Federal Tax Considerations For Life and Annuities

LIFO (last in, first out)

When money is withdrawn from the annuity during accumulation phase the amounts are taxed in Last In First Out basis (LIFO).

The minimum number of credits required for partially insured status for Social Security disability benefits is...

6 CREDITS during the 13 - quarter period to be considered partially insured

If an annuitant dies during the accumulation period, what benefit (if any) will be included in the annuitants estate?

Accumulated cash value

If taken as a lump sum, life insurance proceeds to beneficiaries are passed

Free of federal income taxation.

In Life Insurance policies, cash value increases ...

Grow tax deferred.

If an insured surrenders his life insurance policy, which statement is true regarding the cash value of the policy?

It is only taxable if the cash value exceeds the amount paid for premiums.

Death benefits payable to a beneficiary under a life insurance policy are generally

NOT subject to income taxation by the Federal Government.

What is the official name for the Social Security program?

Old-Age Survivors Disability Insurance (OASDI)

Traditional IRA Contributions are tax deductible based on what?

Owner's income. Traditional IRA contributions are tax deductible, but may be limited if the owners income exceeds a certain level.

What are the 3 types of benefits Social Security provides?

Retirement, Disability, And Survivors

If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a

Settlement option

What best describes taxation during the accumulation period of an Annuity?

Tax deferred. The interest accumulated in an Annuity is the tax base but the Taxes are deferred during the accumulation period.

What method is used to determine the taxable portion of each annuity payment?

The Exclusion ratio

When do full Social Security retirement benefits begin?

When the worker reaches age 65 and has earned the required amount of work credits.

What term is used to name the nontaxed return of unused premiums?

dividend.

An applicant buys a nonqualified annuity, but dies before the starting date. For which of the following beneficiaries would the contract's interest NOT be taxable?

spouse.