QUESTION 13

1. 22-3.A credit shelter trust can be the beneficiary of a life insurance policy when an insured spouse dies.

   True

   False

5 points

QUESTION 14

1. 22-3.All of the following statements regarding liquidity planning for estates are correct, except:

   An ILIT that owns a life insurance policy can make loans to the estate for adequate interest and security.

   AnILITcan purchase assets from the estate at FMV.

   Insurance proceeds are included in theinsured'sestate if the trustee is obligated to purchase estate assets.

   Insurance proceeds in anILIT are included in theinsured'sprobate estate if they are used to pay postmortem expenses.

5 points

QUESTION 15

1. 22-3.Which statement regarding an ILIT is incorrect?

   Insurance proceeds paid to the trust are protected from the claims of creditors,including the decedent's creditors..

   The trust cannot hold a survivorship policy when a husband and wife are co-insureds.

   All incidents of ownership over a policy are held by the trustee.

   An ILIT Allows an insured to leverage annual exclusion gifts, his/her unified credit, and his/her GST exemption by gifting a policy with a low current gift value in relation to the value at theinsured'sdeath.

5 points

QUESTION 16

1. 22-3.Hugh created an irrevocable trust five years ago and transferred a $4 million whole-life policy to the trust. His wife, Meryl, will receive the income for life, with the remainder payable to her estate. What is the consequence of this transfer?

   Hugh and Meryl can offset the taxable amount of the premiumswith gift splitting and annual exclusions.

   Assuming Merrill survives Hugh, only the trust remainder interest isincludablein her estate.

   When you transfer the policy to the trust,he could not offset the gift tax with a marital deduction.

   You can borrow from the policies cash value without adverse tax consequences.

5 points

QUESTION 17

1. 22-3.Ginger created an ILIT and transferred her life insurance policy and rental property to the trust. She named her husband Alfred and her children the beneficiaries of the trust. The income from the property is sufficient to pay policy premiums every year. How is the trust income taxed?

   Trust income is taxed to Ginger becausegrantortrust rules apply.

   Trust income is not taxed to Ginger because the trust is a revocableand Ginger will not receive any income from the trust.

   Trust income is taxed to the trust beneficiaries.

   Trust income is taxed to the trust is distributable net income.

5 points

QUESTION 18

1. 22-3.B.J. owns a single-premium life insurance policy on his wife Coras life. His will provides that all of his estate will pass to Cora or, if she predeceases him, to their son, Hoss. Assume that B.J. predeceased Cora. Which statement is incorrect?

   The replacement cost value of the policy is included inBJ'sprobate estate..

   A marital deduction is available toBJ'sestate equal to the replacement cost of the policy.

   Hossis the new owner of the policy.

   If BJ had gifted the policy to Cora six months before he died, the policy would not be included inBJ'sestate.

5 points

QUESTION 19

1. 22-3.Which statement concerning a spouse as beneficiary of an ILIT is incorrect?

   A gift tax marital deduction is not available to a donor spouse when a policy is transferred to an ILITbecause the spouses interest in trust is contingent upon surviving the insured.

   A surviving spouse cannot be given an ascertainable standard over trust corpus.

   A grantor's spouse can take an annual exclusion for premium payments transferred to a trust when the beneficiary spouse has a crummy power.

   If the trustee can only make discretionary distributions of income to the surviving spouse,the corpus is not included in the spouse's estate.

5 points

QUESTION 20

1. 22-3.Which characteristic of a dynasty trust is incorrect?

   Dynasty trusts are created only in states that have rules against perpetuities.

   Dynasty trust can avoid estate,gift,and GST taxes.

   A spendthrift provision in trust protects the income and assets from the claims of the beneficiaries' creditors.

   AgrantorsGST exemption allocated to a dynasty trust removes the life insurance proceeds and further appreciation from GST taxes for the life of the trust.

1. QUESTION 13 22-3. A credit shelter trust can be the beneficiary of a life insurance policy when an insured spouse dies. True False 5 points 1. QUESTION 14 22-3. All of the following statements regarding liquidity planning for estates are correct, except: An ILIT that owns a life insurance policy can make loans to the estate for adequate interest and security. An ILIT can purchase assets from the estate at FMV. Insurance proceeds are included in the insured's estate if the trustee is obligated to purchase estate assets. Insurance proceeds in an ILIT are included in the insured's probate estate if they are used to pay postmortem expenses. 5 points 1. QUESTION 15 22-3. Which statement regarding an ILIT is incorrect? Insurance proceeds paid to the trust are protected from the claims of creditors, including the decedent's creditors.. The trust cannot hold a survivorship policy when a husband and wife are co-insureds. All incidents of ownership over a policy are held by the trustee. An ILIT Allows an insured to leverage annual exclusion gifts, his/her unified credit, and his/her GST exemption by gifting a policy with a low current gift value in relation to the value at the insured's death. 5 points 1. QUESTION 16 22-3. Hugh created an irrevocable trust five years ago and transferred a $4 million whole-life policy to the trust. His wife, Meryl, will receive the income for life, with the remainder payable to her estate. What is the consequence of this transfer? Hugh and Meryl can offset the taxable amount of the premiums with gift splitting and annual exclusions. Assuming Merrill survives Hugh, only the trust remainder interest is includable in her estate. When you transfer the policy to the trust, he could not offset the gift tax with a marital deduction. You can borrow from the policies cash value without adverse tax consequences. 5 points 1. QUESTION 17 22-3. Ginger created an ILIT and transferred her life insurance policy and rental property to the trust. She named her husband Alfred and her children the beneficiaries of the trust. The income from the property is sufficient to pay policy premiums every year. How is the trust income taxed? Trust income is taxed to Ginger because grantor trust rules apply. Trust income is not taxed to Ginger because the trust is a revocable and Ginger will not receive any income from the trust. Trust income is taxed to the trust beneficiaries. Trust income is taxed to the trust is distributable net income. 5 points 1. QUESTION 18 22-3. B.J. owns a single-premium life insurance policy on his wife Cora's life. His will provides that all of his estate will pass to Cora or, if she predeceases him, to their son, Hoss. Assume that B.J. predeceased Cora. Which statement is incorrect? The replacement cost value of the policy is included in BJ's probate estate.. A marital deduction is available to BJ's estate equal to the replacement cost of the policy. Hoss is the new owner of the policy. If BJ had gifted the policy to Cora six months before he died, the policy would not be included in BJ's estate. 5 points 1. QUESTION 19 22-3. Which statement concerning a spouse as beneficiary of an ILIT is incorrect? A gift tax marital deduction is not available to a donor spouse when a policy is transferred to an ILIT because the spouses interest in trust is contingent upon surviving the insured. A surviving spouse cannot be given an ascertainable standard over trust corpus. A grantor's spouse can take an annual exclusion for premium payments transferred to a trust when the beneficiary spouse has a crummy power. If the trustee can only make discretionary distributions of income to the surviving spouse, the corpus is not included in the spouse's estate. 5 points 1. QUESTION 20 22-3. Which characteristic of a dynasty trust is incorrect? Dynasty trusts are created only in states that have rules against perpetuities. Dynasty trust can avoid estate, gift, and GST taxes. A spendthrift provision in trust protects the income and assets from the claims of the beneficiaries' creditors. A grantors GST exemption allocated to a dynasty trust removes the life insurance proceeds and further appreciation from GST taxes for the life of the trust