CDFA Exam Study Materials With Complete Solutions
New @ 2025
Financial Affidavit - ANSWER ___________________________ is a very important
document used to gather financial information; some states may refer to it as a
"Financial Statement" and may have an official form to be utilized. It becomes part of the
record of documents that are filed with the court. Contained within the
______________________ are all sources of income and deductions from income, all living
expenses, all assets, and all liabilities.
Appraisal - ANSWER ______________________ is the procedure for determining the fair
market value of an asset when it is to be sold or divided as part of the divorce process.
Career Assets - ANSWER ______________________ are tied to one's career (e.g., health
insurance, stock options, retirement plans, etc.)
Community Property - ANSWER In ___________________ states, any property not
considered "separate" - i.e., owned before the marriage or acquired by gift or
inheritance - is "community" property and will probably be divided 50/50.
Equitable - ANSWER ___________________ means fair; does not necessarily mean equal.
Equitable Division of Property - ANSWER ____________________________ refers to a
method of dividing property based on various considerations, including but not limited
to length of marriage, differences in age, wealth, earning potential, and health of
partners involved, with the ultimate goal of arriving at an equitable division, but not
necessarily equal.
Goodwill - ANSWER ___________________ refers to the value of a business beyond its
sales revenue, inventory and other tangible assets: it includes prestige, name
recognition, and customer loyalty.
,Joint Property - ANSWER ________________________ refers to the property held in the
name of more than one person.
Lis Pendens - ANSWER __________________ means a piece of property cannot be
transferred during a pending lawsuit that may change the disposition of it once a notice
has been led in the public record.
Marital Property - ANSWER _____________________________ is accumulated income and
property acquired by the spouses during the marriage subject to equitable division by
the court. States will vary on their precise definition of what is to be included in marital
property, sometimes excepting property acquired by gift or inheritance.
Property Settlement Note - ANSWER _________________________________ is a note from
the payor to the payee for an agreed-upon length of time with a reasonable interest rate.
Can be collateralized.
Recapture - ANSWER ________________ is deductions taken in a previous year's
income.
Section 1041 - ANSWER This section of the IRS Code states that any transfer of property
between spouses during marriage, or former spouses if it is incident to divorce, is
tax-free. No gain or loss is recognized and for income tax purposes, the transferee's
basis and holding period in the property is the adjusted basis and holding period of the
transferor. An assignment of an annuity contract is not a taxable event to either the
transferor spouse or the transferee spouse under this section.
Separate Property - ANSWER Generally considered any property owned before
marriage (earned or acquired by gift or inheritance), acquired during the marriage by
one partner using only that partner's separate property, or earned after a formalized
agreement. This definition will vary from state to state.
Tax Reform Act of 1984 - ANSWER Tax Reform Act of 1984 (TRA) added Code Sec.
1041, which allows marital property to be transferred back and forth between spouses
without creating any tax on the transfer. The income tax basis of each asset is the basis
,of the asset in the hands of the transferor. TRA simplified the definition of spousal
support, and it prevents property settlements from being disguised as spousal support.
Deferred Division or Future Share Method - ANSWER One of three methods that can be
used to divide pension benefits. No present value is determined. Each spouse is
awarded a share of the benefits if and when they are paid.
Defined Benet Plan - ANSWER Type of employer-sponsored pension plan that
promises to pay the employee a certain amount per month at retirement time. It does not
have a cash value today.
Double-Dipping - ANSWER When one spouse is paid twice from the same asset.
Employee Retirement Income Security Act of 1974 (ERISA) - ANSWER A federal law
that sets minimum standards for pension plans in private industry. ERISA does not
require any employer to establish a pension plan-it only requires that those who
establish plans must meet certain minimum standards. The law generally does not
specify how much money a participant must be paid as a benefit. ERISA requires plans
to provide participants with information about the plan periodically, including
information on plan features and funding; establishes minimum standards for
participation, vesting, benefit accrual, and funding; requires accountability of plan
fiduciaries; and provides participants with the right to sue for benefits and breaches of
fiduciary duty. ERISA also provides for the payment of certain benefits, through the
Pension Benefit Guaranty Corporation, a federally chartered corporation, if a defined
plan is terminated.
