CDA Financial Planning & Property Division 3 — Questions and Answers
Question 1: Which concept allows a spouse to claim Social Security benefits based on an ex-spouse's earnings record if the marriage lasted at least 10 years?
- Derivative benefits
- Divorced spousal benefit (Correct answer)
- Survivor benefit transfer
- Retirement credit sharing
Correct answer: Divorced spousal benefit
A divorced spouse may claim up to 50% of the ex-spouse's Social Security benefit if married for 10+ years, divorced for 2+ years, and currently unmarried.
Question 2: When dividing a traditional IRA in divorce, which transfer method avoids triggering taxes and the 10% early withdrawal penalty?
- Direct rollover via QDRO
- Transfer incident to divorce (Correct answer)
- In-service distribution
- 72(t) distribution
Correct answer: Transfer incident to divorce
An IRA transfer incident to divorce, completed via a trustee-to-trustee transfer as specified in the divorce decree, moves funds tax-free without penalty.
Question 3: In community property states, which of the following assets acquired during marriage is generally classified as separate property?
- Wages earned by either spouse
- A gift received by one spouse from a third party (Correct answer)
- Property purchased with community funds
- Business profits earned during the marriage
Correct answer: A gift received by one spouse from a third party
Gifts received by one spouse from a third party during the marriage remain separate property even in community property states, as they were not earned through the marital partnership.
Question 4: What financial planning tool calculates the after-tax, after-cost present value of each asset to make true 'apples-to-apples' comparisons in divorce settlements?
- Net worth statement
- Asset comparison worksheet (Correct answer)
- Equalization payment formula
- Financial disclosure affidavit
Correct answer: Asset comparison worksheet
An asset comparison worksheet adjusts each asset's gross value for taxes, penalties, and transaction costs, revealing its true net value for equitable comparison.
Question 5: What is 'transmutation' in the context of divorce property law?
- Converting retirement assets into annuities
- The change of property from separate to marital or vice versa (Correct answer)
- Liquidating community property for cash
- The process of revaluing assets at divorce date
Correct answer: The change of property from separate to marital or vice versa
Transmutation occurs when property changes its classification from separate to marital (or reverse), often through commingling, titling changes, or written agreement.
Question 6: Which living expense is most commonly underestimated by divorcing spouses when projecting post-divorce budgets?
- Rent or mortgage payment
- Health insurance premiums (Correct answer)
- Grocery costs
- Transportation fuel
Correct answer: Health insurance premiums
Health insurance premiums, especially when one spouse loses coverage from the other's employer plan and must purchase individual coverage, are frequently and significantly underestimated.
Question 7: Which type of annuity contract is most likely to have a significant surrender charge that must be considered when valuing it for divorce purposes?
- Immediate fixed annuity
- Deferred annuity still within surrender period (Correct answer)
- Single premium immediate annuity (SPIA)
- Variable annuity in payout phase
Correct answer: Deferred annuity still within surrender period
Deferred annuities often carry surrender charges of 7-10% during the early accumulation phase, reducing the contract's net distributable value in divorce.
CDA Financial Planning & Property Division 3
Which concept allows a spouse to claim Social Security benefits based on an ex-spouse's earnings record if the marriage lasted at least 10 years?