Use Of Life Insurance In Estate Planning - Sample Questions 1 - 4
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.
Financial AdvisorsWealthy clients have an enviable problem — managing, preserving and growing wealth. Properly structured life insurance can help with these goals.
RetirementFind out whether life insurance may be a smart investment after you retire, and why it really depends on what you are trying to accomplish.
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.
Personal FinanceAn Irrevocable Life Insurance Trust helps minimize estate and gift taxes, provides creditor protection and protects government benefits.
RetirementWhether you need life insurance in your retirement depends on your existing insurance and your goals for passing on your wealth.
Wealth ManagementWhat are the pros and cons of owning cash value life insurance in a qualified retirement plan?
What life insurance is: A contract with an insurance company that provides your beneficiaries with a certain amount of money when you die. Pros: Beneficiaries are safeguarded from the financial ...
Financial AdvisorsLife insurance needs will likely change over the client’s lifetime and again financial advisers can provide an objective sounding board.
RetirementThe answer depends on your sources of income, how much debt you carry and whether you have dependents who rely on you financially.
Financial AdvisorsInheritance is a double-edged sword, as leaving money can create estate tax burdens. Opting for a life insurance plan can help mitigate those burdens.
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