Tom purchased a residence several years ago. At the time of the purchase, the lender required Tom to pay the premiums on a credit life insurance policy to pay off the balance of the loan in the event she died. The lender is named the owner and beneficiary of the policy. She died in the current year when the outstanding loan balance was $125,000. The credit life insurance policy satisfied the outstanding balance of the loan. What amount is includable in Tom's estate?

• A. $-0-
• B. $25,000
• C. $62,500
• D. $125,000
• E. None of the above

Several years ago, Keith created an irrevocable life insurance trust and transferred cash to the trust. The trustees, the couple's three children, purchased secondto die policies for Keith and his spouse, Ellen. The trust holds only the two life insurance policies. The trust agreement provided Ellen with annual withdrawal rights up to $5,000, and the trustees had discretion to annually distribute trust income and principal to Ellen and to themselves. If Ellen survived her spouse, the trustees were required to distribute the trust's net income to her for life. Keith died in the current year. Later that year, Ellen executed a disclaimer of her annual withdrawal right. In addition, the trustees filed a petition in state probate court to reform the trust, saying Keith had not intended for Ellen to have a beneficial interest that would cause the trust assets to be included in her gross estate. (In fact, the trust instrument was incorrectly drafted as one that was intended to be funded with singlelife insurance policies rather than policies on joint lives.) Ellen had never received a distribution of trust income or principal. What should be included into Ellen's estate upon her death as the second to die?

• A. $5,000
• B. $2,500
• C. $3,500
• D. $-0-