Font size
WorksheetsLUTCF Glossary - Course Three
Total questions: 72
Worksheet time: 39mins
401k distributions are taxable income unless it's a Roth 401k and rules are met.
True
False
What is a 403(b) Plan?
A retirement plan for self-employed individuals and small business owners, allowing higher contribution limits than traditional IRAs.
Used for employees of tax-exempt organizations like public schools or churches. It has the same yearly contribution limits as 401(k) plans. There are traditional and Roth 403(b) plans, which differ in how contributions and withdrawals are taxed.
A government health insurance plan for people aged 65 and older, covering hospital and medical expenses.
A savings plan for education expenses, offering tax advantages for qualified higher education costs.
What is the definition of 412(e)(3) Plans?
412(e)(3) plans are defined contribution plans with employee-directed mutual fund investments.
412(e)(3) plans are fully funded plans using life insurance or fixed annuities, providing guaranteed benefits.
412(e)(3) plans are government retirement accounts for public sector employees only.
412(e)(3) plans are health savings accounts for retirees.
What is a 457 Plan?
A health savings account available to all employees.
A tax-advantaged retirement plan for state and local government employees and employees at tax-exempt organizations, with a yearly contribution limit.
A retirement plan for private corporation employees with no contribution limits.
A government pension plan funded only by employers.
What is an ABLE Account?
A retirement account for individuals over 65.
A 529(A) or ABLE account is a tax-free savings account for people diagnosed with a long-term disability before age 26. (This age will change to 46 on 1/1/2026.)
A savings account only for college expenses, regardless of disability.
A checking account for small business owners with no tax benefits.
What is an Advanced Directive?
A type of insurance policy.
See Living Will.
A medical procedure for emergencies.
A government-issued identification document.
What is the definition of Alternate Valuation Date?
It is the date the estate tax return is filed, regardless of asset disposition.
If an asset is sold, exchanged, distributed, or disposed of, it is valued on that date. If alternate valuation is used, it applies to all assets, even those that increased in value.
It is the date the decedent's will is executed, not asset valuation.
It is the date the executor is appointed, not related to asset values.
What is Ancillary Probate?
Is a type of trust used to avoid probate.
Can also occur when the decedent owns real property in a state other than a state of domicile.
Refers to contesting a will in court.
Is the legal term for distributing personal property only.
What is a 'Bypass Trust'?
A trust used only for charitable donations.
A trust for managing retirement accounts.
A trust for caring for pets after the owner's death.
A trust that helps married couples reduce estate taxes by using the federal estate tax exclusion.
What is 'Capital Gains Tax'?
A tax on total yearly income.
Tax on the profit from selling an asset, calculated as sale price minus original cost.
A tax on goods and services at sale.
A tax on inherited property.
What is the definition of 'Cash Balance Pension Plan'?
A cash balance pension plan is a savings account where employees contribute a fixed percentage of their salary and the employer matches it.
A cash balance pension plan provides a guaranteed investment return and mandatory employer contributions based on a set formula. It is backed by the Pension Benefit Guarantee Corporation and requires annual actuarial services.
A cash balance pension plan is a retirement plan where benefits depend only on the investment performance of the employee's chosen assets.
A cash balance pension plan is a government plan that gives retirement income based on years of service and final salary.
What is the definition of 'Cliff Vesting'?
Cliff vesting allows employees to receive partial vesting each year until fully vested after ten years.
With cliff vesting, there is no vesting until the end of the cliff period, usually three to five years. Then 100% vests at once. This can encourage employees to stay longer.
Cliff vesting means employees are immediately 100% vested upon hire with no waiting period.
Cliff vesting provides for gradual vesting over a period of time, typically with a percentage vested each year.
What is the definition of 'Defined Benefit Plan'?
A defined benefit plan allows employees to choose their own investments and bears the investment risk themselves.
With a defined benefit plan, the employer defines the benefit using a formula, and the employer bears the investment risk and must cover any funding shortfall.
A defined benefit plan is a retirement savings account where contributions are made only by the employee and benefits depend on investment performance.
