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(solution) . 1. John and Mary are married and have three children. Five


.       1.    John and Mary are married and have three children. Five years ago, Mary bought a life insurance policy on her mother?s life. The death benefit was $100,000, and Mary named her children as the beneficiaries.

            Mary was in a car accident and died this year. At the time of her death, the policy value was $20,000. Discuss the following:

            a. What (if anything) is included in Mary?s estate?

            b. What happens to the death benefits ? who gets it and when?

            c. Is the policy subject to probate?

            d. Will the death benefits be subject to income tax?

2.         Two years ago, Alan transferred $50,000 into a trust. He named the bank the trustee and his wife, Sarah as the income beneficiary. Their son, James, is the remainder beneficiary. Included in the trust was a provision that Mary could appoint property to herself for her health, education, maintenance, and support.

The bank purchased a $1 million life insurance policy on Alan when the money was transferred into the trust. Alan died this year. At the time of his death, the policy was valued at $250,000. Discuss the following:

a. What (if anything) is included in Alan?s estate?

 b. What happens to the death benefits ? who gets it and when?

            c. Is the policy subject to probate?

            d. Will the death benefits be subject to income tax?

3.         Jason (age 45) and Nancy (age 42) are married and have two children. They each have an IRA with their spouse named as beneficiary. If Jason dies this year, when does Nancy have to take distributions? Can she name additional beneficiaries?

4.         Amanda and Jerry are married.  Jerry has a 401(k) at work and has named his wife, Amanda, and the primary beneficiary with Angela, their daughter, as the contingent beneficiary. Amanda and Jerry were in an automobile accident. Amanda died instantly.  Jerry died two months later. When Angela inherits Jerry?s 401(k), what options does she have? When does she have to take distributions? Can she defer distributions until she turns 70 ½? What taxes will she have to pay (if any)?

5.         If an individual is charitably inclined, describe the income and estate tax consequences of leaving retirement assets to a charity?

6.         Dick and Jane own a small landscaping business. They have a son, Jerome, who is a single parent and who is struggling to make ends meet. Dick and Jane would like to help Jerome, but their money is tied up in the business. They are considering a sale/leaseback arrangement with Jerome, using an installment sale and leasing the business. Describe the benefits for Jerome. For Dick and Jane.

7.         George is the owner and president of ABC, Inc. The corporation purchased a $1 million life insurance policy on George. The corporation is the owner and beneficiary of the policy. Upon George?s death, will the policy be included in George? estate? How much will George?s family receive? Will there be any income tax consequences to the beneficiaries?

8.         Define portability. Discuss its uses in estate planning. Describe any drawbacks.

9.         Delilah is an elderly widow who is charitably inclined. She is considering making a donation to her favorite charity of highly appreciated securities, but she needs the guaranteed income stream to meet her living expenses. What would you advise her to do? What would the income and estate tax consequences be if she implemented your recommendations?

10.       There are many ways for property to be transferred upon death. Describe 3 ways to avoid probate. 

           


Insurance Assignment

 

Que 1(a) Since Mary both the life insurance policy on her mother, she forfeited ownership of the policy

 

and therefore, insurance policy cannot be included in her taxable...

 


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