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Life Insurance > 04 Retirement > Flashcards

04 Retirement Flashcards

1
Q

Who qualifies for tax sheltered annuities, 403B plans?

A

Employees of nonprofit organization under section 501(c)(3) and employees of the public school systems.

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2
Q

Who owns a group life insurance contract?

A

The employer (also known as the sponsor of the group).

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3
Q

In what form of payment must the contributions to a traditional IRA be made?

A

In cash (or cash equivalents).

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4
Q

What is the penalty for excessive contributions to a traditional IRA?

A

6%.

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5
Q

When would life insurance policy proceeds be included in the insured’s taxable estate?

A

When there is an incident of ownership at the time of death.

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6
Q

What is the main purpose of the 7 pay test?

A

To determine if life insurance policy is a Modified Endowment Contract.

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7
Q

Why are dividends in life insurance policies not taxable?

A

Dividends are not considered income for tax purposes; they are a return of unused premium.

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8
Q

What qualified plan is suitable for the self employed?

A

HR-10 or Keogh.

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9
Q

Who may contribute to an HR-10 plan?

A

Self employed individual.

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10
Q

What does liquidating mean in life insurance policy?

A

Availability of cash value.

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11
Q

What are some examples of qualified plans?

A

IRA, 401(k), HR-10 (Keogh), SEP, SIMPLE.

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12
Q

What type of policy issues certificates of insurance to the insureds?

A

Group policy.

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13
Q

If the beneficiary of a life insurance policy receives death benefit payments that consist of principal and interest, which portion, if any, will be taxed?

A

Interest only.

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14
Q

Is the death benefit of a life insurance policy taxed to the beneficiary if it’s received a lump sum?

A

No, lump sum benefits are received tax free.

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15
Q

Life insurance maybe used to pay state inheritance taxes and federal estate taxes is eliminating the need to sell assets from the estate. What is this called?

A

Estate conservation.

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16
Q

What are the personal uses of life insurance?

A

Survivor protection, estate creation and conservation, cash accumulation and liquidity.

17
Q

What are the characteristics of the group that underwriters will consider before issuing a group life policy?

A

Group’s purpose, size, financial strength and turnover.

18
Q

What type of policy is typically issued without proof of insurability from the insured?

A

Group policy.

19
Q

If a retirement plan is qualified, what does that mean?

A

The plan has favorable tax treatment.

20
Q

In qualified plans, are employees contributions taxed as income to the employees?

A

No, employer contributions are not taxed as income to the employees.

21
Q

What are the three types of Social Security benefits?

A

Retirement, disability, and survivors.

22
Q

SIMPLE plans are available to groups of how many employees?

A

No more than 100.

23
Q

If an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage?

A

Whole life.

24
Q

What is the general taxation rule for death benefits payable to the beneficiary of a life insurance policy?

A

Death benefits are generally not subject to income taxes.

25
Q

What is the main advantage of converting from group life insurance to individual coverage?

A

Evidence of insurability is not required.

26
Q

For retirement plan to be qualified, it must be designed for whose benefit?

A

Employees.

27
Q

Group life insurance policies are written as what type of insurance?

A

Annually renewable term.

28
Q

What is the primary purpose of 401K plan?

A

Provide retirement income.

29
Q

What is required to qualify for an individual to contribute to a traditional IRA?

A

Earned income.

30
Q

Who would be considered a third-party owner?

A

An individual or an entity who is not insured.

31
Q

Upon surrender of a life insurance policy, what portion of the cash value will be taxed?

A

Only the portion In excess of the premium paid

32
Q

When planning for survivor protection in life insurance, what needs to be considered?

A

The insured’s current assets, liabilities, and survivors needs.

33
Q

According to the taxation rules of life insurance policies, how are cash value increases taxed?

A

Cash value growth is tax deferred.

34
Q

What are the consequences of withdrawing funds from a traditional IRA prior to the age of 59 and half?

A

10% penalty.

35
Q

What is the name of overfunded life insurance policy?

A

A modified endowment contract

MEC

Life Insurance (5 decks)

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