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. Insurance

    How To Avoid Taxation On Life Insurance Proceeds

    Decrease the value of your taxable estate and prevent the tax man from getting you one last time.
  2. Financial Advisor

    How Life Insurance Can Help With Liquidity

    Life insurance can provide liquidity in personal and business situations when access to capital is essential. Learn how to utilize its unique properties.
  3. 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.
  4. Managing Wealth

    Mistakes to Avoid When You Own Life Insurance

    How to avoid some common mistakes that can cause tax and inheritance problems when you own life insurance.
  5. 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.
  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. Insurance

    3 Reasons to Avoid Term Insurance

    Find 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.
  8. 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.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center