inc (FG) a Good Dividend Stock? | AAII In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. D)variable annuities. \hspace{7pt} b. December 303030, to record the employers payroll taxes on the payroll to be paid on December 313131. D) a lifetime withdrawal benefit (LWB) or lifetime income benefit is generally in the form of a rider attached to the contract which will come at a cost to the annuitant.