1. All of the following would indicate an incidence of ownership in a life insurance policy EXCEPT:
A) You pay the premiums.
B) You borrow against the policy.
C) You cannot change the beneficiary.
D) You transferred ownership within the last three years.
2. Which of the following is TRUE concerning the income, estate and gift taxation of life insurance proceeds and ownership?
A) Life insurance proceeds are included in the gross estate of the decedent if they owned the policy.
B) Transfer of life insurance ownership with no cash value triggers a gift tax above $13,000.
C) Life insurance proceeds are state income tax-free, but taxed at the federal income tax level.
D) Life insurance transfers within the first two years of the policy can be brought back into the estate of the original owner if they die.
3. Irrevocable life insurance trusts (ILITs) are effective estate planning tools for which of the following reasons:
I. Life insurance ownership is changed to the trust and removed from the grantors estate.
II. Proceeds still remain federal income tax-free for the beneficiary.
III. The trust can be amended over time to reflect life changes.
IV. The trust is creditor protected.
A) I and II only
B) II and III only
C) III and IV only
D) I, II and IV only
E) All of the above
4. All of the following are prudent reasons to include life insurance in an estate plan EXCEPT:
A) Income replacement for a family member.
B) Tax deduction for insurance payments.
C) Help cover the cost of estate taxes for your heirs.
D) Pay off your mortgage at death.
InsuranceDecrease the value of your taxable estate and prevent the tax man from getting you one last time.
Financial AdvisorLife insurance can provide liquidity in personal and business situations when access to capital is essential. Learn how to utilize its unique properties.
Financial AdvisorWealthy clients have an enviable problem — managing, preserving and growing wealth. Properly structured life insurance can help with these goals.
Managing WealthHow to avoid some common mistakes that can cause tax and inheritance problems when you own life insurance.
Financial AdvisorCovering the needs of the ones you would leave behind is not easy. But efforts to secure a life insurance policy outside of work should pay off.
InsuranceWe look at four common reasons people give for not applying for life insurance, and see if they're legitimate.
InsuranceFind out the reasons why term life insurance may not be for everybody, and why you may want to avoid it in favor of a permanent life insurance policy.
RetirementAn Irrevocable Life Insurance Trust helps minimize estate and gift taxes, provides creditor protection and protects government benefits.