candidate body of knowledge (cbok)€¦ · c. self-control bias d. status quo bias e. endowment...

CANDIDATE BODY OF KNOWLEDGE (CBOK)

CORE TOPICS EXAM WEIGHTING

Part I: Human Dynamics 15%

Section 1: Ethics 5%

Section 2: Applied Behavioral Finance 5%

Section 3: Family Dynamics 5%

Part II: Wealth Management Strategies 33%

Section 4: Tax Strategies and Planning 14%

Section 5: Portfolio Management 12%

Section 6: Risk Management and Asset Protection 7%

Part III: Client Specialization 30%

Section 7: Client Focus–Executives 10%

Section 8: Client Focus–Closely Held Business Owners 10%

Section 9: Client Focus–Retirement 10%

Part IV: Legacy Planning 22%

Section 10: Charitable Giving 7%

Section 11: Estate Planning and Wealth Transfer 15%

–2–CPWA® Candidate Body of Knowledge 01.190129.01.0891.ctrl ©2019 Investments & Wealth Institute®

This document lists all of the topics and learning objectives for CPWA candidates, along with the suggested readings and other resources that will help candidates prepare for class and for the exam. All readings and resources can be accessed through the Online Learning Center.

Part I: Human Dynamics

Section 1: Ethics

A. Institute Code of Professional Responsibility

LO 1.01 – List and differentiate among the nine principles of the Institute Code of Professional Responsibility Readings & Resources

• Document: Institute Code of Professional Responsibility – Code of Professional Responsibility, p. 4 – Guidance for the Code of Professional Responsibility, pp. 5–11

B. Advisory role and responsibilities to the client 1. Fiduciary standard2. Confidentiality

LO 1.02 – Analyze the relationships among firm, advisor, client, and other applicable professionals given the responsibility of each CPWA certificant to place the client’s financial interests first

Readings & Resources• Document: Institute Code of Professional Responsibility

– Preamble to the Code of Professional Responsibility ο Values, pp. 2–3

– Code of Professional Responsibility, p. 4 ο Code Principle 1, p. 5 ο Code Principle 6, pp. 8–9 ο Code Principle 7, p. 9

C. Disclosure of compensation and conflicts of interest

LO 1.03 – Understand requirements to disclose all compensation received for services provided and all potential conflicts of interest

Readings & Resources• Document: Institute Code of Professional Responsibility

– Preamble to the Code of Professional Responsibility ο Values, pp. 2–3

– Code of Professional Responsibility, p. 4 ο Code Principle 2, pp. 5–6 ο Code Principle 3, pp. 6–7

Candidate Body of Knowledge (CBoK)Core Topics List & Learning ObjectivesReading List


D. CPWA certification maintenance requirements 1. Proper use of the marks 2. Institute disciplinary rules

LO 1.04 – List all requirements necessary to maintain the CPWA certification, and describe the rules and consequences pertaining to violations of the Institute Code of Professional Responsibility

Readings & Resources• Website: CPWA Renewal Requirements and Guidelines (investmentsandwealth.org)• Document: Use of the Marks • Document: Disciplinary Rules

Section 2: Applied Behavioral Finance

A. History of behavioral finance 1. Prospect Theory 2. Paradox of Choice 3. Adaptive Market Hypothesis

LO 2.01 – Demonstrate knowledge of the history and evolution of behavioral finance

Readings & Resources• Textbook: Behavioral Finance and Wealth Management (Pompian)

– Chapter 1: What is Behavioral Finance? – Chapter 2: The History of Behavioral Finance Micro (Prospect Theory is covered on pages 31–36)

• Web Resource: The Paradox of Choice (wikipedia)• Web Resource: Barry Schwartz on the Paradox of Choice (TED Talk)• Web Resource: The Adaptive Market Hypothesis• Document: Adaptive Markets Hypothesis

B. Neuro-economics 1. Physiological impact on decision making 2. Intuitive vs. deliberative decision making 3. Actions that develop trust

LO 2.02 – Demonstrate knowledge of published neurological research in the field of behavioral finance, and describe conclusions from these studies related to financial and investment decision making

Readings & Resources• Web Resource: Emotions in Decision Making (wikipedia) (Note: Lowenstein-Lerner classifications are more common)• Document: An Overview of Cornelia Betsche’s Preference for Intuition or Deliberation Scale (Harbour)• Web Resource: Trust Barometer (Edleman Insights) (Note: this is for those who want to dig deeper; not covered on the exam)

C. Behavioral biases 1. Biases based on existing beliefs a. cognitive dissonance

b. conservatism bias c. confirmation bias d. representative bias e. illusion of control bias f. hindsight bias

LO 2.03 – List and describe various behavioral biases based on existing beliefs and how they may impact financial decision making and behavior



– Chapters 4–9: Belief Perseverance Biases Defined and Illustrated

2. Biases based on information processing a. mental accounting b. anchoring and adjustment bias c. framing bias d. availability bias e. self-attribution bias f. outcome bias g. recency bias

LO 2.04 – List and describe various behavioral biases based on information processing and how they may impact financial decision making and behavior


– Chapters 10–16: Information Processing Biases Defined and Illustrated

3. Biases based on emotions a. loss-aversion bias b. overconfidence bias c. self-control bias d. status quo bias e. endowment bias f. regret-aversion bias g. affinity bias

LO 2.05 – List and describe various behavioral biases based on emotions and how they may impact financial decision making and behavior


– Chapters 17–23: Emotional Biases Defined and Illustrated

D. Investor personality types 1. Common client personality types

a. preservers b. followers c. independents d. accumulators

LO 2.06 – List and describe primary investor personality types, and explain how they may impact client decision making


– Chapter 26: Behavioral Investor Type Diagnostic Process – Chapter 27: Behavioral Investor Types

Section 3: Family DynamicsA. Client discovery 1. Family and individual goals 2. Family challenges and issues 3. Family and individual opportunities


LO 3.01– Demonstrate knowledge of resources and skills required to engage in client discovery in order to identify issues and opportunities relative to family dynamics including identifying and assessing collective and individual values, and goals and objectives of family members

Readings & Resources• Document: Evolving Your Practice to Serve the Next Generation of High Net Worth Families (Grubman) • Document: Core Techniques for Effective Client Interviewing and Communication (Grubman and Jaffe) • Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– pp. 551–552 Special Needs Planning

B. Family roles and responsibilities 1. Individual vs. family roles and responsibilities 2. Responsibilities for different roles in families, trusts, corporations, and charities 3. Alignment of goals and responsibilities

LO 3.02 – Identify key family roles and positions, as well as special circumstances and unique situations; and develop plans that align individuals with appropriate family roles

Readings & Resources• Document: Wealth Continuity and Family Unity: 10 Best Practices for Navigating Family Wealth with Intention

(Merrill Lynch) • Document: How Much Should I Give to My Family? On the Risks and Rewards of Giving (Merrill Lynch) • Document: Evolving Your Practice to Serve the Next Generation of High Net Worth Families (Grubman)

C. Family dynamics, history, and conflicts 1. Common relational behaviors and conflicts 2. Immigrants and natives to wealth metaphor

