kentucky life insurance Exam Questions With Correct
Answers (Updated)
.Accumulations - Answer-interest taxable
.all of the following are taxation rules that apply to MEC's cash value - Answer-1; tax deferred
accumulations
2; any distributions are taxable, including withdrawals and policy loans
3: distributions are taxed on LIFO basis (last in, first out) — known as "interest first" rule
4: distributions before age 59 1/2 are subject to a 10% penalty
.amounts available to policy owner - Answer-as you have already learned, permanent life insurance
provide living benefits. There are several ways in which policy owners may receive those living
benefits from the policy
.amounts received by beneficiary - Answer-if the owner dies before distributions have begun, the
entire interest must be distributed in full on or before December 31 of the calendar year of the fifth
anniversary of the owners death, unless the owner named a beneficiary
.amounts received by the beneficiary; general rule and exceptions - Answer-Life insurance proceeds
paid to the name beneficiary are generally free of income taxation is taken in lump sum. And
exception to this rule would apply to the benefit payment results from a transfer for value, meaning
the life insurance policy is sold to another party prior to the insured's death
, .Business insurance - Answer-The premiums paid by a business for life insurance policies used for
business purposes are generally not deduct was business expenses, with the exception of group
insurance. However, the proceeds from life insurance policies purchase for business purposes are
received by the company income tax free. if the business is subject to the alternative minimum at
tax, that tax may apply to death proceeds
The policy proceeds are not usually included in the estate of an individual insured by business,
unless the individual possesses some incident of ownership in the policy. This is true even if the
insured is the owner of one of the owners of the business. If the insured is a controlling
stockholder, then the corporation incidence of ownership may be attributed to the insured
if the general requirements for qualified plans are met, the following tax advantages apply;
1: employer contributions are tax-deductible to the employer, and are not taxed as income to the
employee
2: The earnings in the planner accumulate tax deferred
3: lump sum distributions to employees are eligible for favorable tax treatment
.cash value accumulations - Answer-any cash value accumulations in the policy can't be borrowed
against by the policy owner, or may be paid to the policy owner upon surrender of the policy. Cash
values grow tax deferred. Upon surrender or endowment, cash value in excess of cost basis
premium payments as taxable as ordinary income. Upon death, the face ammo is paid, and there is
no more cash value. Death benefits generally are paid to the beneficiary income tax free
.cash value gains - Answer-taxed at surrender
.cash value increases - Answer-not taxable (as long as policy in force)
.Charitable Uses of Life Insurance - Answer-The following are two basic ways to make charitable gift
of life insurance;
1: make it out right gift of policy on a life of the donor. The value of the policy at the time of the gift
is generally deductible, with certain restrictions. The charity is the beneficiary. The donor may give
the charity enough cash each year to pay the premium on the policy. If so, these cash gas are
Answers (Updated)
.Accumulations - Answer-interest taxable
.all of the following are taxation rules that apply to MEC's cash value - Answer-1; tax deferred
accumulations
2; any distributions are taxable, including withdrawals and policy loans
3: distributions are taxed on LIFO basis (last in, first out) — known as "interest first" rule
4: distributions before age 59 1/2 are subject to a 10% penalty
.amounts available to policy owner - Answer-as you have already learned, permanent life insurance
provide living benefits. There are several ways in which policy owners may receive those living
benefits from the policy
.amounts received by beneficiary - Answer-if the owner dies before distributions have begun, the
entire interest must be distributed in full on or before December 31 of the calendar year of the fifth
anniversary of the owners death, unless the owner named a beneficiary
.amounts received by the beneficiary; general rule and exceptions - Answer-Life insurance proceeds
paid to the name beneficiary are generally free of income taxation is taken in lump sum. And
exception to this rule would apply to the benefit payment results from a transfer for value, meaning
the life insurance policy is sold to another party prior to the insured's death
, .Business insurance - Answer-The premiums paid by a business for life insurance policies used for
business purposes are generally not deduct was business expenses, with the exception of group
insurance. However, the proceeds from life insurance policies purchase for business purposes are
received by the company income tax free. if the business is subject to the alternative minimum at
tax, that tax may apply to death proceeds
The policy proceeds are not usually included in the estate of an individual insured by business,
unless the individual possesses some incident of ownership in the policy. This is true even if the
insured is the owner of one of the owners of the business. If the insured is a controlling
stockholder, then the corporation incidence of ownership may be attributed to the insured
if the general requirements for qualified plans are met, the following tax advantages apply;
1: employer contributions are tax-deductible to the employer, and are not taxed as income to the
employee
2: The earnings in the planner accumulate tax deferred
3: lump sum distributions to employees are eligible for favorable tax treatment
.cash value accumulations - Answer-any cash value accumulations in the policy can't be borrowed
against by the policy owner, or may be paid to the policy owner upon surrender of the policy. Cash
values grow tax deferred. Upon surrender or endowment, cash value in excess of cost basis
premium payments as taxable as ordinary income. Upon death, the face ammo is paid, and there is
no more cash value. Death benefits generally are paid to the beneficiary income tax free
.cash value gains - Answer-taxed at surrender
.cash value increases - Answer-not taxable (as long as policy in force)
.Charitable Uses of Life Insurance - Answer-The following are two basic ways to make charitable gift
of life insurance;
1: make it out right gift of policy on a life of the donor. The value of the policy at the time of the gift
is generally deductible, with certain restrictions. The charity is the beneficiary. The donor may give
the charity enough cash each year to pay the premium on the policy. If so, these cash gas are