A defined benefit plan is a short-term savings plan that provides lump sum payments upon resignation, not retirement.
What is a 'Defined Contribution Plan'?
What is the term for a legal document that lets someone appoint another person to make financial decisions for them if they become unable to do so?
Living Will
Durable Power of Attorney for Financial Issues
Health Care Proxy
Revocable Trust
What is the term for a legal document that lets someone appoint another person to make healthcare decisions for them if they can't?
Living Will
Durable Power of Attorney for Healthcare Issues
Advance Directive for Finances
Medical Proxy for Property
What is the term for a retirement plan that lets employees own shares in their company?
Defined Benefit Pension Plan
Employee Stock Ownership Plan (ESOP)
Health Savings Account (HSA)
Roth IRA
Which term includes 401(k)s, 403(b)s, SEPs, and SIMPLEs?
Employer-Sponsored Retirement Plans.
Health Savings Accounts.
Individual Retirement Accounts.
Defined Benefit Pensions.
What term refers to all rights, titles, and interests a person has in any property?
Lien
Estate
Leasehold
Encumbrance
What is the process of planning how to manage and distribute a person's estate to meet tax and non-tax goals?
Retirement Planning
Estate Planning
Tax Evasion
Asset Liquidation
What is the term for a plan that provides a flat amount of retirement benefit or compensation?
Defined Contribution Plan
Flat Benefit Plan
Career Average Plan
Money Purchase Plan
What is a tax-advantaged account from employers for pre-tax healthcare expenses?
Health Savings Bond
Flexible Spending Account
Retirement Savings Account
Education Savings Account
What is the term for transferring assets to others during your lifetime, with annual tax-free limits set by the IRS?
Trusts
Gifts
Bequests
Inheritance
What is the term for benefits like Social Security and Medicaid that help cover basic needs for people with disabilities?
Private Insurance
Government Benefits
Personal Savings
Charitable Donations
What is the term for a vesting schedule where vesting is 20% per year, reaching 100% at the end of two to six or three to seven years?
Graded Vesting
Cliff Vesting
Immediate Vesting
Deferred Vesting
What is the term for organizations that focus on preventative care, pay providers a set fee per patient regardless of visits, and may limit specialist access and out-of-network coverage?
Preferred Provider Organization (PPO)
Health Maintenance Organization (HMO)
Point of Service (POS)
Exclusive Provider Organization (EPO)
What is a tax-advantaged account for saving and paying for medical expenses, used with high-deductible health plans?
Flexible Spending Account
Health Savings Account
Roth IRA
401(k)
What is the term for a health insurance plan with lower premiums but higher deductibles, where you pay more out-of-pocket before insurance pays?
Preferred Provider Organization
High-Deductible Health Plan
Health Maintenance Organization
Exclusive Provider Organization
What is the term for when contributions are available as soon as the employer makes them?
Deferred Vesting
Immediate Vesting
Cliff Vesting
Graded Vesting
What is the term for planning for the possibility of becoming unable to make decisions due to illness, injury, or age?
Asset Allocation
Incapacity Planning
Charitable Giving
Tax Deferral
What is the risk that expenses will rise over time called?
Credit Risk
Inflation Risk
Liquidity Risk
Market Risk
What is it called when someone dies without a will?
Testate
Intestate
Probate
Executor
What is the term for the potential for loss with investments?
Asset Allocation
Investment Risk
Liquidity
Diversification
What is a trust designed to own a life insurance policy and transfer wealth to beneficiaries tax-efficiently?
Charitable Remainder Trust
Irrevocable Life Insurance Trust
Revocable Living Trust
Testamentary Trust
What is another name for a Revocable Trust?
Irrevocable Trust
Living Trust
Testamentary Trust
Charitable Trust
What is the term for a legal document that states a person's wishes for medical treatment if they cannot communicate due to a serious condition? It is also called an advanced directive.
Power of Attorney
Living Will
Do Not Resuscitate Order
Medical Proxy
What is the risk of outliving your money?
Credit Risk
Longevity Risk
Inflation Risk
Liquidity Risk
What is the term for a benefit that replaces 50-70% of pay and starts 90 days after disability?