LO 3.03 – Identify family dynamics and sources of conflicts

Readings & Resources• Document: Immigrants and Natives to Wealth-Understanding Clients Based On Their Wealth Origins (Grubman

and Jaffe) • Document: Client Relationships and Family Dynamics: Competencies and Services Necessary for Truly

Integrated Wealth Management (Grubman and Jaffe) • Document: Evolving Your Practice to Serve the Next Generation of High Net Worth Families (Grubman)

D. Family education plan (incorporating each of the following below) 1. Human capital 2. Intellectual capital 3. Financial capital 4. Social capital

LO 3.04 – Develop a family education plan appropriate to meet stated needs and objectives

Readings & Resources• Document: Family Wealth Education: A Resource Toolkit for Financial Advisors (Nuveen) • Document: Can You Make the Money Last? The Road to Sustainable Wealth (Merrill Lynch) • Document: Evolving Your Practice to Serve the Next Generation of High Net Worth Families (Grubman)

E. Family meetings and mission statement 1. Family governance models 2. Family meeting guidelines 3. Family mission statements


LO 3.05 – Identify the elements necessary to conduct a successful family meeting and help clients develop a family mission statement

Readings & Resources• Document: Talking it Through (Jaffe and Allred)• Document: Family Wealth Education Workshop (Nuveen)• Document: Money and Meaning – Implementation of Effective Family Governance Structures

(Goldbart and DiFuria)

F. Family office structures and models 1. Multi-family office models and services 2. Single family office models and services

LO 3.06 – Knowledge of when and how to incorporate the appropriate family office infrastructure tailored to the family’s wealth level and objectives

Readings & Resources• Document: Family Office Guide (Ernst & Young)• Document: “Should I Choose a Single or Multi-family Office?” (Families in Business)

Part II: Wealth Management Strategies

Section 4: Tax Strategies and Planning

General Resource• Website: Fairmark (Note: this is a good resource for tax facts and questions; particularly on more basic

concepts and topics.)

A. Personal tax forms and calculations1. Tax forms and schedules (e.g., Form 1040, 1065, Schedule A, K-1)2. Client situations and planning opportunities a. estimated tax payments b. limitations on personal deductions for high-net-worth clients c. tax rates for high-net-worth clients (progressive tax schedule) d. self-employment tax3. Current and future years – multi-year modeling a. marginal vs. effective tax rates b. scenario analysis and planning4. Client tax jurisdictions – understanding how jurisdictions impact taxation

LO 4.01 – Demonstrate knowledge to review and interpret personal tax forms and calculations to understand client situations and planning opportunities in current and future years based on client tax jurisdictions

Readings & Resources• Textbook: Private Wealth Management (Hallman and Rosenbloom)

– Chapter 10: Income Tax Fundamentals, pp. 199–211 —This reading has been updated and is available online.

• Document: Tax Reference Guide (Note: This is just a handy reference guide to current rates and rules; there is no need to memorize this information.)

• Document: IRS Form 1040• Document: IRS Form 1065• Document: IRS Schedule A


• Document: IRS Schedule K-1 (Note on all IRS forms: candidates do not need to memorize these forms but should be familiar with each)

• Document: Tax Research Consultant, FILEIND: 21,052 Determining Amounts of Estimated Tax Payments – Individuals• Document: Tax Research Consultant, INDIV: 63,000 Overview - Self-Employment Tax• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– pp. 136–137 Domicile

B. Alternative Minimum Tax (AMT) 1. Calculation 2. Transactions and situations 3. Strategies to avoid or minimize AMT and maximize AMT credits

LO 4.02 – Understand the Alternative Minimum Tax (AMT) calculation and how it differs from the regular federal income tax calculation

LO 4.03 – Identify transactions and situations that result in AMT and develop strategies to avoid or minimize AMT and/or maximize the use of AMT credits


– Chapter 10: Income Tax Fundamentals, pp. 212–214• Document: CCH Tax Reseach Consultant, FILEIND 100 Q9 – What is the AMT• Document: Step-by-Step Computation of Alternative Minimum Tax AMT

C. Charitable deduction limitations 1. Gifts of cash, appreciated and depreciated assets, leveraged assets 2. Impact of making gifts to public or private charities

LO 4.04 – Understand and calculate charitable income tax deductions and limitations applicable to cash and appreciated asset contributions to public charities and private foundations


– Chapter 19: Charitable Giving Techniques, pp. 393–396 EFFECTIVE JANUARY 1, 2018 Deduction of cash contributions to public charities is limited to 60% of AGI

• Document: “Percentage Limitations and Deduction Rules” (Charitable Contribution Limitation Rules)

D. Interest expense classifications and limitations 1. Mortgage interest 2. Investment interest 3. Business activity interest 4. Strategies to maximize interest expense deductibility

LO 4.05 – List interest expense classifications and applicable limitations including the treatment of mortgage interest, investment interest expense, and interest on business activities, and recommend alternative strategies to maximize current interest deductibility

Readings & Resources • Document: Tax Research Consultant, INDIV: 48,000 Overview - Interest Expense Deduction• Document: Tax Research Consultant REAL 605615 Deductible Mortgage Interest Qualified Residence Interest


• Document: Tax Research Consultant INDIV 48450 Limitation on Deduction of Investment Interest• Document: Tax Research Consultant BUSEXP 21054 Deduction for Interest as Business Expense Requires a Debt• Document: Tax Research Consultant INDIV 48500 Allocating Interest Expenses Among Different Categories

E. Taxation of investment transactions 1. Capital gains and losses 2. Qualified and non-qualified dividends 3. Wash sale rules

LO 4.06 – Understand taxation of investment transactions including capital gains, qualified and non-qualified dividends, and wash sale rules

Readings & Resources• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– pp. 106–109 Basis Planning and Capital Gains• Document: U.S. Master Tax Guide - 733 Dividends• Document: U.S. Master Tax Guide - 1935 Wash Sale of Stock or Securities• Textbook: Private Wealth Management (Hallman and Rosenbloom)

– Chapter 11: Planning Sales of Securities for Tax Losses, pp. 222–224• Document: U.S. Master Tax Guide - 1739 Netting of Gains and Losses• Document: U.S. Master Tax Guide - 1747 Property Used in Trade or Business• Document: Wealth Management: A Concise Guide to Financial Planning and Investment Management - 315

Capital Gains and Losses

F. Taxation of executive stock options 1. Incentive stock options and non-qualified stock options 2. Impact of stock options on AMT

LO 4.07 – Calculate the tax liability of executive stock option exercises


– p. 401 Incentive Stock Option – p. 477 Nonqualified Stock Options

• Document: Executive Compensation Answer Book - What is the effect of the AMT on the tax treatment of an ISO?

G. Taxation of pass-through entities 1. Flow through characteristics including limitations 2. Classification of income as passive or active 3. Characterization of income and deductions to individuals 4. Tax basis rules and limitations

LO 4.08 – Demonstrate an understanding of pass-through entities including the flow- through feature of income, limitations that apply at the individual level, classification of income as passive or active, and the proper characterization of income and deductions to individual taxpayers

LO 4.09 – Demonstrate an understanding of tax basis rules and gains from disposition as they apply to pass-through entities owned by individuals


– Chapter 10: Income Tax Fundamentals, pp. 217–218 (Note: consider this introductory material)


EFFECTIVE JANUARY 1, 2018 Business income that passes through to an individual from a pass-through entity and income attributable to a sole proprietorship will be taxed at individual tax rates less a deduction of up to 20% (under the rules, it’s possible that you could have no deduction). The rules for calculating the deduction can be complicated, depending on your situation.

