life insurance test study

which of the following will not be an appropriate use of a deferred annuity? a. accumulating retirement funds b. accumulating funds in an ira c. funding a child's college education d. creating an estate

d. creating an estate

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

When the owner of a $250,000 life insurance policy died, the beneficiary decided to leave the proceeds of the policy with the insurance company and selected the Interest Settlement Option. If at the time of withdrawal the interest paid was $11,000, the beneficiary would be required to pay income tax on a 239,000 b 11,000 c none, bc the beneficiary has not received the death benefit d 261,000

b 11,000 the death benefit is not income taxable, any interest earned is income taxable

If taken as a lump sum, life insurance proceeds to beneficiaries are passed a without interest b free of federal income taxation c tax-deductible d part tax-free and part taxable

b free of federal income taxation

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. nonforfeiture option b. rollover c. settlement option d. nontaxable exchange

c settlement option

Under the 401(k) bonus or thrift plan, the employer will contribute a. an undetermined percentage for each dollar contributed by the employee b. all of the money to the plan c. 30% of employee contribution d. 75% of employee contributes

a. an undetermined percentage for each dollar contributed by the employee. there is no specific rule

For a retirement plan to be qualified, it must be designed for whose benefit? a. irs b. employees c. key employee d. employer

b. employees

which of the following is another term for the accumulation period of an annuity? a. annuity period b. pay-in period c. premium period d. liquidation period

b. pay-in period

When would life insurance policy proceeds be included in the insured's taxable estate? a if the insured transfers ownership of the policy or makes a gift of the policy 5 years prior to his or her death b when the beneficiary is named in the policy c when there are any incidents of ownership at the time of death d if the insured's spouse is the policy owner

c when there are any incidents of ownership at the time of death

A lucky individual won the state lottery, so the state will be sending him a check each month for the next 25 years. What type of annuity products are they likely to use to provide these benefits? a. flexible payment annuity b. deferred interest annuity c. immediate annuity d. variable annuity

c. immediate annuity

what happens if a deferred annuity is surrendered before the annuitization period? a the insurer can only apply the surrender value toward another annuity b. deferred annuities cannot be surrendered prior to the annuitization period c. the owner will receive the surrender value of the annuity d. the owner will only receive a refund of premium

c. the owner will receive the surrender value of the annuity

Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits? a. variable period b. variable amount c. fixed period d. fixed amount

d. fixed amount

What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary? a. income tax on distributions plus 10% penalty b. capital gails tax on distributions and no penalty c. capital gains tax on distributions plus 10% penalty d. income tax on distributions and no penalty

d. income tax on distributions and no penalty if the beneficiary waits until the owner would have been 70.5

which type of retirement account allows contributions to continue beyond age 70.5 and does not force distributions to start age age 70.5 a. roth ira b. flexible ira c. standard ira d. traditional ira

a roth ira

if $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually? a 7,000 b 3,000 c 13,000 d 10,000

b 3,000 as interest

which of the following is not true regarding a nonqualified retirement plan? a. contributions are not currently tax deductible b. it can discriminate in benefits and selecting participants c. earnings grow tax deferred d. it needs irs approval

d. it needs irs approval

which of the following statements concerning a simplified employee pension (SEP) is incorrect? a employer contributions are not included in the employees gross income b SEPs are suitable for large companies c SEPS allow the employer to make annual tax deductible contributions up to 25% of an employees earned income d SEPs have a higher tax deductible contribution limit than an IRA

b seps are suitable for large companies it's designed for a small employer for the benefit of the employees

a 60 y.o. participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. which of the following is true? a the amount distributed is subject to ordinary income tax b the amount of the distribution is reduced by the amount of a 20% withholding tax c no taxes are due since the plan participant is over age 59.5 d there is a 10% early withdrawal penalty

b the amount of the distribution is reduced by the amount of a 20% withholding tax because he took a distribution instead of doing a rollover

all of the following statementss are true regarding tax- qualified annuities except a. employer contributions are not tax deductible b. annuity earnings are tax deferred c. they must be approved by the irs d. withdrawals are taxed

a. employer contributions are not tax deductible

J transferred his life insurance policy to his son two years before his death. Which of the following is true? a because the policy has been transferred, it will not be included in j's taxable estate b the entire face value of the policy will be included in j's taxable estate c the interest portion of the policy will be included in j's estate d the unpaid premiums on the policy will be deducted from j's taxable estate

b the entire face value of the policy will be included in j's taxable estate (because it's within 3 years)