Short-Term Disability
Long-Term Disability
Workers' Compensation
Unemployment Insurance
What is the term for tax-advantaged plans that meet government guidelines? Non-qualified plans do not meet these requirements and usually lack tax advantages.
Non-Qualified Retirement Plans
Traditional IRAs
Roth IRAs
401(k) Plans
What is the term for legal rights and obligations that are created or transferred automatically by law, without any action by the parties?
Testamentary Trust
Operation of Law
Power of Attorney
Probate
What is the term for a plan where all investment risk is borne by the employer, except for target benefit plans?
Profit Sharing Plan
Pension Plan
401(k) Plan
Employee Stock Ownership Plan
What is the term for a managed care plan where members can use any provider, but pay less if they use providers in the network, and more if they go outside the network?
Point of Service Plan (POS)
Health Maintenance Organization (HMO)
Exclusive Provider Organization (EPO)
Preferred Provider Organization (PPO)
Fill in the blank: These organizations have a network of healthcare providers. Members pay less for using network providers and more for out-of-network care. Providers are paid fee-for-service. This is called _________
Health Maintenance Organization (HMO)
Exclusive Provider Organization (EPO)
Preferred Provider Organization (PPO)
High Deductible Health Plan (HDHP)
Fill in the blank: The court process for distributing a deceased person's estate and paying debts is called _________.
Litigation
Probate
Arbitration
Mediation
Fill in the blank: Standard profit sharing plans, stock bonus plans, ESOPs, LESOPs, 401(k) plans, and thrift plans are all types of _________. With these plans, all investment risk is borne by the employee.
Defined Benefit Plans
Profit Sharing Plans
Nonqualified Deferred Compensation Plans
Welfare Benefit Plans
Fill in the blank: Expenses for things like education, housing, transportation, and health care that improve a loved one’s quality of life are called _________
General Living Expenses
Qualified Disability Expenses
Taxable Income Expenses
Non-Essential Expenses
Fill in the blank: Individuals with assets in traditional plans must take annual distributions by April 1st of the year after they are required to start. This is called _________
Annual Contribution Limit
Required Minimum Distribution
Early Withdrawal Penalty
Tax Deferral Period
Fill in the blank: A legal instrument that lets someone transfer assets to a trust but keep control during their lifetime is called a _________. This trust can be changed or revoked at any time.
Irrevocable Trust
Revocable Trust
Living Will
Power of Attorney
Fill in the blank: This IRA does not allow tax-deductible deposits, but withdrawals are tax-free. Early gains may be taxed and penalized. Income limits affect contributions. This is called a _________.
Traditional Individual Retirement Account
Roth Individual Retirement Account
Simplified Employee Pension (SEP) IRA
Savings Incentive Match Plan for Employees (SIMPLE) IRA
What is the term for plans that set up an individual account for each employee and are used by businesses with fewer than 100 employees, with low startup and administration costs?
401(k) Plans
Savings Incentive Match Plan for Employees (SIMPLEs)
Defined Benefit Pension Plans
Employee Stock Ownership Plans (ESOPs)
What is the term for the following definition? Designed to coordinate with long-term disability insurance. The elimination period can be as short as 0 days for an accident or 7 days for an illness. The benefit periods range from 90 days to 2 years.
Short-Term Disability
Critical Illness Insurance
Accidental Death Insurance
Long-Term Care Insurance
What is the term for the following definition? These plans are popular with businesses with very few employees or with sole proprietorships. The business owner, if a sole proprietor or partnership, can only contribute 20% of their eligible compensation if they are contributing 25% for nonowner employees.
Simplified Employee Pensions (SEP)
401(k) Plans
Roth IRAs
Defined Benefit Plans
What is the term for the following definition? Social Security retirement benefits are an important part of their retirement income plan. The earliest age a person may receive benefits is 62. Full benefits begin between ages 65 and 67 depending on the person’s year of birth. Individuals who delay receiving benefits usually receive increased benefits.
Social Security Retirement Plan
401(k) Plan
Roth IRA
Pension Fund
What is the term for the following definition? A trust that is set up for a loved one with a disability to help provide funding options to supplement their government benefits.
