PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN: 9781337117005
Author: Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher: Cengage Learning
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Chapter 10, Problem 7FPE
Summary Introduction
To discuss: The appropriate type of supplemental insurance for the H’s family in the light of their expressed concerned.
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Which of the following situations describes a risk exposure that can be most appropriately insured against with an individual disability income policy?
A)A self-employed bookkeeper earns $40,000 a year out of a small office located in her neighborhood, and wants to protect her income.
B)A lawyer wants to make sure his business overhead expenses are covered if he becomes disabled.
C)A couple with a military retirement income manages a self-storage business, and they are compensated with a place to live that is on the premises of the business.
D)An accountant's spouse owns the building in which the accounting office is located. All of the practice’s income is used to pay rent and other business expenses, so the accountant has no compensation from the business.
Which statement describes a technique used to address the issue of ensuring the payment of adequate child support by a noncustodial parent when the parents of minor children are divorced?
A)
A provision in the noncustodial parent's will leaving property to the minor will solve this concern.
B)
To ensure that child support payments are continued if the noncustodial parent dies or becomes disabled before such payments are to cease, the parents must enter into a nuptial agreement.
C)
An irrevocable trust established and funded by the noncustodial parent to ensure payment of child support can be a valuable tool to protect such assets from the claims of future creditors of the noncustodial parent.
D)
Insurance on the life of the noncustodial parent must be owned by an irrevocable life insurance trust to prevent the noncustodial parent from changing the beneficiary.
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)…
Chapter 10 Solutions
PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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- 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 strategies would you recommend to address these issues? A) Have each spouse draft a will disinheriting the other B) Have Henry and Rita title all of their assets as JTWROS after they get married C) Have the families enter into a family settlement agreement D) Have Henry and Rita execute a premarital property agreementarrow_forwardA couple applied for a loan to finance the purchase of a new home. What federal act was created to ensure that they have knowledge of all closing costs? a. fair credit reporting act b. equal credit opportunity act c. uniform settlement act d. real estate settlement procedures actarrow_forwardJuanita is the owner of a 30-year-old home, and is looking to buy a homeowner’s insurance policy. The previous home she owned was severely damaged by a tree falling through the roof, a peril that was not covered by her basic-form policy, therefore she is looking to buy a comprehensive policy that covers damage from all perils (except those specifically excluded). Based on the peril coverage it offers, she purchases an insurance policy.arrow_forward
- Bonnie and Clyde jointly own their own home when Clyde defaults on credit card debt. To determine if Clyde is insolvent, how will the home play into the calculation?arrow_forwardHarlow Stevens has an insurance policy that she and her three daughters, ages 5, 9, and 11, are entitled to benefits under. Which provision in her insurance policy is defined by this list of covered members? Multiple Choice - Eligibility - Assigned benefits - Benefit limits - Guaranteed renewable - Exclusions and limitationsarrow_forwardUnder the liability portion of a personal Auto policy, all of the following people are considered insureds Except The named insured spouse An auto mechanic who test drives the named insured car A nephew residing in the named insured’s household A neighbor who drives the named insured’s auto with permissionarrow_forward
- 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? 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.arrow_forwardUsing the “nonworking” spouse method, what should be the life insurance needs for a family whose youngest child is 5 years old? Insurance Need: ?arrow_forwardEleanor is the owner of a 15-year-old home, and is looking to buy a homeowner’s insurance policy. She feels it would be overly cautious to purchase protection from all perils, but in addition to protection from fire, vandalism, windstorms, and so on, she also wants insurance for damage caused by malfunctioning of internal structures like air conditioning or plumbing. Based on the peril coverage it offers, she purchases an _________ insurance policy. Her home has a replacement value of $250,000, therefore she insures her home for the minimum legal requirement of __________________. Assuming she does not purchase any additional coverage beyond the legal minimums, complete the following table indicating the maximum dollar value of reimbursement she can receive for each of the following: Damage to personal property: $ _____________________ Detached buildings: $_____________________ Loss of Use (Additional living expenses): $____________________ Property…arrow_forward
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