Question 16

Which of the following are not desired tax advantages of a tax basis irrevocable trust?

A - Carryover basis

B - Step-up in basis

C - Marital deduction

D - Income shift

Question 17

Mr. Smith exchanges one life insurance policy on his life for another policy on his life. The exchange will qualify as an exchange under Internal Revenue Code section 1035. He has paid $80,000 in premiums over the years and the old policy is now worth $85,000 (without regard to any loans). Also, the old policy has an outstanding loan of $10,000. The new policy will be worth $75,000 and the loan from the old policy will be forgiven. How much will Mr. Smith be taxed on this exchange, assuming he holds the new policy until at least after the end of this year?

A - $0

B - $5,000

C - $10,000

D - $100,000

Question 18

For estate planning purposes, the definition of life insurance does not include which of the following?

A - Whole life contract

B - Tax-deferred annuity contract

C - Term contract

D - Single life contract

Question 19

Which of the following is true with respect to utilizing life insurance trusts for estate planning purposes?

1. Provides a method by which death benefit proceeds are removed from the insured's estate.
2. Transfers into the trust qualify for the annual exclusion.
3. The number of annual exclusions is determined by the number of trustees.

A - I and II

B - I and III

C - II and III

D - III only

Question 20

Which of the following is a true statement concerning Crummey powers?

1. Allows an otherwise future interest to qualify for the annual exclusion.
2. Beneficiary must be given a reasonable time within which to exercise the withdrawal power.
3. The beneficiaries must be notified by the Grantor whenever a contribution has been made into the trust.

A - I only

B - I and II

C - I and III

D - III only