Estate

Question 1

What happens to insurance cash value when the insured dies?

Answer 1

Cash value is retained by the carrier at death; only Death Benefits are paid out (unless UL or VUL Option B)

Question 2

Which assets qualify for marital deductions?

Answer 2

All assets in decesed estate qualify for marital deduction

Question 3

What’s a speacial power of appointment?

Answer 3

Power that can be exercised in favor of the holder’s children or someone other than the power holder only

Question 4

List General Powers?

Answer 4

Power that can be exercised in favor of the holder for the holder’s health, education and maintenace, and well-being
Power that can be exercised in favor of the holder

(HEMS ascertainable standards are not general powers)

Question 5

Which assets are SUBJECT TO PROBATE?

Answer 5

I - Singly Owned / Free Simple
C - Community Property (50% attributable to each spouse)
E - Estate as bene (Assets where the beneficiary is the “estate of the insured” )
T - TIC (Tenancy in common)

Question 6

What’s a testamentary trust?

Answer 6

AFTER the probate process, probate assets can be placed into the testamentary trust. This trust doesn’t go through the probate as it’s created as part of the probate process.

Question 7

Which tax form is filed at death and who files it?

Answer 7

Form 706 is filed within 9 months
For gross estate + adjustable taxable gifts over the life time exempt amount
Executor responsible for paying estate taxes

Question 8

What is considered incident of ownership?

Answer 8

1. DB paid to executor (Bene is the deceased / estate)
2. Dead owned the policy (can be on anyone’s life) (right to assign, terminate, borrow against the cash reserve, name bene, change bene)

Premiums Paying IS NOT an incident of ownership.

Question 9

What are the two 3 yr rules in estate planning?

Answer 9

• 1. Gifted Life Insurance Policy – If a decedent gifts a life insurance policy (or transfers ownership of one) and dies within 3 years, the death benefit is pulled back into their gross estate.
     *2. Gross-up Rule: Gift Taxes Paid – Gift tax paid on gifts made within 3 years before death

Question 10

What are the 3 situations in which life insurance death benefit will be included in my gross estate when I die?

Answer 10

DB included in my estate
1. I own it and die
2. I gifted it to Arun and Arun becomes the owner of this policy in last 3 years
3. I’m beneficiary of a Life Policy

Question 11

Under which situation replacement cost of the life insurance policy included in my gross estate?

Answer 11

4. You own a policy on someone else and die. (Replacement cost is included in my estate - unused presidium; terminal reserve + unearned premium)

Question 12

Which trusts are simple trusts?

Answer 12

2503(b), QTIP, QDT, Dynasty