• Document: Financial Planning Answer Book – How to plan for business entities• Document: Tax Research Consultant, LLC: 9,000 Overview - Basic Tax Rules for LLC’s: Contributions,

Distributions & Allocations• Document: Tax Research Consultant, PART 15,000 Overview - Basis, Liabilities and Loss Limitations• Document: Tax Research Consultant, PART 15,254.05 – Allocating Recourse and Nonrecourse Liabilities• Document: Tax Research Consultant, PART 45,206 – Capital Accounts• Document: Tax Research Consultant, PART 100 – Fundamental Concepts Partnerships

H. Tax deferral strategies 1. Like-kind transactions 2. Small business stock treatment (ongoing operations and upon sale)

LO 4.10 – Identify strategies to defer gains on various property transactions, including like-kind exchanges and sales of certain small business stock


– p. 563 Tax-Free Exchange – p. 513 Qualified Small Business Stock

I. Tax challenges specific to high-net-worth (HNW) clients 1. Intra-family tax planning 2. Income shifting strategies

LO 4.11 – Demonstrate tax issues and planning strategies common to high-net-worth clients including intrafamily tax planning opportunities and strategies for shifting income and taxation


– Chapter 11: Income Tax Reduction and Management Techniques for Individuals pp. 226–227: Shifting the Tax Burden to Others

• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady) – p. 555 Step Transaction Doctrine

J. Taxation of trusts

LO 4.12 – Demonstrate knowledge of trust taxation


– Chapter 10: Federal Income Taxation of Trusts and Estates, pp. 218–220

Section 5: Portfolio Management

A. Measure investment risk 1. Define and calculate investment risk 2. Calculate risk adjusted returns


LO 5.01 – Demonstrate ability to calculate and understand risk adjusted returns and portfolio risk metrics including the impact of leverage

Readings & Resources• Document: Financial Planning Answer Book – excerpt regarding Measurement of Risk (Rattner)• Document: Financial Planning Answer Book – excerpt regarding Measurement of Performance (Rattner)• Document: Financial Planning Answer Book – excerpt regarding Risk-Adjusted Return (Rattner)

B. Manage portfolio risk 1. Diversification – benefits and limitation 2. Tactical asset allocation and market timing strategies 3. Risk-budgeting and risk-parity strategies 4. Options and insurance a. options strategies: collars, straddles, strangles, spreads, etc. 5. Other strategies and techniques for managing portfolio risk a. low volatility funds b. buy-write strategies c. factor-analysis models and funds d. volatility index (VIX)

LO 5.02 – Knowledge of portfolio risk management strategies including diversification, hedging, etc.

LO 5.03 – Skill to evaluate, implement and monitor hedging strategies including options and non-options hedging, and non-hedging strategies

Readings & Resources• Document: Investment Planning Answer Book - selected readings on managing portfolio risk (Shein) • Website: Risk Parity (wikipedia) • Website: CBOE Equity Option Strategies (CBOE) (Note: Use this website to become familiar with the basic equity

options strategies such as puts, calls, collars, straddles, etc.) • Document: Low Volatility Funds In High Demand (short summary) • Website: Buy-write (Investopedia) • Website: Barra Risk Factor Analysis (Investopedia) • Website: CBOE Volatility Index (VIX)

C. Tax-aware investing1. Impact of taxes on returns and future value2. After-tax returns and efficiency for

a. asset classes and categories b. strategies (e.g., active vs. passive) c. structures (e.g., mutual funds, hedge funds, exchange traded funds, partnerships)

3. Tax-efficiency ratios4. Choosing optimal investments on an after-tax basis

LO 5.04 – Demonstrate the skill to calculate and evaluate after-tax returns and tax efficiency for various asset classes and categories

Readings & Resources• Document: Investment Planning Answer Book - selected readings on tax-aware investing (Shein)

D. Tax gain and loss harvesting

LO 5.05 – Demonstrate knowledge and skill to implement tax gain and loss harvesting strategies


Readings & Resources• Document: Investment Planning Answer Book - selected readings on tax harvesting (Shein)

E. After-tax analysis of bond and equity managers

LO 5.06 – Evaluate bond and equity managers on an after-tax basis

Readings & Resources• Document: The Search for Persistent After-Fee and After-Tax Alpha

F. Asset location1. Identify tax efficiency2. Determine best fit within portfolio (taxable or tax-deferred accounts)

LO 5.07 – Position asset classes and managers by the tax characteristics of investment entities including personal taxable assets, qualified retirement accounts, and individual retirement accounts (IRAs)


– Chapter 9: Asset Allocation Strategies and Financial Management ο pp. 186–188

• Document: Investment Planning Answer Book - selected readings on asset allocation management (Shein) (Note: these readings include more advanced strategies)

G. Alternative investments (AI)1. Characteristics2. Benefits and risks3. Strategies and structures4. Incorporating AI into portfolios

LO 5.08 – Demonstrate knowledge of problems, issues, and risks of alternative investments (“AI”) and the benefits and risks of incorporating AI into a portfolio

LO 5.09 – Integrate an appropriate mix of alternative investments into a portfolio based on a client’s objectives, time horizon, risk tolerance, and applicable constraints

Readings & Resources• Document: Investment Planning Answer Book, Alternative Investment Strategies• Document: Incorporating Alternative Investments Into High-Net-Worth Portfolios (Welch)

H. Socially responsible investments1. Shareholder advocacy2. Inclusive or exclusive strategies3. Green investing4. Strategies may differ from one client to another

LO 5.10 – Demonstrate knowledge of the distinguishing characteristics of socially responsible investing (e.g., shareholder advocacy, inclusive or exclusive strategies, green investing)

Readings & Resources• Website: Socially Responsible Investing (wikipedia) (Note: this is a general overview)• Document: Journal of Investment Consulting - Socially Responsible Investments, (Part I)• Document: Journal of Investment Consulting - Socially Responsible Investors and Their Advisors (Part II) (Statman)


I. Portfolio construction and management1. Liability-driven strategies and portfolio construction2. Goal-driven strategies and portfolio construction

LO 5.11 – Demonstrate knowledge of liability-driven and goal-driven investing for individual portfolios

Readings & Resources• Document: Perspective: Global Assets in a Liability-Driven Investing Platform (Stevens, Finn, and Mudumba)• Document: Applications of Global Real Assets in a Liability-Driven Investing Framework (A Collaborative Case

Study) (Underhill)• Website: Goal-based Investing (wikipedia)

Section 6: Risk Management and Asset Protection

A. Insurance coverage types and gaps1. Special insurance for collectibles and unique assets2. Life insurance solutions for high-net-worth clients

LO 6.01 – Demonstrate knowledge of insurance coverage types and identify common gaps in coverage for the unique activities and special assets of high net worth clients


– Chapter 24: Property and Liability Insurance (Note: candidates should be familiar with fundamentals of property and liability insurance found in this chapter)

