Vern has a whole life policy, and he has named his wife Corinne as a revocable beneficiary. He is considering changing her status to an irrevocable beneficiary, but is unsure of the potential consequences. If Vern makes Corinne irrevocable beneficiary, what actions can he still take without Corinne's permission? i) Receive policy dividends. ii) Obtain a policy loan. iii) Assign the policy. iv) Let the policy lapse. alil and ii)
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- Sandy purchased a life insurance policy on her own life and made her revocable living trust the owner and beneficiary of the policy. Sandy will continue to pay the premiums on the life insurance policy. Sandy has a moderate estate, but is not concerned about owing estate tax at her death. She is married and has two children, who are both named as beneficiaries under her revocable living trust. Which of the following statements correctly identify advantages or disadvantages of Sandy's life insurance transfer? I. Sandy will not owe gift tax on the premium payments she will be making on the life insurance policy because they are not considered to be completed gifts. II. At Sandy's death, the life insurance policy will avoid probate. III. Sandy will owe gift tax for transferring the ownership of the life insurance policy to the revocable living trust. IV. Sandy has made a completed gift of the life insurance policy by placing it in the revocable living trust. A) II and III B)…Mallory would like to create an irrevocable trust for her children that will remove assets from her gross estate, but she is uncomfortable relinquishing all control of the property because her children are young and they may not prove to be financially responsible. She would like to be able to change the beneficiaries of the trust, perhaps to her grandchildren, or change the shares of each beneficiary in the event they waste their distributions. Will the retention of these powers affect the transfer to the trust?Your client wants to purchase a residence for his aging parents, while minimizing the burden of ownership of the property for them and maximizing their enjoyment of it. Which one of the following states an advantage of titling the property in your client's name as sole owner rather than in joint tenancy with right of survivorship with his parents? A) The property will receive a step-up in basis when his parents die. B) The property will pass to his parents outside of probate. C) He will avoid gift tax liability by titling the property this way. D) His parents will have a life estate in the property if he predeceases them.
- Henry and Rita disagree about how to manage their finances after their marriage, and their children are concerned about receiving their inheritances. Which of the following would be a good strategy to allow Henry and Rita to agree on how their property is divided while they are living and also agree on the relinquishment of marital property rights when one of them dies? Henry and Rita should execute a premarital property agreement. Henry and Rita should title all of their assets as JTWROS after they are married. A) Neither I nor II B) II only C) I only D) Both I and IIA married couple have written a will that leaves part of their money to a trust fund. The income from this trust will benefit the surviving spouse until death, with the principal then going to their children. Why was the trust fund created? Choose the correct.a. To reduce the estate of the surviving spouse and, thus, decrease the total amount of estate taxes to be paid by the couple.b. To ensure that the surviving spouse is protected from lawsuits filed by the couple’s children.c. To give the surviving spouse discretion over the ultimate use of these funds.d. To maximize the earning potential of the money because trust funds generate more income than other investments.A married couple have written a will that leaves part of their money to a trust fund. The income from this trust will benefit the surviving spouse until death, with the principal then going to their children. Why was the trust fund created? To reduce the estate of the surviving spouse and, thus, decrease the total amount of estate taxes to be paid by the couple. To ensure that the surviving spouse is protected from lawsuits filed by the couple’s children. To give the surviving spouse discretion over the ultimate use of these funds. To maximize the earning potential of the money because trust funds generate more income than other investments.
- Henry wants to establish a trust for his financially challenged adult daughter. He wants to contribute annually to the trust, but his daughter would receive only the trust income. The remainder would go to his grandchildren (her children) at her death. Henry wants the daughter to receive all the earnings from the trust with no restrictions. He realizes that she will probably just squander the money she receives but wants to otherwise protect her from her creditors. Which of the following trusts would you recommend Henry establish for the benefit of his daughter? A) An irrevocable trust, including spendthrift provisions B) A Section 2503(b) trust C) A Section 2503(c) trust D) A support trustJamal, who lives in a common law state, would like to place his new bride on the deed to a residence that is currently in his own name. His goals regarding this residence and the transfer are: He does not want the transfer to cause him to use any of his gift tax applicable credit amount. He wants to be able to use the annual exclusion for the transfer. He wants the survivor of himself and his wife to receive title to the deceased spouse's interest in the residence. He does not want his wife to be able to convey her interest in the residence without his consent. He does not want more than 50% of the fair market value of the house to be included in his gross estate if he is the first to die. On the death of the first spouse, he does not want the residence to be subject to a probate proceeding. What is the most appropriate way for Jamal to title the residence when he makes the transfer? A) Tenants by the entirety B) Tenants in common with equal interests C) Jamal as the…Marco decides to take $2,000 from the partnership for the repair and record it as an expense of the partnership. He believes that this is appropriate since he needs his car to get to work every day. Is Marco behaving ethically? Why or why not? Who is affected by Marco’s decision? What other alternatives might Marco consider?
- Larry is married and has five children. He is worried about the stability of his current employment and does not have a lot of savings. Larry sought out financial advice and he was told to purchase a life insurance policy that provided him with total control over the lifetime benefits, just in case he becomes unemployed. Since his estate is significantly under the estate tax exclusion amount, Larry is not concerned about the policy being included in his gross estate. He plans to name his spouse as the beneficiary to ensure that she, and his children, will be adequately provided for in the event of his death. Which one of the following techniques satisfies Larry's planning objectives? A) Larry should have a life insurance policy that is owned by an irrevocable trust. B) Larry should have a life insurance policy that is owned by a revocable trust. C) Larry should purchase a life insurance policy that names his wife as the insured. D) Larry should purchase a life…Danny and Julie, a married couple, decided to sell their community property home in a community property state, and reinvest their sale proceeds in a new home in a common law state with only Julie's name on the title. Which statement below is correct? A) The new home will be considered community property, but only if Julie places Danny’s name on the title as tenancy by the entirety. B) The new home will be considered the separate property of Julie. C) The new home will be considered community property. D) Danny would have rights to only the sale proceeds from their prior home.Cara wants to make sure that her stock portfolio will not have to go through probate when she dies. She wants these stocks to go to her daughter, Jolene, but does not want Jolene to have any control of the stocks until Cara dies. Cara wants to continue having exclusive right to the income from the stocks until she dies. Cara does not want to pay any gift tax. Which one of the following is the most appropriate form of will substitute for Cara to use? A)Place the stocks in joint tenancy with right of survivorship with Jolene B)Place the stocks in an inter vivos irrevocable trust C)Give Jolene a general power of appointment over the portfolio D)Name Jolene as the transfer on death beneficiary of the portfolio