CFP CERTIFICATION EXAM PRACTICE QUESTIONS AND CORRECT ANSWERS (VERIFIED ANSWERS) PLUS RATIONALES 2026 Q&A |
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Core Domains
Professional Conduct and Regulation
General Financial Planning Principles
Risk Management and Insurance Planning
Investment Planning
Tax Planning
Retirement Savings and Income Planning
Estate Planning
Psychology of Financial Planning
Introduction
This assessment is designed to prepare candidates for the Certified Financial Planner (CFP) Certification Examination. It measures the
ability to apply integrated financial planning knowledge, analyze complex client situations, and recommend appropriate strategies
consistent with the CFP Board’s Code of Ethics and Standards of Conduct. Questions include foundational theory, regulatory compliance,
ethical decision-making, and real-world client scenarios. Each item emphasizes professional judgment, critical thinking, and practical
application across all major domains. The format mirrors the actual exam through multiple-choice questions and scenario-based
problems. Correct answers are verified with concise rationales to reinforce learning objectives.
SECTION ONE: QUESTIONS 1 – 100
Question 1
A CFP® professional discovers that a client unintentionally provided inaccurate information about their investment time horizon. What
is the professional’s FIRST duty under the CFP Board’s Code of Ethics?
,A. Notify the client’s family of the error
B. Correct the client’s misunderstanding and update the financial plan
C. Report the error to the CFP Board
D. Continue using the original information to avoid client embarrassment
🟢B
🔴 RATIONALE: A CFP® professional has a duty of competence and to act in the client’s best interest. Correcting inaccurate
information is the first step to ensure the plan remains suitable.
Question 2
Which risk management technique is being used when a homeowner installs a security system to reduce the likelihood of burglary?
A. Risk avoidance
B. Risk reduction
C. Risk transfer
D. Risk retention
🟢B
🔴 RATIONALE: Risk reduction involves actions taken to decrease the probability or severity of a loss, such as installing a security
system.
Question 3
Under the alternative minimum tax (AMT) system, which of the following is generally an add-back adjustment to regular taxable
income?
A. Qualified residence interest
B. State income tax refunds
C. Incentive stock option exercise (if not sold in same year)
D. Municipal bond interest from a 2019 issue for a public purpose
🟢C
,🔴 RATIONALE: The bargain element on incentive stock options (ISOs) when exercised but not sold in the same year is a preference
item for AMT purposes.
Question 4
A client age 62 begins receiving Social Security retirement benefits. Later, at full retirement age (FRA), they suspend benefits to earn
delayed retirement credits. Which statement is TRUE?
A. Suspension stops all future benefits permanently
B. The client cannot restart benefits after suspension
C. Suspension allows delayed retirement credits to accrue until age 70
D. Medicare Part B enrollment becomes invalid upon suspension
🟢C
🔴 RATIONALE: Voluntary suspension at FRA allows delayed retirement credits to accrue up to age 70, increasing the eventual benefit.
Question 5
Under the CFP Board’s fiduciary duty, when may a CFP® professional receive a referral fee from a third party without violating the
duty?
A. Never, any referral fee is prohibited
B. Only if the client provides oral consent
C. Only if the fee is fully disclosed and the client provides informed written consent
D. Only if the fee is less than $100
🟢C
🔴 RATIONALE: Disclosure of material conflicts, including referral fees, and obtaining informed written consent is required to uphold
the fiduciary duty.
Question 6
Which of the following assets typically receives a step-up in adjusted basis to fair market value at the owner’s death under current
federal law?
, A. IRA owned by the decedent
B. Joint tenancy with right of survivorship (spouse not surviving)
C. Qualified annuity contract
D. Stock held in a revocable living trust
🟢D
🔴 RATIONALE: Assets included in the decedent’s gross estate, including those in a revocable trust, receive a step-up in basis to date-
of-death fair market value.
Question 7
A married couple has two children ages 8 and 10. They want to save for college using a 529 plan. Which statement is correct regarding
529 plans?
A. Contributions are federally tax-deductible
B. Earnings grow tax-free if used for qualified education expenses
C. Funds can only be used at public universities
D. The account owner must be the beneficiary’s parent
🟢B
🔴 RATIONALE: 529 plans offer tax-deferred growth and tax-free withdrawals for qualified higher education expenses.
Question 8
A client has a $500,000 term life insurance policy with an accidental death benefit rider. The client dies from a heart attack while
driving. How much is payable?
