chapter 4

Social Security was created to provide all of the following benefits EXCEPT

unemployment income

What percentage of a company's employees must take part in a noncontributory group life plan?

100%

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?

10000k no tax consequence

To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters?

6 credits

SIMPLE Plans require all of the following EXCEPT

At least 1,000 employees.

What is the purpose of key person insurance?

To lessen the risk of financial loss because of the death of a key employee

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

Viator

Who can make a fully deductible contribution to a traditional IRA?

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

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

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

All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT

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

A life insurance policy used to fund an agreement that contractually establishes the intent of someone to purchase a business upon the insured business owner's death is a

buy-sell agreement

All of the following are personal uses of life insurance EXCEPT

buy-sell agreement

A key person insurance policy can pay for which of the following?

cost of training a replacement

A partnership buy-sell agreement in which each partner purchases insurance on the life of each of the other partners is called a

cross purchase plan

In the Executive Bonus plan, who is the owner of the policy, and who pays the premium?

executive is the owner and pays the premium

Traditional IRA contributions are tax deductible based on which of the following?

owners income

An insured under a life insurance policy has been diagnosed with a terminal illness and has 6 months to live. The insured knows that his financial state will worsen even more with the upcoming medical expenses. What option could the insured utilize?

vatical settlement

Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?

withdrawals are not taxable

In a life settlement contract, whom does the life settlement broker represent?

the owner

All of the following benefits are available under Social Security EXCEPT

welfare benefits

All of the following are characteristics of group life insurance EXCEPT

premiums are determined by the age sex and occupation of each individual certificate holder

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?

premiums are not tax deductible as a business expense.

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 known as

survivor protection

The premiums paid by the employer in a business life insurance policy are

tax deductible by the employer

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then

the benefit is received tax free

All of the following are true of key person insurance EXCEPT

the plan is funded by permanent insurance only

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT

the policy is owned by the company

Which of the following best defines the "owner" as it pertains to life settlement contracts?

the policy owner of the lief insurance policy

Which of the following is NOT true of life settlements?

the seller must be terminally ill.

Under a SIMPLE plan, which of the following is TRUE regarding taxation on both contributions and earnings?

they are tax deferred until withdrawn.

Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?

those who have been insured under the plan for at least 5 years

Which of the following is the best reason to purchase life insurance rather than annuities?

to create an estate

All of the following are business uses of life insurance EXCEPT

funding against company's general financial loss

In a direct transfer, how is money transferred from one retirement plan to a traditional IRA?

from trustee to trustee