General Agreement on Tariffs and Trade (GATT) Rate - ANSWER Interest rate based
on a 30-year Treasury bond interest rate and is used as a benchmark for calculations of
lump-sum distributions from defined benefit plans.
Pension Benefit Guaranty Corporation (PBGC) - ANSWER A federal corporation
created by the government that announces monthly interest rates (for the following
month) that are used to calculate the present value of pension plans. This rate is based
on average annuity rates.
, Qualified Domestic Relations Order (QDRO) - ANSWER A court decision that assigns
part of a person's retirement or pension fund payments to be paid to his/her ex-spouse
as part of a marital assets division. The administrator of the fund pays directly to the
non-employee ex-spouse at the time of divorce or at the time the employee's retirement
payments are to begin.
Reserved Jurisdiction - ANSWER One of three methods which may be used to
apportion pension benefits. In this case, the court maintains authority to grant
disbursements from a pension plan in the future.
Retirement Equity Act of 1984 (REA) - ANSWER This Act amended ERISA to introduce
mandatory spousal rights in pension plans so the choice of the form of the benefit
received from a pension plan was no longer solely the participant's choice.
Section 72 - ANSWER This section of the IRS Code allows the alternate payee to take
money from a qualified plan, pursuant to a QDRO, without having to pay a 10% tax
penalty. The distribution would still be subject to ordinary income tax.
Vesting - ANSWER In a retirement account, "vesting" means ownership. If an employee
is "fully vested," he/she owns 100% of the account balance. When an employee is
"partially vested," he/she is only entitled to a specified percentage of the employer's
contributions. Employee contributions are always 100% vested. Depending on the plan
type, employer contributions have different vesting requirements.
Capital Gain - ANSWER A profit made from the sale of a capital asset property or
investment.
Cost Basis - ANSWER The original value of an asset for tax purposes.
Emancipation - ANSWER The stage of life when a minor child becomes independent.
Most states consider minors to be emancipated at the age of majority, which is 18, 19 or
21 years of age, or when they get married, become employed full-time, graduate from
high school, or enter the armed services. It is the stage at which parents are no longer
legally or financially responsible for support of the child.
New @ 2025
Financial Affidavit - ANSWER ___________________________ is a very important
document used to gather financial information; some states may refer to it as a
"Financial Statement" and may have an official form to be utilized. It becomes part of the
record of documents that are filed with the court. Contained within the
______________________ are all sources of income and deductions from income, all living
expenses, all assets, and all liabilities.
Appraisal - ANSWER ______________________ is the procedure for determining the fair
market value of an asset when it is to be sold or divided as part of the divorce process.
Career Assets - ANSWER ______________________ are tied to one's career (e.g., health
insurance, stock options, retirement plans, etc.)
Community Property - ANSWER In ___________________ states, any property not
considered "separate" - i.e., owned before the marriage or acquired by gift or
inheritance - is "community" property and will probably be divided 50/50.
Equitable - ANSWER ___________________ means fair; does not necessarily mean equal.
Equitable Division of Property - ANSWER ____________________________ refers to a
method of dividing property based on various considerations, including but not limited
to length of marriage, differences in age, wealth, earning potential, and health of
partners involved, with the ultimate goal of arriving at an equitable division, but not
necessarily equal.
Goodwill - ANSWER ___________________ refers to the value of a business beyond its
sales revenue, inventory and other tangible assets: it includes prestige, name
recognition, and customer loyalty.
,Joint Property - ANSWER ________________________ refers to the property held in the
name of more than one person.
Lis Pendens - ANSWER __________________ means a piece of property cannot be
transferred during a pending lawsuit that may change the disposition of it once a notice
has been led in the public record.
Marital Property - ANSWER _____________________________ is accumulated income and
property acquired by the spouses during the marriage subject to equitable division by
the court. States will vary on their precise definition of what is to be included in marital
property, sometimes excepting property acquired by gift or inheritance.
Property Settlement Note - ANSWER _________________________________ is a note from
the payor to the payee for an agreed-upon length of time with a reasonable interest rate.
Can be collateralized.
Recapture - ANSWER ________________ is deductions taken in a previous year's
income.