– Chapter 21: Life Insurance and Social Security (Note: candidates should be familiar with life insurance fundamentals found in this chapter but do not need to review the content covering Social Security)

• Document: Financial Planning Answer Book (Rattiner) – Chapter 3: Insurance Umbrella Liability Insurance (Q3.150 and Q3.151)

• Document: Collectibles Coverage: Insuring Prized Possessions (PropertyCasualty360.com)• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– p. 561 Survivorship Life Insurance – p. 323 Contingent Ownership – p. 347 Divorce and Life Insurance

B. Insurance specifics1. Pricing2. Structures3. Self-insurance

LO 6.02 – Compare insurance policy pricing and structures, and analyze self-insuring as a strategy


– Part VII: Insurance Planning and Risk Management (chapters 20-24) (Note: candidates should be comfortable with different structures of insurance for life, health and

disability, long-term care, and property and liability insurances)

(Note: candidates should be able to calculate potential losses and analyze the ability of clients to fund these losses using various assets (i.e., with personal or business funds rather than through insurance and help clients decide which is more appropriate for them)

• Document: Supplement to Reading 6.02: Health Insurance


C. Protected assets and assets at risk1. Insurance2. Real estate3. Retirement funds4. College savings accounts5. Trust assets, corporate assets, partnership assets

LO 6.03 – List and describe creditor protection features of various asset structures and identify assets at risk


– p. 299 Asset Protection - a brief overview• Document: Asset Protection Strategies: Life Insurance (Solomon and Saret)• Document: Asset Protection Strategies: Irrevocable Life Insurance Trust (Solomon and Saret)• Document: Asset Protection Strategies: Homestead Exemption (Solomon and Saret)• Document: Asset Protection Strategies: ERISA Qualified Retirement Plans (Solomon and Saret)

D. Asset protection strategies and entities1. Simple forms of asset protection a. insurance products including annuities b. home equity c. retirement accounts2. Intermediate complexity level of asset protection a. lifetime and post-death gifts b. education gifts (e.g., Section 529 plans) c. spendthrift trusts3. Complex forms of asset protection a. business structures b. pass-through entities (e.g., limited partnerships) c. protective trusts including domestic asset protection trusts and off-shore trusts

LO 6.04 – List asset and creditor protection strategies and entities including the advantages, disadvantages, and legality of each

LO 6.05 – Compare various entities used in asset and creditor-protection strategies


– p. 539 Section 529 Plans EFFECTIVE JANUARY 1, 2018 Section 529 Plans can be used for K-12 expenses, for qualified withdrawals up to $10,000 per year.

• Document: Asset Protection Strategies: Limited Partnerships (Solomon and Saret)• Document: Fact or Fiction (Schurig)• Document: Limited Partnership (LP) Tables (Schurig) (Reference Only - you are not responsible for this material

on the exam)• Document: Asset Protection Strategies - Limited Liability Companies (Solomon and Saret)• Document: Limited Liability Company (LLC) Tables (Schurig) (Reference Only - you are not responsible for this

material on the exam)


E. Transfer techniques and fraudulent conveyance

LO 6.06 – Describe common transfer techniques and differentiate between legal transfers and fraudulent conveyance

Readings & Resources• Document: Asset Protection Strategies: Actual Intent Fraudulent Conveyance (Solomon and Saret)

F. Domestic trusts1. Grantor and non-grantor trusts2. Domestic asset protection trusts3. Dynasty trusts4. Other trusts

LO 6.07 – Describe and analyze domestic trusts as an asset protection tool, and define and differentiate between self-settled trusts, grantor trusts, dynastic trusts, and domestic asset protection trusts


– p. 393 Grantor Trust Rules – p. 86 Self-Settled Trust (a.k.a. domestic asset protection trusts) – p. 356 Dynasty Trust

G. Off-shore trusts1. Structures and jurisdictions2. Advantages and disadvantages3. U.S. compliance4. Costs to set-up and maintain

LO 6.08 – Describe and analyze off-shore trusts as an asset-protection strategy

Readings & Resources• Document: Asset Protection Strategies (Solomon and Saret)• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– p. 570 Trust Protector

Part III: Client Specialization

Section 7: Client Focus - Executives

Textbook: Private Wealth Management (Hallman and Rosenbloom) – Chapter 18: Employee Stock Compensation Plans

(Note – this chapter provides a nice overview of the more common types of executive compensation plans; for a more thorough and tax updated description, candidates will need to refer to the reference material below)

A. Executive stock options1. Types a. incentive stock options (ISOs) b. non-qualified stock options (NSOs)


2. Taxation a. holding period b. cost basis c. tax liability d. effect on alternative minimum tax (AMT)3. Exercise strategies a. exercise strategies for portfolios of stock options b. minimizing AMT on incentive stock-option exercises c. simultaneous exercise of incentive and nonqualified stock options4. Section 83b5. Calculation, execution, value of... a. cashless exercise b. exercise and hold

c. pyramiding (stock swapping)6. Develop an integrated strategy of holding, exercising, and/or selling stock options

LO 7.01 – Demonstrate knowledge of the planning implications of executive stock options including the tax ramifications (e.g., holding periods, basis, tax liability, and effect on alternative minimum tax) of exercising incentive and non-qualified stock options

LO 7.02 – Develop option exercise strategies for both incentive and non-qualified option awards based on client objectives

LO 7.03 – Describe the consequences, and advantages and disadvantages of making a Section 83(b) election as it pertains to executive stock options

LO 7.04 – Demonstrate an understanding of the calculation, execution, and value of a cashless exercise, an exercise and hold strategy, and a pyramiding (stock swapping) strategy

LO 7.05 – Develop an appropriate strategy and prioritize the interaction of incentive and non-qualified stock options by incorporating risk and reward analysis based on client objectives


– p. 401 Incentive Stock Options – p. 477 Nonqualified Stock Options

• Document: Executive Compensation Answer Book - selected readings on the taxation of ISOs and NQSOs• Textbook: Private Wealth Management (Hallman and Rosenbloom)

– Chapter 18: Employee Stock Compensation Plans ο pp. 380–381 Section 83(b) Election

• Document: Executive Compensation Answer Book - 10:101 What is a cashless option exercise?• Document: Executive Compensation Answer Book - 10:104 What is pyramiding?• Document: Stock Option Strategies (from Wealth Management - Appendix 1) (Kochis)• Document: Weighing Your Options

B. Executive deferred compensation plans1. Types of deferred compensation plans2. Tax implications of deferred compensation plans

LO 7.06 – Demonstrate an understanding of the different types and tax implications of executive deferred compensation plans


– p. 560 Supplemental Executive Retirement Plans (SERPs)• Document: Nonqualified Deferred Compensation Answer Book - select readings


C. Equity compensation plans1. Types of equity compensation plans a. restricted stock b. phantom stock c. performance share plans2. Tax implications of equity compensation plans

LO 7.07 – Differentiate between different equity compensation plans including restricted stock, phantom stock, and performance share plans; and describe the tax implications of each

Readings & Resources• Document: Executive Compensation Answer Book - select readings on restricted stock• Document: Executive Compensation Answer Book - select readings on stock appreciation plans (phantom stock)• Document: Executive Compensation Answer Book - select readings on performance share plans• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– p. 557 Stock Bonus Plan

