Qualified Plans and Federal Tax Considerations for Life Insurance and Annuities

For personal life insurance, the lump-sum death benefit is received

tax free

The policyowner cashes in his policy to which he has paid $6,000 in premium, and receives $7,200 in cash surrender. How much is taxable?

$1,200

If $100,000 of life insurance proceeds were used in a settlement option which paid $13,000 per year for 10 years, which of the following amounts would be taxable annually?

$3,000

A policyowner cancels his life policy but instructs the insurance company to transfer the cash value of the policy to an annuity. This nontaxable transaction is called a `

1035 exchange

In a traditional IRA plan, at what age may the plan owner begin withdrawing funds?

59.5

Excess contributions to a Roth IRA are subject to what tax penalty?

6%

The 10% early withdrawal penalty from an IRA can be waived for

catastrophic medical expenses

What qualifies an individual to contribute to an IRA?

earned income

Which of the following terms is used to name the nontaxable, return of unused premiums?

dividend

For a retirement plan to be qualified, it must be designed for a benefit of the

employees

When a beneficiary in a life insurance policy receives payments consisting of both principal and interest portions, what will be taxed as income?

interest only

Avoiding tax consequences when transferring assets from one IRA to another can be accomplished by which of the following?

direct rollover from one plan to the other

Which of the following is NOT true regarding policy loans?

money borrowed from the cash value is taxable

Generally, the premium paid for personal life insurance is

not tax deductible

In life insurance policies, cash value increases are

tax deferred