CFP EXAM |ACTUAL QUESTIONS AND VERIFIED
ANSWERS|BRAND NEW 2026-2027
UPDATE|GRADED A+
Question 1
A client who was severely injured in an accident says that the insurance company involved
with the claim has offered a monthly structured settlement. The payments will
compensate for the loss of income because the person was paralyzed. If accepted, which
of the following is an advantage of this strategy?
A
Any remainder of interest or term certain passes estate and income tax-free to the heirs.
B
The monthly income would not be subject to creditors of the client.
C
The payments may be structured by the client in a way that allows a lump sum at a date in
the future.
D
All ongoing life payments would be income tax-free.
CORRECT ANSWER
A. Incorrect. Any remainder of interest in an award of damages is included in gross
estate.
B. Incorrect. The law allows creditors to attach the monthly income from a structured
settlement as the recipient has unfettered access and the funds.
C. Incorrect. The periodic payment schedule cannot be changed.
D. Correct. Amounts received as damages on account of personal physical
injuries or physical sickness are excludable from income (Code Sec 104(a)(21))
1
,Question 2
A client couple would like to maintain their current lifestyle but also want to do the
following: retire in 10 years, purchase a new vacation home, and fund their children's
education. After assessing the couple's risk tolerance, a CFP® professional has determined
that they could be more aggressive with their investments to increase the likelihood of
meeting all of their goals. Which of the following is the BEST way to discuss these findings
with the couple?
A
Present alternative goals that may be easier to attain
B
Discuss potential inflation scenarios and their impact on asset values
C
Ask the clients how they could reduce their current lifestyle expenses
D
Present scenarios for the likelihood of meeting goals based on different asset allocations
CORRECT ANSWER
A. Incorrect. While the clients' goals may eventually change based on the information
presented, it is not helpful to begin the discussion by asking clients to alter goals before
having reviewed alternatives.
B. Incorrect. While the clients' goals may eventually change based on the information
presented, it is not helpful to begin the discussion by discussing potential inflation
scenarios and their impact on asset values.
C. Incorrect. While the clients' goals may eventually change based on the information
presented, it is not helpful to begin the discussion by asking clients to alter goals before
having reviewed alternatives.
D. Correct. The best course of action is to present several scenarios, including
the clients' original wishes, and educate the client on the likelihood of attaining
those goals.
2
,Question 3
An executive in Sox Co. is negotiating a non-qualified retirement arrangement and wants
the benefits to be protected in the event that Sox Co. changes ownership. Which of the
following plan provisions will promote this objective?
A
Informal funding through a rabbi trust that becomes irrevocable if Sox Co. changes
ownership
B
Placement of assets to fund the plan in an irrevocable trust for the benefit of the executive's
spouse
C
Indemnifying the executive for any benefit losses through a surety bond purchased by Sox
Co.
D
A plan provision that allows the executive to make withdrawals from the plan at the
executive's discretion
CORRECT ANSWER
A. Correct. This protective provision is approved by IRS rulings.
B. Incorrect. The value of the assets will be currently taxable under the economic
benefit doctrine.
C. Incorrect. An indemnity bond provided by the company causes current taxation.
D. Incorrect. A withdrawal provision results in constructive receipt of all benefits subject
to withdrawal
Question 4
Antonio and Maria, residents in a common-law state, have the following assets:
• Joint checking account: $10,000
3
, • Principal residence (held as tenants by the entirety): $200,000
• Antonio's brokerage account: $84,000
• Life insurance on Antonio's life, owned by him, payable to Maria: $300,000
• Life insurance on Maria's life, owned by her, payable to Antonio: $100,000
Assuming Antonio dies first, which of the following is the correct combination of assets
included in the following respective categories?
ProbateEstate
GrossEstate
$0 $294,000 $42,000 $405,000 $84,000 $105,000 $84,000 $489,000
CORRECT ANSWER
A. Incorrect. Antonio's brokerage account in his sole name is 100% includable in his
probate estate.
B. Incorrect. Antonio's brokerage account in his sole name is 100% includable in his
probate estate.
C. Incorrect. Antonio's brokerage account in his sole name is 100% includable in his
gross estate. Antonio's life insurance, owned by him, is 100% includable in his gross
estate.
D. Correct. Probate: $84,000
Gross:(½ x $10,000) + (½ x $200,000) + 84,000 + 300,000 = $489,000
Question 5
Which of the following BEST describes a CFP® professional's obligations when identifying
and selecting goals for a financial planning client?
A
A CFP® professional must identify potential goals and then select the goals for the client.