D. Concentrated stock positions1. Financial and tax implications2. Decision factors for concentrated stock positions a. net worth b. risk tolerance c. long-term objectives d. scenario analysis and planning3. Regulatory rules and restrictions of concentrated stock positions a. short-swing profit rules b. insider information c. exercise windows d. company policies4. Tax results and strategies of concentrated stock positions5. Strategies considering: value, risks, and tax results a. cashless collars b. prepaid variable forward contracts c. portfolio margin strategies d. exchange funds e. charitable remainder trusts f. Section 10b-5(1) plans

LO 7.08 – Identify the financial and tax implications of a concentrated stock position in the context of the client’s net worth, risk tolerance, and long-term objectives

LO 7.09 – Identify regulatory rules and restrictions governing a corporate executive’s publicly held stock including short-swing profits, insider information, exercise windows, and other policies unique to the issuing company

LO 7.10 – Calculate tax results of various outright stock sales over multiple time periods in order to develop tax efficient strategies and action plans

LO 7.11 – Demonstrate knowledge of the value, risks, and tax implications of diversifying concentrated stock portfolios, such as cashless collars, prepaid variable forward contracts, portfolio margin strategies, exchange funds, and charitable remainder trusts

LO 7.12 – Demonstrate knowledge of the value, risks, and tax implications of utilizing Section 10b-5(1) plans


Readings & Resources• Document: Wealth Management - 620 Concentrated Equity Positions (Kochis)• Document: Continuum of Concentration Management Strategies (from Wealth Management - Appendix 4) (Kochis)• Document: Nuveen Wealth Management Strategies - Providing Needs-Based Solutions for Managing

Concentrated Stock Positions

More Advanced Strategies• Document: Portfolio Margining - Recent Developments and Innovations in Single Stock Concentration Risk

Management (Part I) (Boczar)• Document: Structuring To Optimize Tax-Efficiency - Recent Developments and Innovations in Single Stock

Concentration Risk Management (Part II) (Boczar)

Section 8: Client Focus—Closely Held Business Owners

A. Methods of financing a closely held business1. Angel investors2. Venture capital3. Mezzanine financing4. Leveraged buyouts5. Distressed debt6. Restructuring

LO 8.01– Demonstrate an understanding of the various methods of financing used by closely held business owners including the use of angel investors, venture capital funding, mezzanine financing, leveraged buyouts, distressed debt, and restructuring

Readings & Resources (Note: the following basic descriptions of the types of financing should be adequate)

• Website: Angel Investor (wikipedia)• Website: Venture Capital (wikipedia)• Website: Mezzanine Finance (wikipedia)• Website: Leveraged Buyout (wikipedia)• Website: Distressed Debt (wikipedia)• Website: Restructuring (wikipedia)

B. Exit strategies and succession plans for closely held businesses1. Identifying the successor a. third-parties b. employees c. family members2. Timing and transition3. Potential sale types and structures4. Liquidity planning

LO 8.02 – Analyze closely held business exit strategies and succession plans


– pp. 162–165 Disposition of a Business Interest – pp. 194–197 Partial Stock Redemption, Reverse Section 303, Key Person Insurance and Reverse Key

Person Insurance – pp. 214–223 Recapitalization and Attribution – pp. 360–361 Employee Stock Ownership Plan (ESOP)

• Document: Tax and Wealth Strategies for Businesses: 27.05 Sales to Family


For those who want to take a deeper dive into the process and options of selling the closely held business:• Document: Tax and Wealth Strategies for Businesses - Part 3 Exit Phase

C. Issues resulting from sale or succession of a closely held business1. Family dynamics2. Family conflicts

LO 8.03 – Identify potential family conflicts and issues resulting from succession planning or the sale of a closely held business as they relate to family dynamics

Readings & Resources• Document: Understanding Family Dynamics and Family Conflicts (PWC)

D. Common business entity structures of closely held businesses1. Types of entities a. c-corporations b. s-corporations c. limited liability companies d. partnerships2. Taxation of entities a. from operations b. from sale

LO 8.04 – Differentiate between different types of business entity structures (e.g., c- corporations, s-corporations, limited liability companies, and partnerships) including applicable taxation resulting from operations and the sale of the business

Readings & ResourcesOverview of entities and their taxation:

• Textbook: Private Wealth Management (Hallman and Rosenbloom) – Chapter 31: Types of Business Entities and Business Planning


Process for determining which business entity is best for business owners with different goals and objectives:• Document: Financial Planning Answer Book - Planning For Business Entities

– Questions 2:16-2:24

Readings offering a more thorough review of specific types of entities:• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– pp. 531–533 S Corporation – p. 377 Family Holding Company – pp. 449–452 Limited Liability Company – pp. 481–483 Partnerships (Family Limited Partnerships) – p. 487 Personal Holding Company – p. 501 Professional Corporation – p. 576 Unreasonable Compensation



For a deeper look at the taxation of different business entity types and structures:• Document: Tax and Wealth Strategies for Businesses - Part 3 Exit Phase

– Chapter 22, sub-sections 22.01-22.03 (p. 49-53)

E. Buy-Sell agreements1. Types of buy-sell agreements a. cross-purchase plans b. entity redemption plans2. Funding strategies3. Strategies based on entity type and exit plan

LO 8.05 – Describe the types of buy-sell agreements (e.g., cross-purchase, entity redemption, etc.) and funding strategies applicable for death and disability planning

LO 8.06 – Determine which buy-sell agreements are most appropriate based on entity structure and a client’s needs including intended exit strategy


– pp. 170–193 Entity Purchase Agreement, Cross Purchase Agreement, Trusteed Cross Purchase Agreement, “Wait and See” Buy/Sell Agreement, Key Person Buy Out Agreement

– pp. 625–626 Comparison Chart: Cross Purchase & Entity Purchase – p. 324 Controlling Stockholder – p. 380 First-To-Die Life Insurance

F. Valuation methodologies1. Types of valuation models a. comparable sales b. revenue and earnings models c. book value and other asset-based approaches2. Differentiate between types of valuation models (including appropriateness based on multiple factors)3. Discounts and premiums in closely held businesses4. Impact of sale structure on buyers and sellers

LO 8.07 – Differentiate among the different valuation methodologies and list strengths and weaknesses of these methods based on the underlying business entity and situation

LO 8.08 – Describe when discounts or premiums may apply to a business valuation

LO 8.09 – Determine the impact of different valuation methods and sale structures on the intended buyer (e.g., third party buyers, employees, and/or family members)


– pp. 166–169 Business Valuation – p. 301 Book Value


• Document: Estate & Gift Tax Handbook-Valuation Discounts• Textbook: Private Wealth Management (Hallman and Rosenbloom)

– Chapter 31: pp. 625–635: Disposition of Business Interests

G. Taxation on the sale of a business

H. Special sales strategies and structures1. Private annuities2. Self-canceling installment notes3. Seller financing4. Employee Stock Option Plans (ESOPs)

LO 8.10 – Demonstrate knowledge of different financing techniques including private annuities, self- canceling installment notes, seller-financing, third-party financing, and employee stock option plans (ESOPs)

LO 8.11 – Describe the structure and tax treatment from the viewpoint of the buyer and seller of private annuities, self-canceling installment notes, seller-financing, third-party financing, and ESOPs


– Chapter 11: Tax Deferral Strategies, p. 230-236 EFFECTIVE JANUARY 1, 2018 Pages 230-232 refer to 50% exclusion for gains on small business stock. This should be changed to 100% exclusion for gains on small business stock.

• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady) – pp. 38–41 Installment Sale & Private Annuity – p. 406 Installment Sale – p. 496 Private Annuity – p. 542 Self-Canceling Installment Notes (SCINs) – pp. 360–361 Employee Stock Ownership Plan (ESOP) – pp. 214–223 Recapitalization and Attribution

LO 8.12 – Determine which sales structures (e.g., asset or stock sales, installment sales, asset exchanges, etc.) are most appropriate based on client goals and circumstances

Readings & ResourcesThe following gives a nice overview of what advisors and business owners should think about (questions they should ask) before selling a business:

• Document: Financial Planning Answer Book - Planning the Closely Held Business – Questions 2:3 - 2:6

Section 9: Client Focus—Retirement

A. Qualified retirement plans1. Rules and structures of qualified retirement plans a. 401(k) b. profit sharing plans c. defined benefit plans d. cash balance pension plans e. hybrid plans2. Choosing the best plan based on client objectives


LO 9.01 – Describe qualified plan rules and structures (e.g., 401(k) plans, profit sharing plans, defined benefit plans, cash balance pension plans, and hybrid plans)

LO 9.02 – Match a specific qualified plan to a unique client situation


– p. 512 Qualified Retirement Plans – pp. 268–271 401(k) Plan – p. 404 Individual 401(k) Plan – p. 502 Profit Sharing Plan – p. 339 Defined Benefit Pension Plan – p. 306 Cash Balance Pension Plan

• Textbook: Private Wealth Management (Hallman and Rosenbloom) – Chapter 13: Retirement Needs Analysis

ο pp. 297–298 Hybrid Qualified Retirement Plans

Other forms of qualified retirement plans:• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– p. 296 Age-Weighted Profit Sharing Plan – p. 562 Target Benefit Plan – p. 508 Qualified Domestic Relations Order (QDRO) – p. 543 Self-Employed Retirement Plans – p. 549 Simplified Employee Pension (SEP)

B. Retirement accumulation planning1. Capital needs analysis2. Asset accumulation strategies in qualified and non-qualified plans3. Time value of money calculations4. Analytical forecasting (e.g., Monte Carlo simulation)

LO 9.03 – Develop asset accumulation strategies in qualified and non-qualified structures (e.g., qualified retirement accounts, individual retirement accounts, and personal taxable accounts)

LO 9.04 – Perform capital needs analysis for retirement objectives set by a client

LO 9.05 – Calculate the time value of money in the context of accumulation and distribution planning for retirement


– Chapter 3: Valuation Concepts in Wealth Management, Capital Accumulation Concepts, pp. 55–61 – Chapter 13: Retirement Needs Analysis

• pp. 259–263 Retirement Needs Analysis • pp. 293–296 Illustration of Before-Tax Contributions (Investing) Compared with After-Tax Investing (or Power of Deferral) (Note: This reading addresses Learning Objectives 9.03 and 9.05) EFFECTIVE JANUARY 1, 2018 Beginning in 2018, there are four tax brackets for trusts and estates: 10%, 24%, 35%, and 37%–but the brackets are extremely compressed–with the 37% bracket beginning with taxable income over $12,751 (2019).


Various forms of non-qualified deferred compensation plans:• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– p. 541 Secular Trust – p. 514 Rabbi Trust – p. 489 Phantom Stock Plan – p. 565 Top-Hat Plan

Resources for using your financial calculator:• Website: Financial Calculator Tutorial Index

C. Retirement distribution planning1. The importance of the sequence of returns2. Sustainable withdrawal rates3. Taxation of retirement plan distributions a. tax rates on distributions b. Required Minimum Distributions (RMD) c. Unrelated Business Taxable Income (UBTI)4. Time value of money calculations5. Analytical forecasting (e.g., Monte Carlo simulation)

LO 9.06 – Explain the impact of return sequencing on sustainability of retirement distributions

LO 9.07 – Demonstrate an understanding of analytical forecasting techniques, such asMonte Carlo simulation, in projecting retirement outcomes

LO 9.08 – Determine the tax treatment of distributions from various types of retirement plans

LO 9.09 – Calculate required minimum distributions (RMD)

LO 9.10 – Describe sustainable withdrawal rate methodologies given various conditions and scenarios and apply sustainable withdrawal-rate decision rules in order to modify distributions based on various events or outcomes

Readings & Resources• Website: Why Mediocre Returns Can Be Worse Than A Market Crash from Nerd’s Eye View - Kitces.com

(Michael Kitces)• Document: Understanding Safe Withdrawal Rates (Kitces)• Textbook: Private Wealth Management (Hallman and Rosenbloom)

– Chapter 16: Planning for Taking Distributions from Retirement Plans – Chapter 13: Retirement Needs Analysis

ο p. 261-263 Expected Total Returns Assumed During Retirement (Note: Monte Carlo analysis is discussed in this section)

• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady) – p. 535 Section 72(t) Calculation

• Document: U.S. Master Tax Guide - Required Minimum Distributions (RMDs)• Document: U.S. Master Tax Guide - Unrelated Business Taxable Income Defined (UBTI)

D. Net Unrealized Appreciation (NUA)1. NUA calculation2. NUA as a planning strategy

LO 9.11 – Explain net unrealized appreciation (NUA) rules and applications, and calculate tax liability on a NUA distribution Readings & Resources• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– p. 471 Net Unrealized Appreciation


E. Tax-aware withdrawal strategies for...1. Tax-deferred accounts2. Taxable accounts

LO 9.12 – Establish tax-aware withdrawal strategies for various types of tax-deferred and after-tax accounts


– Chapter 16: Planning for Taking Distributions from Retirement Plans

F. Asset-location strategies for...1. Tax-deferred accounts2. Taxable accounts

LO 9.13 – Demonstrate knowledge of asset-location issues (i.e., asset placement among various tax-deferred and after-tax accounts) and demonstrate skill to target appropriate placement among various tax-deferred and after-tax accounts

Readings & Resources• Document: Tax Management of Retirement Savings Vehicles (Keebler)

G. Roth Individual Retirement Accounts (Roth IRAs)1. Roth IRA conversion rules

LO 9.14 – Describe Roth IRA conversion rules, and develop strategies that integrate a Roth IRA conversion with other advanced planning techniques


– p. 405 Individual Retirement Accounts – pp. 528–529 Roth IRA Conversion

• Textbook: Private Wealth Management (Hallman and Rosenbloom) – pp. 318–320 Roth IRAs

H. Individual Retirement Accounts (IRAs)1. Stretch IRA planning2. Inherited IRA rules3. Taxation of retirement accounts and IRAs post-death4. Distribution rules for retirement accounts and IRAs post-death

LO 9.15 – Demonstrate an understanding of stretch IRA planning

LO 9.16 – Calculate inherited retirement account required minimum distributions (RMD)and apply the correct distribution table

LO 9.17 – Explain post-death distribution requirements relative to beneficiary type



– p. 405 Individual Retirement Accounts – pp. 411–413 IRA Distribution Planning – p. 468 Minors and IRAs – p. 541 See-Through Trust

• Document: Stretch IRAs: Should You Set One Up? (AICPA)

Part IV: Legacy Planning Section 10: Charitable Giving EFFECTIVE JANUARY 1, 2018 Deduction of cash contributions to public charities is limited to 60% of AGI.

