1. Rick and Barbara are married with two children. Four yearsago, Barbara bought a $75,000 life insurance policy on her mother’slife and named her children as policy beneficiaries. Barbara didnot name a contingent owner of the policy. Barbara died this yearand the insurance policy was valued at $18,000. Which of thefollowing statements is/are correct?

A. The death benefit of $75,000 will beincluded in Barbara’s gross estate.

B. The $18,000 value of the policy willbe included in Barbara’s gross estate.

C. The value of the policy will beincluded in Barbara’s probate estate.

D. Following Barbara’s death, thechildren will receive the life insurance proceeds income taxfree.

2. Assume that Barbara did not have a will and that her state’sintestacy succession laws grant 50% of her estate to her husbandand the other half of her estate is divided equally between herchildren. Which of the following statements is/are correct?

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

B. The marital deduction in Barbara’sestate is equal to one-half of the value of the policy.

C. No marital deduction is available tooffset Barbara’s estate tax because her mother is the insured.

D. Barbara’s mother, who is the insured,will become the new owner of Barbara’s policy.

3. Five years ago, Don bought a $600,000 life insurance policyon his own life and named his estate as the beneficiary. Four yearsago, Don irrevocably assigned all incidents of ownership in thepolicy 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 amountof $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 Don’sestate.

C. The life insurance policy is notincluded in Don’s estate at death because he transferred the policyto Betty more than three years ago.

D. The $400,000 value of the policy willbe included in Don’s estate at his death.

4. Six years ago, Philip bought a life insurance policy on hisown life worth $1,250,000 and he named his wife Anita thebeneficiary. Two years ago Philip created an unfunded ILIT andtransferred the policy to the trust. The trust gives Anita alifetime income interest with a general power of appointment overthe trust corpus. At Anita’s death, the remainder interest in thetrust will pass to Philip’s favorite charity. Which of thefollowing statements is/are correct?

A. The death benefit will be included inPhilip’s gross estate.

B. Because Anita is entitled only toreceive income for her lifetime, Philip’s estate will not have amarital deduction available to offset the estate tax for the valueof the policy included in his gross estate.

C. Philip’s estate will receive acharitable deduction for $1,250,000 if Anita should predeceasePhilip.

D. The death benefit will not be includedin Philip’s estate because he purchased the policy more than threeyears ago.

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

A. The death benefit amount of $2 millionis included in Ronnie’s gross estate.

B. The value of the policy is included inRonnie’s gross estate.

C. Neither the death benefit amount northe value of the policy is included in Ronnie’s gross estate.

D. If Brad disclaims the death benefitproceeds, then $2 million is included in Ronnie’s gross estate.