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CFP Certification Exam: Practice Questions 2
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The CFP® certification exam is a 6-hour, 170-question, multiple-choice test in the US assessing financial planning proficiency. It includes standalone questions, scenarios, and case studies, focusing on application over recall. Key areas include tax, retirement, estate, and investment planning, designed to test critical thinking and practical application.  Key Aspects of the CFP® Exam Structure: The exam is broken into two 3-hour sessions with a 40-minute break. Content: Questions cover 8 main domains: Financial Planning Process, Risk Management/Insurance, Investment Planning, Tax... Show more
CFP Certification Exam: Practice Questions 2
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25 Questions

1. An HO-4 insurance policy has which of the following characteristics?
2. Which of the following describes a type of split-dollar life insurance coverage in which the insured pays the portion of the premium that supports the death benefit, and when the insured dies the other party recovers its investment and the beneficiary receives the death benefit, less any amount owed to the other party, tax free?
3. Which of the following describes the taxation of an annuity owned by a decedent?
4. Which of the following is/are correct regarding a QPRT?
(1) A QPRT is generally appropriate for vacation homes valued at over $1 million.
(2) A QPRT is ideal for a single parent in his or her 30s or 40s.
(3) The grantor will have a taxable gift upon the creation of a QPRT.
(4) After the trust term ends, the house reverts back to the grantor.
5. The annual payout rate for a CRUT must be at least __________ of the current fair market value of trust assets.
6. Cosmormanmy, age 13, works for his father developing children’s computer games. His father owns and operates a sole proprietorship. Cosmormanmy is paid $15,000 annually for his work. What is Cosmormanmy’s tax bracket for the majority of his earnings?
7. Under the social security system, a fully insured worker is one that has paid into the system for at least __________ during his or her employment career.
8. The three categories of hazards are __________, __________, and __________.
9. Which of the following will decrease an employer’s contribution to a defined benefit plan?
(1) High ratio of married to unmarried participants
(2) Large forfeitures
(3) Lower than expected investment returns
(4) High turnover among employees
10. All but which of the following are characteristics of a defined benefit plan?
11. A special catch up provision is permitted in 403b plans for employees with at least __________ of service who have not made contributions and are employed by universities.
12. A group term life insurance policy can be converted to an individual life policy within __________ of an employee terminating employment.
13. Dame Edna owns a house she would like to pass to her nephew at death. Rather than wait, she gives the house to her nephew today with the stipulation that she will continue to live in the house for the rest of her life. Which of the following interests has Dame Edna given to her nephew?
14. Which of the following are among the exemptions from the 10% early withdrawal penalty from an IRA?
(1) Hardship withdrawals
(2) Higher education expenses for a participant’s child
(3) First-time home purchase up to $10,000
(4) Loan for qualified education expenses
15. If a married couple rents out their beach house for five months of the year, how many days can they personally use the house without losing federal income tax deductions?
16. How is the adjusted basis of an asset calculated? Assume the asset was originally acquired at an arm’s length transaction from a non-related party.
17. Which of the following is/are correct regarding use of the marital deduction?
(1) There may be a requirement that the surviving spouse survive the decedent by a period not to exceed six months.
(2) If the decedent was not a US citizen, a QDOT is required in order to qualify property for the marital deduction.
18. If a company has three owners, how many life insurance policies will be purchased if a cross-purchase agreement is used?
19. Which of the following is a characteristic of participating life insurance policies?
20. According to the Principle of __________, a CFP® Board designee shall exercise reasonable and prudent professional judgment in providing professional services to clients. (This question is subject to change after October 1, 2019, when the CFP® Board adopts its new Code of Ethics and Standards of Conduct.)
21. All but which of the following are characteristics of American Depository Receipts (ADRs)?
22. Which of the following will result if an insured of a life insurance policy dies during the grace period and the premium has not yet been paid?
23. Which of the following theories is based on the assumption that investors are risk-averse, and for a given level of risk investors prefer higher returns to lower returns?
24. A loss on the sale of securities is not deductible if a taxpayer purchases identical securities within __________ prior to or after the date of sale.
25. Gifts made during a donor’s lifetime receive a __________ of basis, and gifts made at death receive a __________ of basis.

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