ChFC cheat sheet

Seven-step process: establish engagement, gather client data, analyze data, develop recommendations, present recommendations, implement, monitor.

Net worth = total assets − total liabilities; cash flow surplus = income − expenses − debt service.

FV = PV(1 + r)^n; PV = FV ÷ (1 + r)^n; annuity FV = PMT × [((1 + r)^n − 1) ÷ r].

Real return = (1 + nominal) ÷ (1 + inflation) − 1; approximation is nominal minus inflation.

Rule of 72: doubling years ≈ 72 ÷ annual rate; at 6% money doubles in roughly 12 years.

Liquidity guideline: 3–6 months of fixed expenses; longer for variable income or single earners.

Ratios: current ratio = liquid assets ÷ current liabilities; savings rate = savings ÷ gross income.

Fiduciary duty requires loyalty and care; the suitability standard is less demanding than a fiduciary standard.

Indemnity principle: insurance restores the insured to the pre-loss financial position, never better.

Property coinsurance payment = (insurance carried ÷ insurance required) × loss, capped at the policy limit.

Life insurance need measured two ways: human life value (PV of future earnings) or capital needs (expenses less resources).

Own-occupation disability definition is broader and more favorable to the insured than any-occupation.

Elimination period and benefit period move inversely with premium: longer waits and shorter benefit periods cost less.

Homeowners forms: HO-3 (special/open perils on dwelling) is most common; HO-5 is comprehensive; HO-8 covers older homes.

Personal umbrella liability sits above auto and homeowners limits and usually requires specified underlying limits.

IRC §1035 permits tax-free exchange of life insurance or annuity contracts; basis carries over to the new contract.

AD&D pays only for accidental death or dismemberment and is not a substitute for life insurance.

Taxable income = gross income − above-the-line deductions − (standard or itemized deduction).

Long-term capital gains (holding period > 1 year) are taxed at 0%, 15%, or 20%; short-term gains at ordinary rates.

Net investment income tax: 3.8% surtax above MAGI of $200,000 single / $250,000 married filing jointly.

Basis of inherited property equals fair market value at date of death (IRC §1014), erasing pre-death gain.

Marginal rate applies to the next dollar of income; average rate = total tax ÷ taxable income.

State and local tax deduction is capped at $10,000 ($5,000 married filing separately).

Estimated tax safe harbor: pay 90% of current-year or 100% of prior-year tax (110% if prior AGI exceeds $150,000).

Kiddie tax taxes a child's unearned income above the threshold at the parents' marginal rate.

Above-the-line deductions include HSA contributions, deductible traditional IRA, student loan interest, and self-employed health insurance.

Full retirement age is 67 for those born 1960 or later; claiming at 62 permanently reduces the benefit.

Early claiming reduction: 5/9 of 1% per month for the first 36 months and 5/12 of 1% for each additional month.

Delayed retirement credits add 8% per year for claims filed after FRA, up to age 70.

RMD age is 73 for those born 1951–1959 and 75 for those born 1960 or later under SECURE 2.0.

Roth IRA contributions are withdrawable anytime tax- and penalty-free; earnings need a 5-year holding period and age 59½.

10% early distribution penalty exceptions include disability, substantially equal periodic payments, and separation from service at age 55 or later.

The 4% rule sets the first-year withdrawal at 4% of the portfolio, inflation-adjusted thereafter, for a 30-year horizon.

Defined benefit plans promise a stated benefit; defined contribution plans promise only the contributions and their earnings.

Replacement ratio target is typically 70%–80% of pre-retirement gross income.

CAPM: E(R) = Rf + β × (Rm − Rf); beta measures only systematic (nondiversifiable) risk.

Sharpe ratio = (Rp − Rf) ÷ σp; Treynor ratio = (Rp − Rf) ÷ β.

Bond prices move inversely to yields; approximate percentage price change ≈ −duration × change in yield.

Correlation below +1 creates diversification benefit; unsystematic risk can be eliminated, systematic risk cannot.

Time-weighted return measures manager performance; dollar-weighted return reflects the investor's own cash flow timing.

Geometric mean is less than or equal to the arithmetic mean; the gap widens as volatility rises.

Real return = (1 + nominal) ÷ (1 + inflation) − 1.

Efficient market hypothesis forms: weak (past prices), semi-strong (public information), strong (all information).

Alpha = actual return − CAPM expected return; positive alpha indicates outperformance after adjusting for beta.

Gross estate includes all property owned at death plus certain lifetime transfers under IRC §§2033–2046.

Unlimited marital deduction applies to property passing to a surviving spouse who is a U.S. citizen.

Annual gift tax exclusion applies per donee per year; excess gifts use lifetime exclusion and require Form 709.

Portability: a timely estate tax return election transfers the deceased spouse's unused exclusion (DSUE) to the survivor.

Inherited assets receive a stepped-up basis to date-of-death fair market value.

Probate assets pass under the will; nonprobate assets pass by beneficiary designation, joint tenancy, or trust.

Crummey withdrawal rights convert a future interest into a present interest so annual exclusion gifts qualify.

Intestacy distributes under state statute; per stirpes splits by branch, per capita splits equally by head.

Generation-skipping transfer tax applies to transfers two or more generations below the transferor, on top of gift and estate tax.

Case sequence: gather qualitative and quantitative data, identify issues, analyze, recommend, implement, monitor.

Lender guidelines: housing expense ratio 28% of gross monthly income; total debt ratio 36%.

Goal funding: discount the goal to a present value at the assumed return, then solve PMT = PV × r ÷ [1 − (1 + r)^−n].

529 plan assets grow tax-deferred and qualified withdrawals are tax-free; some states allow a deduction for contributions.

Retirement gap = present value of projected retirement needs − present value of projected retirement resources.

Insurance review order: quantify the need (life, disability, long-term care, liability) before selecting products.

Tax planning in a case prioritizes capturing deductions and managing bracket thresholds across multiple years.

Recommendations must be prioritized by urgency and impact, with assumptions and conflicts of interest documented.

Behavioral biases affecting client decisions include loss aversion, anchoring, mental accounting, overconfidence, and recency.

SECURE 2.0 changes: RMD ages of 73/75, Roth employer matching contributions, and enhanced catch-up for ages 60–63.

TCJA individual income tax provisions are scheduled to sunset after 2025 absent legislation, reverting to prior brackets.

HSA triple advantage: deductible contributions, tax-deferred growth, and tax-free withdrawals for qualified medical expenses.

Qualified longevity annuity contracts let up to $200,000 of IRA or plan assets be excluded from RMDs, with income starting no later than age 85.

Backdoor Roth strategy: nondeductible traditional IRA contribution then conversion; the pro-rata rule aggregates all IRA balances.

Robo-advisors use algorithms and low-cost exchange-traded funds, typically with lower minimums and fees than traditional advisors.

Fiduciary standard demands loyalty and care; Regulation Best Interest requires broker-dealers to act in retail customers' best interest when recommending.

ESG strategies weight environmental, social, and governance factors, which can cause performance to diverge from broad benchmarks.