A. 0B.500,000
C. 500, 000plusreturnof premiumsD.1,000,000
🟢B
INSTANT DOWNLOAD PDF
Core Domains
Professional Conduct and Regulation
General Financial Planning Principles
Risk Management and Insurance Planning
Investment Planning
Tax Planning
Retirement Savings and Income Planning
Estate Planning
Psychology of Financial Planning
Introduction
This assessment is designed to prepare candidates for the Certified Financial Planner (CFP) Certification Examination. It measures the
ability to apply integrated financial planning knowledge, analyze complex client situations, and recommend appropriate strategies
consistent with the CFP Board’s Code of Ethics and Standards of Conduct. Questions include foundational theory, regulatory compliance,
ethical decision-making, and real-world client scenarios. Each item emphasizes professional judgment, critical thinking, and practical
application across all major domains. The format mirrors the actual exam through multiple-choice questions and scenario-based
problems. Correct answers are verified with concise rationales to reinforce learning objectives.
SECTION ONE: QUESTIONS 1 – 100
Question 1
A CFP® professional discovers that a client unintentionally provided inaccurate information about their investment time horizon. What
is the professional’s FIRST duty under the CFP Board’s Code of Ethics?
,A. Notify the client’s family of the error
B. Correct the client’s misunderstanding and update the financial plan
C. Report the error to the CFP Board
D. Continue using the original information to avoid client embarrassment
🟢B
🔴 RATIONALE: A CFP® professional has a duty of competence and to act in the client’s best interest. Correcting inaccurate
information is the first step to ensure the plan remains suitable.
Question 2
Which risk management technique is being used when a homeowner installs a security system to reduce the likelihood of burglary?
A. Risk avoidance
B. Risk reduction
C. Risk transfer
D. Risk retention
🟢B
🔴 RATIONALE: Risk reduction involves actions taken to decrease the probability or severity of a loss, such as installing a security
system.
Question 3
Under the alternative minimum tax (AMT) system, which of the following is generally an add-back adjustment to regular taxable
income?
A. Qualified residence interest
B. State income tax refunds
C. Incentive stock option exercise (if not sold in same year)
D. Municipal bond interest from a 2019 issue for a public purpose
🟢C
,🔴 RATIONALE: The bargain element on incentive stock options (ISOs) when exercised but not sold in the same year is a preference
item for AMT purposes.
Question 4
A client age 62 begins receiving Social Security retirement benefits. Later, at full retirement age (FRA), they suspend benefits to earn
delayed retirement credits. Which statement is TRUE?
A. Suspension stops all future benefits permanently
B. The client cannot restart benefits after suspension
C. Suspension allows delayed retirement credits to accrue until age 70
D. Medicare Part B enrollment becomes invalid upon suspension
🟢C
🔴 RATIONALE: Voluntary suspension at FRA allows delayed retirement credits to accrue up to age 70, increasing the eventual benefit.
Question 5
Under the CFP Board’s fiduciary duty, when may a CFP® professional receive a referral fee from a third party without violating the
duty?
A. Never, any referral fee is prohibited
B. Only if the client provides oral consent
C. Only if the fee is fully disclosed and the client provides informed written consent
D. Only if the fee is less than $100
🟢C
🔴 RATIONALE: Disclosure of material conflicts, including referral fees, and obtaining informed written consent is required to uphold
the fiduciary duty.
Question 6
Which of the following assets typically receives a step-up in adjusted basis to fair market value at the owner’s death under current
federal law?
, A. IRA owned by the decedent
B. Joint tenancy with right of survivorship (spouse not surviving)
C. Qualified annuity contract
D. Stock held in a revocable living trust
🟢D
🔴 RATIONALE: Assets included in the decedent’s gross estate, including those in a revocable trust, receive a step-up in basis to date-
of-death fair market value.
Question 7
A married couple has two children ages 8 and 10. They want to save for college using a 529 plan. Which statement is correct regarding
529 plans?
A. Contributions are federally tax-deductible
B. Earnings grow tax-free if used for qualified education expenses
C. Funds can only be used at public universities
D. The account owner must be the beneficiary’s parent
🟢B
🔴 RATIONALE: 529 plans offer tax-deferred growth and tax-free withdrawals for qualified higher education expenses.
Question 8
A client has a $500,000 term life insurance policy with an accidental death benefit rider. The client dies from a heart attack while
driving. How much is payable?
A. 0B.500,000
C. 500, 000plusreturnof premiumsD.1,000,000
🟢B
