CHAPTER 2 QUIZ Flashcards
A financial adviser has suggested that Kevin and Paula Jones take out a whole of life policy on a last survivor basis, in order to meet a potential inheritance tax [IHT] liability. He has also said that the policy should be written in trust for their beneficiaries because:
this will take the policy proceeds outside the survivor’s estate for IHT purposes.
Barbara is 68 and she has recently suffered a stroke which has left her mentally incapacitated. As a result, which State benefit is she most likely to be eligible for?
Attendance allowance.
Marcus and Phillipa have a joint life assurance policy which expires in 14 years when their youngest child is 21. The policy provides £200,000 life cover which, in the event of a claim, would be paid to the surviving spouse in instalments for the remainder of the policy term. The type of policy they have is a:
family income benefit.
Peggy is looking for long-term capital growth. What asset class is likely to be most appropriate for her?
Shares.
Daniel is looking to invest his capital over the next four years, and has decided to place at least 95% in a range of equities. His attitude to risk can best be described as:
high.
Mario, a basic-rate taxpayer, has just retired and has bought a purchased life annuity [PLA] using the proceeds of a maturing investment. How would you explain to him the tax treatment of the income it produces?
Part of every PLA income payment is treated as capital and is tax free; the interest element is taxed at 20%.
How does a sale and rent back agreement differ from a home reversion scheme?
Home reversion schemes are for people to release equity from their property.
Norman is a widower who is leaving his £600,000 estate to his daughter. His main asset is the family home, and he does not want his daughter to have to sell the house in order to meet an inheritance tax [IHT] liability. Assuming Norman did not inherit any nil-rate band or residence nil-rate band from his deceased wife, what would be the most suitable life policy to meet the potential IHT liability on his estate?
£40,000 own-life whole of life policy with increasing cover, written in trust.
Cecil has a defined contribution pension scheme. The amount of pension he will ultimately receive is primarily based on:
investment performance.
Michaela has seen a financial adviser about arranging life assurance. What is the LEAST important fact for the adviser to establish during their meeting?
Employment history.
Where a member of a defined contribution occupational pension scheme can, at any time, have their share of the overall fund identified, this is known as what type of money purchase scheme?
Earmarked.
John has collected details of numerous debts held by his client, William. Which of William’s debts would be considered a ‘priority debt’, in the context of his expenditure?
His £145,000 mortgage.
Helen is an employee but is sick and has been off work for 14 weeks. Her employer pays limited salary whilst she is sick and she is expected to be off work for a further six months. What State benefit[s] would she potentially receive?
Employment and support allowance only.
How does a sale and rent back agreement differ from a home reversion scheme?
Home reversion schemes are for people to release equity from their property.
Helen is an employee but is sick and has been off work for 14 weeks. Her employer pays limited salary whilst she is sick and she is expected to be off work for a further six months. What State benefit[s] would she potentially receive?
Statutory sick pay and employment and support allowance.