Section 1041 - ANSWER This section of the IRS Code states that any transfer of property
between spouses during marriage, or former spouses if it is incident to divorce, is
tax-free. No gain or loss is recognized and for income tax purposes, the transferee's
basis and holding period in the property is the adjusted basis and holding period of the
transferor. An assignment of an annuity contract is not a taxable event to either the
transferor spouse or the transferee spouse under this section.
Separate Property - ANSWER Generally considered any property owned before
marriage (earned or acquired by gift or inheritance), acquired during the marriage by
one partner using only that partner's separate property, or earned after a formalized
agreement. This definition will vary from state to state.
Tax Reform Act of 1984 - ANSWER Tax Reform Act of 1984 (TRA) added Code Sec.
1041, which allows marital property to be transferred back and forth between spouses
without creating any tax on the transfer. The income tax basis of each asset is the basis
,of the asset in the hands of the transferor. TRA simplified the definition of spousal
support, and it prevents property settlements from being disguised as spousal support.
Deferred Division or Future Share Method - ANSWER One of three methods that can be
used to divide pension benefits. No present value is determined. Each spouse is
awarded a share of the benefits if and when they are paid.
Defined Benet Plan - ANSWER Type of employer-sponsored pension plan that
promises to pay the employee a certain amount per month at retirement time. It does not
have a cash value today.
Double-Dipping - ANSWER When one spouse is paid twice from the same asset.
Employee Retirement Income Security Act of 1974 (ERISA) - ANSWER A federal law
that sets minimum standards for pension plans in private industry. ERISA does not
require any employer to establish a pension plan-it only requires that those who
establish plans must meet certain minimum standards. The law generally does not
specify how much money a participant must be paid as a benefit. ERISA requires plans
to provide participants with information about the plan periodically, including
information on plan features and funding; establishes minimum standards for
participation, vesting, benefit accrual, and funding; requires accountability of plan
fiduciaries; and provides participants with the right to sue for benefits and breaches of
fiduciary duty. ERISA also provides for the payment of certain benefits, through the
Pension Benefit Guaranty Corporation, a federally chartered corporation, if a defined
plan is terminated.
General Agreement on Tariffs and Trade (GATT) Rate - ANSWER Interest rate based
on a 30-year Treasury bond interest rate and is used as a benchmark for calculations of
lump-sum distributions from defined benefit plans.
Pension Benefit Guaranty Corporation (PBGC) - ANSWER A federal corporation
created by the government that announces monthly interest rates (for the following
month) that are used to calculate the present value of pension plans. This rate is based
on average annuity rates.
, Qualified Domestic Relations Order (QDRO) - ANSWER A court decision that assigns
part of a person's retirement or pension fund payments to be paid to his/her ex-spouse
as part of a marital assets division. The administrator of the fund pays directly to the
non-employee ex-spouse at the time of divorce or at the time the employee's retirement
payments are to begin.
Reserved Jurisdiction - ANSWER One of three methods which may be used to
apportion pension benefits. In this case, the court maintains authority to grant
disbursements from a pension plan in the future.
Retirement Equity Act of 1984 (REA) - ANSWER This Act amended ERISA to introduce
mandatory spousal rights in pension plans so the choice of the form of the benefit
received from a pension plan was no longer solely the participant's choice.
Section 72 - ANSWER This section of the IRS Code allows the alternate payee to take
money from a qualified plan, pursuant to a QDRO, without having to pay a 10% tax
penalty. The distribution would still be subject to ordinary income tax.
Vesting - ANSWER In a retirement account, "vesting" means ownership. If an employee
is "fully vested," he/she owns 100% of the account balance. When an employee is
"partially vested," he/she is only entitled to a specified percentage of the employer's
contributions. Employee contributions are always 100% vested. Depending on the plan
type, employer contributions have different vesting requirements.
Capital Gain - ANSWER A profit made from the sale of a capital asset property or
investment.
Cost Basis - ANSWER The original value of an asset for tax purposes.
Emancipation - ANSWER The stage of life when a minor child becomes independent.
Most states consider minors to be emancipated at the age of majority, which is 18, 19 or
21 years of age, or when they get married, become employed full-time, graduate from
high school, or enter the armed services. It is the stage at which parents are no longer
legally or financially responsible for support of the child.
