MASSACHUSETTS LIFE AND HEALTH INSURANCE NEWEST

MASSACHUSETTS LIFE AND HEALTH INSURANCE NEWEST

ACTUAL / EXAM QUESTIONS AND

ANSWERS.VERIFIED/GRADED A+

individual life insurance accelerated benefits - ----Answers-- -not taxed, certified termially ill, or permanently confinded to nursing home

Taxation of Business Life Policies - ----Answers---premiums not tax deductible except for executive bonus

death benefits not taxable

premiums for executive bonus policies are taxable income to the employee

Taxation of group life insurance - ----Answers---premiums paid by employer are tax deductible

premiums paid by employee are not tax deductible

Death benefits are not taxable

premiums paid by employer for insurance above $50,000 is taxable income to the employee

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Modified Endowment Contract (MEC) - ----Answers---An irrevocable IRS classification of a policy (determined by the 7 Pay Test) whereby tax advantages are lost for all distributions ONLY.*Once MED- Always MEC

Interest on cash values not taxed while in the policy

Withdrawals or loans are taxed

-interest out first -10% ppenalty on interest if withdrawn before 59& 1/2 unless disabled

Taxation of Annuities - ----Answers---Premiums are not tax deductible

Interst during accumulation not taxed in the contract

Withdrawals= interest our first, income tax on interest -10% penalty on interest if younger than 59 & 1/2

No penalty if withdrawal due to disability or death or annuitization

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Annuity payments after annuitization - ----Answers---taxed according to exclusion ration

premiums paid (divided by TOTAL of expected payments over annuitants life expactancy = percent of payment not taxed

If annuitant lived beyond life expectancy, 10% or payment becomes taxable

Distributions at death to a beneficiary - ----Answers---Lump Sum- ALl gain is taxable

• year withdrawal-interest out first - No 10% penalty

Annuity Payments- Taxed according to exclusion ration

If spouse is beneficiary- transfer ownership to spouse with no tax consequences

Section 1035 Exchange - ----Answers---Section 1035 of the Internal Revenue Code allows for certain exchanges without recognizing a gain or loss for tax purposes, such as an annuity exchanged for another annuity.

-Life to Life= Not Taxable

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-Annuity to Annuity = Not Taxable

Life to Annuity = Not Taxable

Annuity to Life = TAXABLE

Estate Taxes - ----Answers---taxes levied on a person's estate or total holdings after that person's death

Estate Taxes Life Insurance Death Benefit - ----Answers--- Included in insured gross estate if Payable to estate, insured owns the policy at time of death, issured transfer ownership within 3 years of death

Estate Taxes Life Insurance Death Benefit - ----Answers--- Annuities are included in gross estate if death occurs during accumulation- entire value including cost is included

Death occurs during annuitization- present value of future payments is included

Individual Retirement Account (IRA) - ----Answers---Must have earned income, non working spouse can make contributions based upon earned in come or spouse

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