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.
 



Answer Key

Related Articles
  1. Financial Advisor

    Why the Wealthy Should Buy Lots of Life Insurance

    Wealthy clients have an enviable problem — managing, preserving and growing wealth. Properly structured life insurance can help with these goals.
  2. Financial Advisor

    Is Life Insurance From Your Employer Enough?

    Covering 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.
  3. Retirement

    Balance and Protect Your Estate With Life Insurance

    Three tips for using life insurance to preserve your estate and equalize estate distributions.
  4. Retirement

    3 Methods to use Life Insurance as an Investment During Retirement

    Find out whether life insurance may be a smart investment after you retire, and why it really depends on what you are trying to accomplish.
  5. Retirement

    Why Own Life Insurance in a Qualified Retirement Plan?

    What are the pros and cons of owning cash value life insurance in a qualified retirement plan?
  6. Insurance

    4 Things That Keep You From Getting Life Insurance

    We look at four common reasons people give for not applying for life insurance, and see if they're legitimate.
  7. Retirement

    7 Reasons To Own Life Insurance in an Irrevocable Trust

    An Irrevocable Life Insurance Trust helps minimize estate and gift taxes, provides creditor protection and protects government benefits.
  8. Retirement

    Does Life Insurance Make Sense When You Retire?

    Whether you need life insurance in your retirement depends on your existing insurance and your goals for passing on your wealth.
Frequently Asked Questions
  1. How do you calculate r-squared in Excel?

    Calculate R-squared in Microsoft Excel by creating two data ranges to correlate. Use the Correlation formula to correlate ...
  2. What is the Difference Between International Monetary Fund and the World Bank?

    Learn about the International Monetary Fund and the World Bank and how they are differentiated by their respective functions ...
  3. Where Did the Bull and Bear Market Get Their Names?

    The terms bull and bear are used to describe general actions and attitudes, or sentiment, either of an individual (bear and ...
  4. What's the difference between Google's GOOG and GOOGL stock tickers?

    Learn the difference between Google's GOOG and GOOGL ticker symbols. Splitting shares into classes prevents management from ...
Trading Center