A. Rules, requirements, and taxation for charitable giving to...1. Public charities2. Private charities

LO 10.01 – Describe the rules, requirements, and taxation regarding gifts made to public and private charities and private foundations; identify rules that govern gifts to each

Readings & Resources• Web Resource: Public Charities (IRS.gov)• Web Resource: Charitable Contribution Deductions (IRS.gov)• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– p. 497 Private Foundation• Document: Tax Research Consultant - INDIV: 51,250 Charitable Deduction Ceilings: Percentage Limitations• Document: “Percentage Limitations and Deduction Rules” (Charitable Contribution Limitation Rules)

B. Character of property donated1. Cash gifts2. Appreciated property or assets3. Depreciated property or assets4. Leveraged property or assets

LO 10.02 – Identify the tax character of property being donated


– Chapter 19: Charitable Giving Techniques

C. Charitable planning based on maximizing deductions

LO 10.03 – Plan charitable contributions to maximize deductions based on client goals


– Chapter 19: Charitable Giving Techniques

D. Donor-Advised Funds1. Rules2. Taxation3. Advantages and limitations


LO 10.04 – Describe the rules for and taxation of donor-advised funds

Readings & Resources• Document: Tax Research Consultant EXEMPT: 33,000, Overview - Donor Advised Funds and Sponsoring

Organizations

E. Charitable Lead Trusts1. Rules2. Taxation3. Advantages and limitations

F. Charitable Remainder Trusts (including NICRUT, NIMCRUT, flip-CRUT)1. Rules2. Taxation3. Advantages and limitations

LO 10.05 – Describe and differentiate between the rules for and taxation of contributions to and distributions from charitable lead and charitable remainder trusts


– Chapter 19: Charitable Giving Techniques• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– p. 309 Charitable Trusts – p. 472 NIMCRUT

G. Charitable planning - choose the most appropriate strategies and timing1. Client discovery2. Situational analysis3. Charitable solutions4. Implementation of a charitable plan

LO 10.06 – Determine in which situations a particular charitable planning vehicle is most appropriate


– Chapter 19: Charitable Giving Techniques• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– p. 307 Charitable Gift Annuity – p. 308 Charitable Gifts of Life Insurance – pp. 310–311 Charity as Designated Beneficiary of Retirement Plan

H. Unrelated Business Taxable Income (UBTI)

LO 10.07 – Describe unrelated business taxable income (UBTI) as it pertains to the taxation of the operation of investments of a private foundation


– p. 283–284 Unrelated Business Taxable Income


Section 11: Estate Planning and Wealth Transfer

A. Estate plan evaluation1. Review estate planning documents2. Analyze a client’s current estate planning strategies3. Discuss potential estate planning strategies

LO 11.01 – Evaluate a client’s current estate plan, and understand and interpret estate planning documents


– Chapter 25: Estate Planning Principles• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– p. 538 Checklist of Documents (reference only) – p. 602 Survivor checklist (reference only) – pp. 8–13 Estate Planning Matrix and The Estate Funnel – pp. 18–33 Simple Will, Trust Will, Revocable Living Trust, Pour Over Will and QTIP Trust

B. Planning for heirs1. Support while living2. Special needs trusts3. Protection of assets4. Wealth-transfer plan post-death

LO 11.02 – Develop strategies to provide living support and protection of heirs while preserving a client’s estate and wealth-transfer goals


– Chapter 27: Lifetime Giving and Other Intrafamily Techniques – Chapter 28: Marital Deduction Planning, Postmortem Planning, and Estate Liquidity – Chapter 30: Revocable Living Trusts and Property Management Agreements

• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady) – p. 492 Post Mortem Planning

C. Lifetime gifts vs. transfers at death1. Crummey gifts and trusts2. Lifetime gift tax exclusion3. Annual gift tax exclusion

LO 11.03 – Evaluate the best course of action for lifetime gifts vs. transfers at death



– p. 332 Crummey Powers – pp. 50–53 Gifts & Split-Gifts

D. Incapacity planning strategies

LO 11.04 – Demonstrate knowledge of incapacity planning strategies


– p. 351 Durable Power of Attorney – p. 400 Health Care Power of Attorney – p. 453 Living Will

E. Powers of appointment

LO 11.05 – Describe the concept of powers of appointment


– p. 493 Power of Appointment

F. Postmortem planning

LO 11.06 – Describe the various aspects of postmortem planning Readings & Resources

• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady) – p. 492 Post Mortem Planning

• Textbook: Private Wealth Management (Hallman and Rosenbloom) – Chapter 28: Marital Deduction Planning, Postmortem Planning and Estate Liquidity, pp. 581–583

G. Estate planning for non-traditional relationships

LO 11.07 – Explain estate planning issues for non-traditional relationships


– pp. 348–349 Domestic Partners – p. 473 Non-citizen Estate Planning

H. Titling issues and beneficiary designation strategies

LO 11.08 – Identify proper titling and beneficiary designation strategies


– Chapter 25: Estate Planning Principles, pp. 505–510• Textbook 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– p. 486 Per Stirpes - Per Capita

I. Probate estates and intestacy issues

LO 11.09 – Demonstrate knowledge of probate estates and intestacy issues



– p. 500 Probate• Textbook: Private Wealth Management (Hallman and Rosenbloom)

– Chapter 25: Probate Estate p. 511 – Chapter 25: Intestate Distribution pp. 514–515

J. Estate tax1. Estate tax rates2. Estate tax calculation3. Estate tax liability4. IRS Form 706

LO 11.10 – Demonstrate knowledge of estate tax rates and calculations, and calculate estate tax liability

LO 11.11 – Review and analyze the estate tax return (Form 706)


– Chapter 26: Federal Estate Tax, pp. 531–541 – Chapter 28: Marital Deduction Planning, Postmortem Planning and Estate Liquidity, p. 565-581

• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady) – pp. 14–17 Federal Estate Tax – p. 582 Federal Estate & Gift Tax Rates – p. 459 Marital Deduction – p. 491 Portability – p. 584 Estate Tax Calculation Steps

• Document: IRS Form 706

K. Gift tax5. Gift tax rates6. Gift tax calculation7. Gift tax liability8. IRS Form 709

LO 11.12 – Demonstrate knowledge of gift tax rates and calculations, and review and analyze the gift tax return (Form 709)


– Chapter 26: Federal Gift Tax, pp. 524–531• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– p. 582 Federal Estate & Gift Tax Rates – p. 584 Gift Tax Calculation Steps – p. 53 Footnote 7 Gift Tax Liability

• Document: IRS Form 709

L. Generation Skipping Transfer Tax (GSTT)1. Gift tax rates2. Gift tax calculation3. Gift tax liability

LO 11.13 – Demonstrate knowledge of generation skipping tax (GST) rates and calculations, and (GST) liability



– Chapter 26: Federal Generation-Skipping Transfer (GST) Tax, p. 542-546• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– pp. 34–37 Generation-Skipping Transfers

M. Strategies to reduce estate tax liability1. Outright gifts made inter-vivos2. Gifts of future appreciation3. Gifts made at death4. Gifts made through trusts5. Disclaimers

LO 11.14 – Determine methods to reduce the estate tax liability


– pp. 50–53 Gifts & Split-Gifts – p. 575 Uniform Transfers/Uniform Gifts to Minors Acts

EFFECTIVE JANUARY 1, 2018 The ‘kiddie tax’ is no longer calculated at the parents’ tax rate. Beginning in 2018, the kiddie tax is now to be calculated using tax rates applicable to trusts and estates.

