Government assistance whose eligibility depends on the resources the recipient owns or receives. Because assets held outright are counted, a bequest or inheritance can suspend eligibility, so for a beneficiary receiving such support the form of ownership can matter more to the outcome than the investment selection or the after-tax return.
Practice questions using Means-tested Benefits
Original questions written against the published FINRA and NASAA exam content outlines — not actual exam questions. Every choice is explained.
A couple have a child with a permanent disability who receives means-tested government benefits. When they ask their adviser how best to leave assets for that child, the adviser should first recognise that
A.the bequest should be maximised, since larger assets always improve the position of the child.Wrong. Assets counted as resources of the child can withdraw more support than they replace.
B.the child should receive the assets outright so that they are available without delay.Wrong. Outright ownership is exactly what puts the means-tested eligibility at risk.
C.how the assets are held matters more here than which investments are selected for them.Correct. Ownership drives the eligibility question, which dominates any difference in investment return.
D.the question is a legal one and therefore falls outside the client profile altogether.Wrong. Benefit implications belong squarely in the profile even though the drafting belongs to counsel.
Why: Government benefit implications are an express part of a client profile, and for a beneficiary receiving means-tested support the form of ownership can matter more than anything about the investments. Assets left outright are counted as resources of the child and can suspend eligibility, so a bequest intended to help may cost more in withdrawn support than it delivers in value. The planning answer generally lies in how the assets are held rather than in how much is left or how it is invested, and the drafting itself belongs to qualified counsel. Increasing the amount without addressing the structure makes the problem larger rather than smaller.
A client receiving means-tested government assistance is about to receive a modest inheritance outright. Comparing an allocation designed for the highest after-tax return with one designed around how the assets are held, the adviser should recognise that
A.return should govern, because a larger portfolio always leaves the client better off.Wrong. Past the eligibility threshold, assets in the wrong form can cost more in support than they earn.
B.the benefits are a government matter and fall outside the client profile altogether.Wrong. Benefit implications belong expressly in the profile even though the drafting is for counsel.
C.how the assets are held may matter more than what they earn, since ownership affects eligibility.Correct. The eligibility constraint dominates, so the structural question outranks the investment one.
D.the inheritance should be disclaimed, since receiving it can only worsen her overall position.Wrong. Disclaiming forfeits real value in answer to a problem that has a structural solution.
Why: Where a client depends on means-tested support, the eligibility rules operate as a constraint that can dominate every other consideration in the profile. Assets held in the wrong form are counted as resources and can suspend the assistance, and the value of the lost support will often exceed anything a superior allocation could earn on a modest sum. The planning question therefore moves from what the assets should be invested in to how they should be held, with the drafting itself referred to qualified counsel. Disclaiming is not the answer either, since that forfeits real value in response to a problem that has a structural solution.
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