Insurance Flashcards
(5 cards)
Under a single coverage high deductible health plan (HDHP) that meets the requirements for the insured to make contributions to a health savings account (HSA) in 2024, if the deductible is $3,500, what are the maximum additional out-of-pocket expenses the insured is required to pay for the year?
$8,050
$4,550
$4,150
$0
For HDHP single coverage to meet the requirements for HSA contribution eligibility in 2024, the HDHP policy must have a minimum deductible of $1,600 and a maximum out-of-pocket limit of $8,050. In this question, the deductible of $3,500 meets the minimum requirement. The deductible is included in the application of the maximum out-of-pocket limit of $8,050. Therefore, the maximum additional out-of-pocket expenses the insured is required to pay for the year is the difference between $8,050 and $3,500, which is an additional $4,550
What amount of Social Security retirement benefits does Terry receive in 2024?
$36,000
$21,040
$31,840
$25,200
Two issues are causing Terry’s Social Security benefit to be less than his primary insurance amount (PIA). First, Terry’s full retirement age (FRA) is 67 and he claimed benefits at age 62. His PIA is $3,000 and the reduction for claiming benefits 60 months early is 30%, a $900 reduction per month, and $10,800 for the year.
Secondly, Terry has earned income more than the allowable threshold of $22,320 (2024) for years before the year in which he attains FRA, so a portion of his monthly benefit will be withheld at a rate of $1 for every $2 of earned income over $22,320. His earned income is $30,640. $30,640 - $22,320 = $8,320 ÷ 2 = $4,160 of benefits withheld.
His benefit in 2024 is $36,000 (PIA) - $10,800 - $4,160 = $21,
Ying, age 65, has a partnership long-term care insurance policy. After a 90-day elimination period, the policy provides $300 per day for 3 years for qualifying long-term care expenses. Ying’s only personal asset is a brokerage account valued at $500,000.
Ying fell down a flight of stairs and has been confined to a wheelchair for the past 48 months. She has been unable to get in and out of bed or get on and off the toilet without standby assistance from a caregiver who stays at her home with her during the day while her brother is at work. Ying has exhausted the benefits of her long-term care insurance policy and feels she may need to apply for Medicaid for assistance in paying for her home health caregiver.
What amount of Ying’s assets will she be able to shelter during the Medicaid spend-down requirement?
$2,000
$328,500
$0
$171,500
Because Ying owned partnership long-term care insurance, she may shelter an amount equal to the benefits paid from her partnership LTCi policy before the benefits were exhausted. Her policy paid $300 per day for 3 years (1,095) days. As a result, she may shelter $300 x 1,095 days = $328,500 under the Medicaid spend-down period
Gigi is listed as owner and insured on a Universal Life insurance, Option B policy. Eighteen months ago she transferred the policy into an Irrevocable Life Insurance Trust (ILIT) and will be using the annual exclusion amount to pay the policy premiums. Gigi’s spouse, Lorne, is listed as the beneficiary on the policy. To date, Gigi has deposited $150,000 into the policy and the average interest rate is 2.35%. The policy’s current face value is $500,000.
If Gigi were to predecease Lorne and pass away today, what amount of the Universal Life insurance policy would be included in her gross estate?
The life insurance policy will be excluded from Gigi’s estate
The face value and cash value.
The face value only.
The lesser of the FMV or interpolation reserve
The death benefit on a Universal Life, Option B policy is both the face value and cash value, combined.
Gigi transferred an existing policy on which she was the insured and owner into an ILIT and only eighteen months had elapsed before her passing. As a result, the face value and cash value will be pulled back into the gross estate.
Mecayla’s whole life insurance policy has a face amount of $300,000 with a current cash value of $100,000. The annual premium is $10,000. Policy dividends have been used to purchase paid-up additions which now total $100,000.
Mecayla, who is age 50, has been certified by a physician to be terminally ill and is expected to die within 12 months. She sells her policy to a viatical settlement company for $100,000. The company continues to pay the annual premium and Mecayla dies five years later.
What is the after-tax benefit at Mecayla’s death to the viatical settlement company assuming a 21% corporate tax rate and the same current policy values?
$237,000
$347,500
$316,000
$300,000
The total death benefit payable to the viatical settlement company is $400,000 under a whole life policy, consisting of the original $300,000 face amount plus the $100,000 paid-up dividend additions. The viatical settlement company’s basis is $150,000 ($100,000 (amount paid originally) + $50,000 (additional over 5 years)). The taxable gain is $400,000 - $150,000 (basis) = $250,000. The gain is taxed at 21% ($250,000 x (1 – 0.21) = $197,500 after-tax). The after-tax amount of $197,500 is added to the basis of $150,000 for a total after-tax benefit to the viatical company of $347,500 ($197,000 + $150,000).
