Insurance

Question 1

Straight Whole life

Answer 1

Lifetime payments
Inflexible
Exam likes whole
Dividend options
Low risk
Insurer controls return
Assets part of general act
Whole life is savings vehicle

Question 2

Limited pay whole life

Answer 2

Low risk
Insurer controls return
General acct
Inflexible
Dividend options
Payments for a specified # of years

Question 3

Universal life

Answer 3

Premiums are level
Stated interest rate=cv
Flexible protection
Can unbundle cash value

Question 4

Variable life

Answer 4

Premium is fixed
High risk
Client controls investment return
Separate acct

Question 5

Variable universal life

Answer 5

High risk
Client controls return
Separate acct
Premiums & level of protection can be adjusted

Question 6

Single life

Answer 6

Death of primary income provider
Need to pay off debt/expenses

Question 7

Survivor ship
Second to die

Answer 7

Estate liquidity
Lower cost

Question 8

Universal a

Answer 8

Death benefit only

Question 9

Universal b

Answer 9

Death benefit + cash value

Question 10

Are term policies convertablev

Answer 10

Yes

Question 11

Can 1035 be done if insured changed?

Answer 11

No

Question 12

Are s corp taxed on disbaility benefits?

Answer 12

No, assume s corp pd taxes with flow through $

Question 13

Endowment

Answer 13

Wrong

Question 14

Nonforfeiture options
(Can’t even pay)

Answer 14

Cash
Pd up reduced-yours forever, smaller DB
Extended term/pd term-same db, shorter term

Question 15

Dividend options
(Crapo)

Answer 15

Cash(tax free return of basis)?
Reduce premium
Accumulate w/ interest
Pd up additions (mini policies forever)
One year term-large, use if loan

Question 16

Settlement options
Ded

Answer 16

Cash
Pure life/single life
Refund
Period certain and life specified period/income interest only

Question 17

Viatical tax if insured dies

Answer 17

Pays ordinary income above basis bc transfer for value

Question 18

Life settlement

Answer 18

Not terminally ill, over age 65
LTCG
CV-basis
Dividends reduce basis

Question 19

Modified endowment contract

Answer 19

MEC
once a meC always a meC
Everything taxed
7 pay rule
After 1988
Distributions taxes as interest first (lifo)
Under 59.5 still pays 10% penalty
Dividends taxed as income if
Cash or reduced premiums
Retained by insurer in repayment of loan

Question 20

How to find number of cross purchase policies

Answer 20

N(n-1)

Question 21

Cross purchase

Answer 21

A&b inc
B owns a policy on a, b is beneficiary

Question 22

Buy sell on death vs disability

Answer 22

At death family gets DB tax free, at disability CG on everything-basis

Question 23

Qualified longevity annuity contract
Qlac

Answer 23

Can defer 200k of RMD

Question 24

Annuity taxation

Answer 24

LIFO
Before 59.5, OI tax + 10% penalty
Contributions before 1982 remain in lifo

Question 25

Exclusion ratio

Answer 25

Used for annuity taxation Basis/expected Expected= If 1000 per month for 20 years then 1kx 12x20 % found will be the % NOT included After the 20 years, the whole thing will be taxable bc whole basis is returned

Question 26

Annuity held by non natural person

Answer 26

Income must be treated as Oi received or accrued by the holder that year So 16k gain, would add 16k to basis 16k loss would deduct from basis

Question 27

Taxation on group life to employee

Answer 27

Employee not taxed on premiums if coverage doesn’t exceed $50k IF NON Discriminatory

Question 28

Tax implications Punitive damages

Answer 28

Taxable

Question 29

Tax implications Punitive damages

Answer 29

Taxable

Question 30

VEBA

Answer 30

501(c)(9) Used to find certain benefits for its memebers Death, med, child care, severance, edu, disability, legal, unemployment Deductible for employer EXCEPT deferred compensation