What are the primary types of municipal fund securities?
- 529 plans
- ABLE accounts
- Local Government Investment Pools (LGIPs)
What are 529 plans primarily used for?
They are tax-advantaged municipal fund securities designed to save for qualified education expenses.
Fill in the blank:
529 plans offer tax benefits such as ______ growth and tax-free withdrawals for qualified education expenses.
tax-deferred
What is a key feature of ABLE accounts?
Tax-free savings for disability-related expenses
Fill in the blank:
ABLE accounts are intended for individuals diagnosed with a disability before age ______.
26
What is the primary purpose of Local Government Investment Pools?
(LGIPs)
To provide local governments with a safe investment option.
Fill in the blank:
Contributions to a 529 plan are considered ______ gifts for tax purposes.
completed
Contributions are subject to annual gift tax exclusion limits, but 529 plans allow front-loading up to five years’ worth.
What is a potential penalty for non-qualified withdrawals from a 529 plan?
10% penalty on earnings
Fill in the blank:
ABLE account contributions are limited to the annual ______ tax exclusion amount.
gift
What is the benefit of investing in LGIPs for local governments?
Professional management and diversification.
Fill in the blank:
529 plan account owners can change the beneficiary to another family member without tax consequences, provided the new beneficiary is a ______ relative.
qualified
What is a key difference between 529 plans and ABLE accounts?
- 529 plans are for education savings.
- ABLE accounts are for disability-related expenses.
What is the primary tax advantage of investing in municipal bonds?
Interest income is generally exempt from federal income tax.
In addition to federal tax exemption, interest may also be exempt from state and local taxes if the investor resides in the state where the bond is issued.
Fill in the blank:
A ______ rollover allows an investor to defer taxes by transferring funds from one qualified plan to another.
tax-free
Tax-free rollovers must be completed within 60 days to avoid penalties and taxes. This process helps maintain the tax-deferred status of retirement savings.
List the two types of rollovers available for municipal fund securities.
- Direct rollover
- Indirect rollover
A direct rollover transfers funds directly from one account to another without the investor handling the funds, while an indirect rollover involves the investor receiving the funds and then redepositing them into another account.
How often can an investor perform an indirect rollover from an IRA?
Once every 12 months.
This rule applies to each IRA the investor owns, and the 12-month period begins on the date the investor receives the distribution.
What is the penalty for failing to complete a rollover within the 60-day limit?
The distribution may be subject to income tax and a 10% early withdrawal penalty if under age 59½.
Exceptions to the penalty may apply, such as for first-time home purchases or certain medical expenses.
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Prospecting and Communication Rules26
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Investment Product Marketing and Disclosure32
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Account Types and Disclosures34
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Customer Identification and Documentation20
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Investment Profiles and Suitability29
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Account Approvals and Supervision15
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Communicating Investment Strategies and Market Data28
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Mutual Funds and Investment Company Products53
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Variable Insurance and Annuities41
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Municipal Fund Securities17
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Disclosures, Risks, and Fees37
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Customer Communication and Recordkeeping19
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Quoting and Trade Execution17
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Transaction Processing and Settlement18
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Error Resolution and Complaints15
