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Chapter 6. Monitor the Results > The Financial Fitness Exam

The Financial Fitness Exam

The following exam will help you determine your basic understanding of the material presented in this book.

A: F. Goals should be specific—use dollar figures and dates.

2. F. Proceeds to a named beneficiary are received income tax free. tax and nontax benefits.

3. T. A living (Inter Vivos) trust is a versatile estate planning tool that offers both

4. F. A balance sheet lists your assets and liabilities. The income statement lists your income and expenses.

5. T. These provisions remain unaffected by the 1986 Tax Reform Act.

6. F. Key advisors, family members and your executor/executrix should know the location of all important financial information.

7. F. Only a municipal bond will generate tax-free income.

8. F. Income accumulates and compounds tax free. Only when funds are withdrawn are they subject to taxation.

9. T.

10. F. The term “intestate” means to die without a will.

11. F. The original deposit does not appreciate in value. It generates taxable income.

12. T.

13. F. It is better suited to long-term needs such as college funding or retirement.

14. T. It’s never too early to prepare for the future.

15. T. However, this sum may be exceeded if you borrow against your home for qualified educational or medical expenses.

16. F. Interest on consumer debt is no longer a tax-deductible item.

17. T. It is possible to borrow the accumulated cash values in a Whole Life or Universal Life Contract and thereby avoid paying income taxes.

18. F. Your tax bracket has a direct effect (See page 84).

19. F. Growth of capital is more important than tax exempt income in a low tax bracket.

20. T. A budget looks at your future plan for earning and spending money.



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