4
ANSWERS|BRAND NEW 2026-2027
UPDATE|GRADED A+
Question 1
A client who was severely injured in an accident says that the insurance company involved
with the claim has offered a monthly structured settlement. The payments will
compensate for the loss of income because the person was paralyzed. If accepted, which
of the following is an advantage of this strategy?
A
Any remainder of interest or term certain passes estate and income tax-free to the heirs.
B
The monthly income would not be subject to creditors of the client.
C
The payments may be structured by the client in a way that allows a lump sum at a date in
the future.
D
All ongoing life payments would be income tax-free.
CORRECT ANSWER
A. Incorrect. Any remainder of interest in an award of damages is included in gross
estate.
B. Incorrect. The law allows creditors to attach the monthly income from a structured
settlement as the recipient has unfettered access and the funds.
C. Incorrect. The periodic payment schedule cannot be changed.
D. Correct. Amounts received as damages on account of personal physical
injuries or physical sickness are excludable from income (Code Sec 104(a)(21))
1
,Question 2
A client couple would like to maintain their current lifestyle but also want to do the
following: retire in 10 years, purchase a new vacation home, and fund their children's
education. After assessing the couple's risk tolerance, a CFP® professional has determined
that they could be more aggressive with their investments to increase the likelihood of
meeting all of their goals. Which of the following is the BEST way to discuss these findings
with the couple?
A
Present alternative goals that may be easier to attain
B
Discuss potential inflation scenarios and their impact on asset values
C
Ask the clients how they could reduce their current lifestyle expenses
D
Present scenarios for the likelihood of meeting goals based on different asset allocations
CORRECT ANSWER
A. Incorrect. While the clients' goals may eventually change based on the information
presented, it is not helpful to begin the discussion by asking clients to alter goals before
having reviewed alternatives.
B. Incorrect. While the clients' goals may eventually change based on the information
presented, it is not helpful to begin the discussion by discussing potential inflation
scenarios and their impact on asset values.
C. Incorrect. While the clients' goals may eventually change based on the information
presented, it is not helpful to begin the discussion by asking clients to alter goals before
having reviewed alternatives.
D. Correct. The best course of action is to present several scenarios, including
the clients' original wishes, and educate the client on the likelihood of attaining
those goals.
2
,Question 3
An executive in Sox Co. is negotiating a non-qualified retirement arrangement and wants
the benefits to be protected in the event that Sox Co. changes ownership. Which of the
following plan provisions will promote this objective?
A
Informal funding through a rabbi trust that becomes irrevocable if Sox Co. changes
ownership
B
Placement of assets to fund the plan in an irrevocable trust for the benefit of the executive's
spouse
C
Indemnifying the executive for any benefit losses through a surety bond purchased by Sox
Co.
D
A plan provision that allows the executive to make withdrawals from the plan at the
executive's discretion
CORRECT ANSWER
A. Correct. This protective provision is approved by IRS rulings.
B. Incorrect. The value of the assets will be currently taxable under the economic
benefit doctrine.
C. Incorrect. An indemnity bond provided by the company causes current taxation.
D. Incorrect. A withdrawal provision results in constructive receipt of all benefits subject
to withdrawal
Question 4
Antonio and Maria, residents in a common-law state, have the following assets:
• Joint checking account: $10,000
3
, • Principal residence (held as tenants by the entirety): $200,000
• Antonio's brokerage account: $84,000
• Life insurance on Antonio's life, owned by him, payable to Maria: $300,000
• Life insurance on Maria's life, owned by her, payable to Antonio: $100,000
Assuming Antonio dies first, which of the following is the correct combination of assets
included in the following respective categories?
ProbateEstate
GrossEstate
$0 $294,000 $42,000 $405,000 $84,000 $105,000 $84,000 $489,000
CORRECT ANSWER
A. Incorrect. Antonio's brokerage account in his sole name is 100% includable in his
probate estate.
B. Incorrect. Antonio's brokerage account in his sole name is 100% includable in his
probate estate.
C. Incorrect. Antonio's brokerage account in his sole name is 100% includable in his
gross estate. Antonio's life insurance, owned by him, is 100% includable in his gross
estate.
D. Correct. Probate: $84,000
Gross:(½ x $10,000) + (½ x $200,000) + 84,000 + 300,000 = $489,000
Question 5
Which of the following BEST describes a CFP® professional's obligations when identifying
and selecting goals for a financial planning client?
A
A CFP® professional must identify potential goals and then select the goals for the client.
4
