1. Rick and Barbara are married with two children. Four years ago, Barbara bought a $75,000 life insurance policy on her mothers life and named her children as policy beneficiaries. Barbara did not name a contingent owner of the policy. Barbara died this year and the insurance policy was valued at $18,000. Which of the following statements is/are correct?

A. The death benefit of $75,000 will be included in Barbaras gross estate.

B. The $18,000 value of the policy will be included in Barbaras gross estate.

C. The value of the policy will be included in Barbaras probate estate.

D. Following Barbaras death, the children will receive the life insurance proceeds income tax free.

2. Assume that Barbara did not have a will and that her states intestacy succession laws grant 50% of her estate to her husband and the other half of her estate is divided equally between her children. Which of the following statements is/are correct?

A. Rick will own one-half of the policy and each child will own one-quarter of the policy.

B. The marital deduction in Barbaras estate is equal to one-half of the value of the policy.

C. No marital deduction is available to offset Barbaras estate tax because her mother is the insured.

D. Barbaras mother, who is the insured, will become the new owner of Barbaras policy.

3. Five years ago, Don bought a $600,000 life insurance policy on his own life and named his estate as the beneficiary. Four years ago, Don irrevocably assigned all incidents of ownership in the policy to his wife Betty. Don died this year after a brief illness. The insurance company placed a value on the policy of $400,000. Which of the following statements is/are correct?

A. When Don dies the death benefit amount of $600,000 is included in his gross estate.

B. Betty is the new owner of the policy; therefore, a marital deduction of $600,000 is available to Dons estate.

C. The life insurance policy is not included in Dons estate at death because he transferred the policy to Betty more than three years ago.

D. The $400,000 value of the policy will be included in Dons estate at his death.

4. Six years ago, Philip bought a life insurance policy on his own life worth $1,250,000 and he named his wife Anita the beneficiary. Two years ago Philip created an unfunded ILIT and transferred the policy to the trust. The trust gives Anita a lifetime income interest with a general power of appointment over the trust corpus. At Anitas death, the remainder interest in the trust will pass to Philips favorite charity. Which of the following statements is/are correct?

A. The death benefit will be included in Philips gross estate.

B. Because Anita is entitled only to receive income for her lifetime, Philips estate will not have a marital deduction available to offset the estate tax for the value of the policy included in his gross estate.

C. Philips estate will receive a charitable deduction for $1,250,000 if Anita should predecease Philip.

D. The death benefit will not be included in Philips estate because he purchased the policy more than three years ago.

5. Ronnie was the owner of a $2 million whole-life insurance policy and her husband Brad was the insured. Ronnie transferred ownership of the policy to Brad last year, and died three months later. Which of the following statements is/are correct?

A. The death benefit amount of $2 million is included in Ronnies gross estate.

B. The value of the policy is included in Ronnies gross estate.

C. Neither the death benefit amount nor the value of the policy is included in Ronnies gross estate.

D. If Brad disclaims the death benefit proceeds, then $2 million is included in Ronnies gross estate.