Special Needs Trust
Revocable Living Trust
Charitable Remainder Trust
Testamentary Trust
What is the term for the following definition? The adjustment made to the tax basis of an asset when it is received by a beneficiary. It can have a significant effect on taxes.
Step-Up in Basis
Depreciation Recapture
Capital Loss Carryover
Gift Tax Exclusion
What is the term for the following definition? Designed to fill the gaps that life insurance, health insurance, and long-term disability insurance may cause for employees.
Supplemental Insurance
Retirement Plan
Flexible Spending Account
Stock Options
What is the term for the following definition? The value of an asset used to calculate capital gains tax.
Tax Basis
Market Value
Depreciation Value
Book Value
What is the term for the following definition? Taxes often pose the greatest drain on retirement income.
Tax Risk
Longevity Risk
Inflation Risk
Market Risk
What is the term for the following definition? A type of trust that is created in a person's will and takes effect after their death.
Testamentary Trust
Living Trust
Revocable Trust
Irrevocable Trust
What is the term for the following definition? If a person dies with a will, they are said to have died testate.
Testate
Intestate
Probate
Executor
What is the term for the following definition? The person creating the trust. This person sets out the terms and conditions of the trust in their will.
Testator
Trustee
Beneficiary
Executor
What is the term for the following definition? 'A retirement program that is only available to federal employees and armed services members. It is a defined contribution plan that is very similar to a 401(k) plan.'
Thrift Savings Plan (TSP)
Roth IRA
403(b) Plan
Traditional IRA
What is the term for the following definition? 'A concept that says a dollar today is worth more than a dollar in the future. This is because a dollar today can be invested and grow to more than a dollar in the future. A dollar today may also have more buying power than a dollar tomorrow, due to inflation. The concept is critical to retirement planning because clients will need to know how much they need to save to accumulate a nest egg sufficient to support their retirement needs.'
Time Value of Money
Compound Interest
Liquidity Preference
Marginal Utility
What is the term for the following definition? 'Available to almost everyone who has earned income, but contributions may not be tax deductible due to phase out rules that reduce or eliminate the ability of higher earning individuals who are covered by a plan at work to make tax-deductible contributions to an IRA.'
Traditional Individual Retirement Account
Roth Individual Retirement Account
401(k) Plan
Simplified Employee Pension (SEP) IRA
What is the term for the following definition? 'The trustee, who is usually an individual or institution named in the will, then manages the trust assets according to the instructions set out in the will.'
Trustee
Executor
Beneficiary
Grantor
What is the term for the following definition? 'Provides a flat amount per year of service, or a percentage of eligible compensation per year of service, based upon either career average pay (an average of an employee’s entire period of plan participation), or final average pay (the average earnings paid over the last three or five years before retirement or the highest paid three or five years in the ten-year period before retirement).'
Unit Benefit Pension Plan
Defined Contribution Plan
Money Purchase Plan
Cash Balance Plan
What is the term for the following definition? 'The requirements and terms under which an employee may receive the portion of the contributions made by the employer. An employee is always vested for their own contributions.'
Vesting
Forfeiture
Matching
Deferral
What is the term for the following definition? 'A legal document that outlines how a person's probate assets will be distributed upon their death. It can also specify funeral arrangements and nominate an executor to oversee the distribution of assets.'
Will
Trust
Power of Attorney
Deed
The “Rule of (a) ” allows individuals to remove funds penalty free if they are separated from their employment at the age of . or later. A vesting schedule may be attached for employer contributions.
Which type of retirement plan promises a specific monthly benefit at retirement, often based on salary and years of service?
Profit Sharing Plan
Defined Contribution Plan
Employee Stock Ownership Plan
Defined Benefit Plan
What is the term for a legal document that allows someone to manage another person's financial affairs if they become incapacitated?
Testamentary Trust
Durable Power of Attorney
Health Care Proxy
Living Will
Which account allows individuals to save for qualified education expenses with tax advantages?
401(k) Plan
529 Plan
Health Savings Account
Roth IRA