If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an a modified endowment contract b accelerated benefit policy c endowment d nonqualified annuity

a modified endowment contract it loses the benefits of a standard life contract

if a retirement plan or annuity is "qualified" this means a. it is approved by the IRS b. it has a penalty for early withdrawal c. it accepts after-tax contributions d. it is noncancellable

a. it is approved by the irs

Tax sheltered annuity is a special tax- favored retirement plan available to a certain groups depending on factors such as race, gender, and age b certain groups of employees only c anyone d certain age groups only

b certain groups of employees only, non profits, educations, religions, etc

an insurance company forwards fixed annuity premiums to their general account, where the money is invested. the guaranteed minimum interest is set at 2.5%. During an economic downswing, the investments only drew 2%. What interest rate will the insurer pay to its policyholders? a. 2% b. 2.5% c. 3% d. whatever the company deems appropriate

b. 2.5%

If an annuitant dies before annuitization occurs, what will the beneficiary receive? a. cash value of the plan b. either the amount paid into the plan or the cash value of the plan, whichever is greater c. same as b but lesser d. amount paid into the plan

b. either the amount paid into the plan or the cash value of the plan, whichever is greater

Who bears all of the investment risk in a fixed annuity? a. annuitant b. insurance company c. owner d. beneficiary

b. insurance company

all of the following are true of an annuity owner except a. the owner is the party who may surrender the annuity b. the owner must be the party to receive benefits c. the owner pays the premiums on the annuity d. the owner has the right to name the beneficiary

b. the owner must be the party to receive benefits

which of the following provisions in annuity contracts allow the owner to surrender the annuity if interest rates drop to a specified level? a. nonforfeiture b. annuitization c. bail-out d. surrender

c. bail-out

which of the following terms is used to name the nontaxed return of unused premiums? a. interest b. surrender c. dividend d. premium return

c. dividend, although they are the return of unused premiums

which of the following is true of a qualified plan? a. it may discriminate in favor of highly paid employees b. it may allow unlimited contributions c. it has a tax benefit for both employer and employee d. it does not need to have a vesting schedule

c. it has a tax benefit for both employer and employee

which of the following is not true regarding the annuitant? the annuitant a. receives the annuity benefits b. the annuitant must be a natural person c. the annuitant cannot be the same person as the annuityowner d. the annuitant's life expectancy is taken into consideration for the annuity

c. the annuitant cannot be the same person as the annuity owner.

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? a 8000, none b 8000 only on growth c 10000 only on growth d 10000 none

d 10000 no tax consequence

An employee quits her job where she has a balance of $10,000 in her qualified plan. The balance was paid out directly to the employee in order for her to move the funds to a new account. If she decides to rollover her plan to a Traditional IRA, how much will she receive from the plan administrator and how long does she have to complete the tax-free rollover? a. 8,000 30 days b. 10,000 60 days c. 10,000 30 days d. 8,000 60 days

d 8,000 60 days because she withdrew instead of transferred directly

in life insurance policies, cash value increases a are income taxable immediately b are taxed annually c are only taxed when the owner reaches age 65 d grow tax deferred

d grow tax deferred

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

which of the following describes the tax advantage of a qualified retirement plan? a distributions prior to age 59.5 are tax deductible b employer contributions are deductible as a business expense when the employee receives benefits c employer contributions are not taxed when paid out the employee d the earnings in the plan accumulate tax deferred

d the earnings in the plan accumulate tax deferred

which of the following statements is true concerning whole life insurance? a dividend interest is not taxable b premiums are tax deductible c policy loans are tax deductible d lump-sum death benefits are not taxable

d. lump sum benefits are not taxable

traditional ira contributions are a. deducted based on the income level b. never tax deductible c. partially tax deductible depending on the income level d. tax deductible

d. tax deductible

when a fixed annuity owner pays a monthly annuity premium to the insurance company, where is this money placed? a. forwarded to an investor b. Each contract's separate account c. the annuity owner's account d. the insurance company's general account

d. the insurance company's general account

if a company has a simplified employee pension plan, what type of plan is it? a. the same as an IRA with the same contribution limits b. an undefined contribution plan for large businesses c. a qualified plan for a small business d. the same as a 401k plan

c a qualified plan for a small business

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true? a. a corporation can be an annuitant as long as the beneficiary is a natural person b. the contract can be issued without an annuitant c. the annuitant must be a natural person d. a corporation can be an annuitant as long as it is also the owner

c. the annuitant must be a natural person

If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a a. joint and survivor annuity b. deferred annuity c. pure annuity d. joint life annuity

d. joint life annuity