[4/6) 12% Taxes, retirement, and other Insurance Concepts

An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer?

10,000 and no tax consequence

What is the number of credits required for fully insured status from social security disability benefits?

40

All of the following would be different between qualified and nonqualified retirement plans EXCEPT a) Taxation of withdrawals b) taxation of contributions c) IRS approval requirements d) Taxation on accumulation

d) taxation on accumulation

What is the name of the insured who enter into a viatical settlement?

viator

A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance know as? a) survivor protection b) life planning c) survivorship insurance d) juvenile protection provision

a) survivor protection

Which of the following is INCORRECT concerning a noncontributory group plan? a) they help to reduce adverse selection against the insurer b) they require 100% employee participation c) the employer pays 100% of the premiums d) the employees receive individual policies

d) the employees receive individual policies

Which of the the following is NOT true of life settlements? a) they could be used for a key person coverage b) they could be sold for an amount greater than the current cash value c) they involve insurance policies with large face amounts d) they seller must be terminally ill

d) the seller must be terminally ill

Which of the following is the best reason to purchase life insurance rather than annuities? a) to liquidate a sum of money over a period of years b) to create regular income payments c) to liquidate a sum of money over a lifetime d) to create an estate

d) to create an estate

All of the following are examples of third party ownership o a life insurance policy EXCEPT?

an insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan

Employer contributions made to a qualified plan? a) are taxed annually as salary b) are subject to vesting requirements c) may discriminate in favor of highly paid employees d) are after-tax contributions

b) are subject to vesting requirements

In which of the following instances would the premium be tax deductible? a) premiums paid by an employer on the life of a key person b) premiums paid by an employer on a $30,000 group term life insurance plan of employees c) premiums paid by an individual on his/her own life insurance d) premiums paid by a mother on her son's policy

b) premiums paid by an employer on a $30,000 group term life insurance plan of employees

If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a? a) rollover b) settlement option c) nontaxable exchanged d) nonforfeiture option

b) settlement option

Which of the following is an example of liquidity in a life insurance contract? a) the money in a savings account b) the cash value available to the policyowner c) the death benefit paid to the beneficiary d) the flexible premium

b) the cash value available to the policyowner

Which of the following is NOT an example of a business use of LIfe Insurance? a) Key person b) workers compensation c) buy-sell funding d) Executive bonuses

b) workers compensation

Who is a third-pary owner? a) an employee in a group policy b) an Irrevocable beneficiary c) a policyowner who is not the insured d) an insurer who issues a policy for two people

c) a policy owner who is not the insured

Who can make a fully deductible contribution to a traditional IRA? a) someone making contributions to an educational IRA b) a person whose contributions are funded by a return on investment c) An individual not covered by an employer-sponsored plan who has earned income d) anybody all IRA contributions are tax deductible

c) an individual not covered by an employer-sponsored plan who has earned income

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement? a) term insurance only b) permanent insurance only c) universal life insurance only d) any form of life insurance

d) any form of life insurance

Which of the following describes the tax advantage of a qualified retirement plan? a) distribution prior to age 59 are tax deductible. b) employer contributions are deductible as business expense when the employee receives benefits. c) employer contributions are not taxed when paid out to the employee d) the earning in the plan accumulate tax deffered

d) the earning in the plan accumulate tax deffered

All of the following are personal uses of life insurance EXCEPT a) cash accumulation b) Buy-sell agreement c) survivor protection d) estate creation

b) buy-sell agreement

Traditional IRA contributions are? a) Never tax deductible b) partially tax deductible depending on the income level c) tax deductible d) deducted based on the income level

c) tax deductible

Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE? a) policy loans are taxable distributions b) accumulation are tax deferred c) withdrawls are not taxable d) distributions before age 59 1/2 incur a 10% penalty on policy gains

c) withdrawls are not taxable

A corporation is the owner and beneficiary of a the key life policy. If the corporation collects the policy benefit, then a) the benefit is received tax free b) the benefit is subject to the exclusionary rule. c) IRS has no jurisdiction d) The benefit is received as taxable income

a) the benefit is received tax free

Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is CORRECT? a) premiums are determined by age, occupation, and individual underwritting b) 100% participation of members is required in noncontributory plans c) each member coved receives a policy d) coverage cannot be converted when an individual leaves the group

b) 100% participation of members is required in noncontributory plans

In a direct rollover, how is the money transferred from one plan to the new one? a) from the original plan to the original custodian b) from trustee to trustee c) from trustee to the participant d) from the participant to the new plan

b) from trustee to trustee

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? a) premiums are taxable to the employee b) premiums are not tax deductible as a business expense c) premiums are tax deductible by the key employee d) premiums are tax deductible as a business expense.

b) premiums are not tax deductible as a business expense

All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT? a) funds accumulate on a tax-deferred basis b) employee and employer contributions are not counted as income to the employee for income tax purposes c) at distribution, all amounts received by the employee are tax-free d) employer contributions are tax-deductible as an ordinary business expense

c) at distribution, all amounts received by the employee are tax-free

Which of the following would describe a legal document which would dictate who can buy a deceased partner's share of a business and for what amount? a) key person agreement b) split dollar agreement c) buy-sell agreement d) profit and loss agreement

c) buy-sell agreement

Which of the following statement concerning buy-sell agreements is true? a) Benefits received are considered income taxable b) buy-sell agreements pay in the event of medical emergency c) buy-sell agreement are normally funded with a life policy d) premiums paid are deductible as a business expense

c) buy-sell agreements are normally funded with life policy

What does "liquidity" refer to in a life insurance policy? a) the policy owner receives dividend checks each year b) the insured receives payments each month in retirement c) Cash value can be borrowed at any time d) the death benefit replaces the assets that would have accumulated if the life insured had not died.

c) cash value can be borrowed at any time