– pp. 371–372 Estate Freezes – pp. 54–57 Life Insurance Trust – pp. 374–375 Estate Taxation of Life Insurance – p. 346 Disclaimer

N. Income in respect of a decedent (IRD)1. Taxation of IRD2. Strategies for minimizing tax on IRD

LO 11.15 – Explain the concept and tax results of income in respect of a decedent (IRD)


– p. 403 Income in Respect of a Decedent• Document: Tax and Wealth Strategies for Business: 27.03 Income in Respect of a Decedent (IRD)

O. Valuation discounts1. Discount for minority interest and lack of control2. Discount for lack of marketability and illiquidity

LO 11.16 – Describe valuation discounts and their applicability under different scenarios


– p. 376 Fair Market Value – pp. 518–519 Reduced Valuation

• Document: Estate and Gift Tax Handbook: Valuation Discounts


P. Trusts1. Types of trusts

a. A–B trust planning and bypass trusts b. Section 2503-c Trust c. Irrevocable Life Insurance Trust (ILIT) d. Grantor Retained Annuity Trust (GRAT) e. Grantor Retained Income Trust (GRIT) f. Generation Skipping Trust (GST) g. Intentionally Defective Grantor Trust (IDGT) h. Qualified Domestic Trust (QDOT) i. Qualified Terminal Interest Property trust (QTIP) j. Qualified Personal Residence Trust (QPRT)

2. Rules and constraints of each trust type3. Difference in taxation between trust types4. Benefits, risks, and limitations of each trust type

LO 11.17 – Demonstrate knowledge of the use of trusts in estate planning, and compare and contrast advantages and disadvantages of different trusts given client objectives

Readings & ResourcesTrust Concepts and Basic Trusts

• Textbook: Private Wealth Management (Hallman and Rosenbloom) – Chapter 25: Trusts in Estate Planning, p. 516-522

• Document: Financial Planning Answer Book: Chapter 7 Estate Planning, Estates & Trusts Q7.121 thru Q7.132 Specific Trusts

• Document: Estate and Retirement Planning Answer Book - Q5:2 Bypass Trusts• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– p. 571 Trusts for Minors - Section 2503(c) Trust – pp. 54–57 Life Insurance Trust – pp. 62–65 Grantor Retained Annuity Trust (GRAT) – p. 394 GRITs, GRUTs, and GRATs – pp. 34–37 Generation Skipping Transfers – pp. 74–77 Intentionally Defective Trust – p. 509 Qualified Domestic Trust – pp. 30–33 QTIP Trust – p. 511 Qualified Personal Residence Trust

Other important concepts and trust types• Textbook: Private Wealth Management (Hallman and Rosenbloom)

– Chapter 3: Valuation Concepts in Wealth Management, p. 62-65 Valuation Factors for Estate Planning and Wealth Transfer (Note: read the material on Section 7520 discount rates)

• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady) – p. 530 Rule Against Perpetuities – pp. 86–89 Self-Settled Trusts – p. 402 Incentive Trust

Q. Fiduciary and trust issues

LO 11.18 – Identify fiduciary and trustee issues for estate planning and administration


– p. 378 Fiduciary – p. 517 Reciprocal Trust Doctrine


R. The use of insurance in the estate plan

LO 11.19 – Evaluate the use of insurance in the estate plan


– Chapter 29: Life Insurance in Estate Planning

S. Impact of holding retirement plan assets in the estate1. Taxation from holding retirement plan and IRA assets in the estate2. Strategies for minimizing tax from holding retirement plan and IRA assets in the estate

LO 11.20 – Describe estate planning and tax implications for holding qualified retirement plan and IRA assets in an estate at death


– Chapter 16: Planning for Taking Distributions from Retirement Plans, p. 347 Federal Estate Taxation• Document: Estate & Retirement Planning Answer Book - Chapter 27

T. Intra-family loans in the estate plan1. Benefits of using intra-family loans in the estate plan2. Taxation of intra-family loans in the estate plan3. Limitations and risks of using intra-family loans in the estate plan

LO 11.21 – Describe intra-family loan strategies and their tax implications


– Chapter 27: Lifetime Giving and Other Intrafamily Techniques, p. 564 Loans to Family Members – Chapter 3: Valuation Concepts in Wealth Management, pp. 64–65 Applicable Federal Rates for Valuing

Below-Market Loans• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– p. 410 Interest-Free Loans

U. The use of partnerships in the estate plan1. Benefits of using partnerships in the estate plan2. Taxation of partnership assets in the estate plan3. Limitations and risks of using partnerships in the estate plan

LO 11.22 – Analyze the advantages, disadvantages, and limitations of using partnerships in the estate plan


– pp. 210–213 Family Limited Partnership• Textbook: Private Wealth Management (Hallman and Rosenbloom)

– Chapter 27: Lifetime Giving and Other Intrafamily Techniques, p. 558-561 Family Limited Partnerships

V. Impact of corporate and business assets in the estate plan1. Benefits of using business entities in the estate plan2. Taxation of business entity assets in the estate plan3. Limitations and risks of using business entities in the estate plan


W. Impact of illiquid assets in the estate

LO 11.23 – Explain the impact of corporate and business assets in the estate plan

LO 11.24 – Identify estate planning strategies available to high-net-worth individuals with large concentrated positions of highly illiquid assets

Readings & Resources• Document: Tax Research Consultant LLC: 3166 Use of LLCs in Estate Planning and Wealth Transfers• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– p. 336 Deferral of Estate Tax• Textbook: Private Wealth Management (Hallman and Rosenbloom)

– Chapter 31: Types of Business Entities and Business Planning, Special Valuation Rules through Estate Liquidity, pp. 633–635

X. Legacy wealth-transfer plans1. Structure2. Strategies3. Solutions

LO 11.25 – Develop specific solutions appropriate to a legacy wealth-transfer plan


– Chapter 27: Lifetime Giving and Other Intrafamily Techniques• Textbook: 2019 Field Guide to Estate Planning, Business Planning & Employee Benefits (Cady)

– pp. 515–516 Recessionary Estate Planning • Document: Wealth Continuity and Family Unity: 10 Best Practices for Navigating Family Wealth with Intention

(Merrill Lynch) • Document: Can You Make the Money Last? The Road to Sustainable Wealth (Merrill Lynch)