Question 1

The best financial plan for financing a child's college education requires:

Accepted Answer

A) a savings plan 
B) a 401(k)plan 
C) premature death protection 
D) both a savings plan and premature death protection 
A) a savings plan 
B) a 401(k)plan 
C) premature death protection 
D) both a savings plan and premature death protection D

Question 2

A terminally ill insured may be able to withdraw life insurance death benefits on tax-free basis while still alive.

Accepted Answer

A) True 
 B)False  True

Question 3

The needs based approach should be used to determine whether life insurance is needed and how much.

Accepted Answer

A) True 
 B)False  True

Question 4

What year is the Federal Estate tax scheduled to end?

Accepted Answer

A) 2010 
B) 2011 
C) 2015 
D) never 
A) 2010 
B) 2011 
C) 2015 
D) never

Question 5

The text mentioned several reasons for purchasing "business" life insurance.Which of the following reasons was NOT mentioned?

Accepted Answer

A) business continuation 
B) fringe benefits 
C) key person insurance 
D) protection from creditor's claims 
A) business continuation 
B) fringe benefits 
C) key person insurance 
D) protection from creditor's claims

Question 6

The early adult years are mainly characterized by pre-retirement planning.

Accepted Answer

A) True 
 B)False

Question 7

The present value of an education fund increases as one gets closer to the college years.

Accepted Answer

A) True 
 B)False

Question 8

In a key-employee insurance purchase,the business should be the owner and the beneficiary of the policy.

Accepted Answer

A) True 
 B)False

Question 9

People are more likely to purchase adequate amounts of life than property insurance.

Accepted Answer

A) True 
 B)False

Question 10

Mr.& Mrs.Clinton are in their 80's. They have saved millions of dollars and need to begin taking steps to minimize their estate tax liability. They have asked you for advice,and you tell them,"Give each of your children,grandchildren,and great-granchildren a cash gift to start spending down your estate. You can do this once a year,and you'll have no gift tax liability. Just make sure that you give each person no more than ____________."

Accepted Answer

A) $10,000 
B) $11,000 
C) $15,000 
D) $22,000 
A) $10,000 
B) $11,000 
C) $15,000 
D) $22,000

Question 11

With respect to a trust fund,what is the role of the trustee?

Accepted Answer

A) provide the initial funding for the trust 
B) receive the benefits of the trust 
C) provide management of the trust's property 
D) determine the beneficiary of the trust 
A) provide the initial funding for the trust 
B) receive the benefits of the trust 
C) provide management of the trust's property 
D) determine the beneficiary of the trust

Question 12

With five owners of a business,an entity purchase plan usually makes more sense than a cross-purchase plan.

Accepted Answer

A) True 
 B)False

Question 13

The Federal Estate Tax is a flat percent on all assets owned at death.

Accepted Answer

A) True 
 B)False

Question 14

Which formula shows the needs based method of estimating the amount of life insurance needed?

Accepted Answer

A) life insurance needed = present value of future income 
B) life insurance needed = burial + education food shelter 
C) life insurance needed = income + social security savings 
D) life insurance needed = total needs existing assets to meet the needs 
A) life insurance needed = present value of future income 
B) life insurance needed = burial + education food shelter 
C) life insurance needed = income + social security savings 
D) life insurance needed = total needs existing assets to meet the needs

Question 15

When an insured dies with an incident of ownership in a life insurance contract

Accepted Answer

A) the face amount is included in the gross estate 
B) the face amount is not taxed at all due to a loophole in estate tax laws 
C) only the cash value at death is included in the estate 
D) onl 2 is taxed due to the spouse's assumed half ownership 
A) the face amount is included in the gross estate 
B) the face amount is not taxed at all due to a loophole in estate tax laws 
C) only the cash value at death is included in the estate 
D) onl 2 is taxed due to the spouse's assumed half ownership

Question 16

Which of the following would not be considered a need in the needs-based approach?

Accepted Answer

A) burial fund 
B) fund to cover the equity in the home 
C) college education fund 
D) debt retirement fund 
A) burial fund 
B) fund to cover the equity in the home 
C) college education fund 
D) debt retirement fund

Question 17

Sound financial planning requires a trade off between

Accepted Answer

A) risk and return alternatives 
B) gratification and savings 
C) investment and saving alternatives 
D) fees and returns 
A) risk and return alternatives 
B) gratification and savings 
C) investment and saving alternatives 
D) fees and returns

Question 18

Which of the following is not a business use of life insurance?

Accepted Answer

A) to protect a business against loss caused by the death of a key person 
B) to provide a means of rewarding and retaining valuable personnel 
C) to lower business losses when an employee is fired 
D) to provide some amount of life insurance to employees 
A) to protect a business against loss caused by the death of a key person 
B) to provide a means of rewarding and retaining valuable personnel 
C) to lower business losses when an employee is fired 
D) to provide some amount of life insurance to employees

Question 19

Grandpa Jones is a divorced elderly man (and quite a catch according to the ladies at the retirement home). He has a lot of money and would like to minimize his estate tax liability as much as possible. He has decided to give each of his children,grandchildren,and great-grandchildren a cash gift. How much can he give to each child and avoid gift tax liability?

Accepted Answer

A) $10,000 
B) $11,000 
C) $15,000 
D) $22,000 
A) $10,000 
B) $11,000 
C) $15,000 
D) $22,000

Question 20

Which of the following statements is false concerning the taxation of life insurance?

Accepted Answer

A) beneficiaries receive death benefits free from any federal taxation 
B) the value of the life insurance death benefit is always included in the insured's estate 
C) if a non insured/owner dies, the value included in the decedent's estate is approximately the cash value of the insurance contract 
D) interest earned on settlement proceeds is taxable 
A) beneficiaries receive death benefits free from any federal taxation 
B) the value of the life insurance death benefit is always included in the insured's estate 
C) if a non insured/owner dies, the value included in the decedent's estate is approximately the cash value of the insurance contract 
D) interest earned on settlement proceeds is taxable

Exam 12: Professional Financial Planning

The best financial plan for financing a child's college education requires:

A terminally ill insured may be able to withdraw life insurance death benefits on tax-free basis while still alive.

The needs based approach should be used to determine whether life insurance is needed and how much.

What year is the Federal Estate tax scheduled to end?

The text mentioned several reasons for purchasing "business" life insurance.Which of the following reasons was NOT mentioned?

The early adult years are mainly characterized by pre-retirement planning.

The present value of an education fund increases as one gets closer to the college years.

In a key-employee insurance purchase,the business should be the owner and the beneficiary of the policy.

People are more likely to purchase adequate amounts of life than property insurance.

With respect to a trust fund,what is the role of the trustee?

With five owners of a business,an entity purchase plan usually makes more sense than a cross-purchase plan.

The Federal Estate Tax is a flat percent on all assets owned at death.

Which formula shows the needs based method of estimating the amount of life insurance needed?

When an insured dies with an incident of ownership in a life insurance contract

Which of the following would not be considered a need in the needs-based approach?

Sound financial planning requires a trade off between

Which of the following is not a business use of life insurance?

Which of the following statements is false concerning the taxation of life insurance?

Fundamentals and Terminology

Defining the Insurable Event

Risk Management

Financial Services Companies

Insurance Occupations

the Insurance Market: the Economic Problem

Insurance Regulation

Insurance Contracts

Basic Property and Liability Insurance Contracts

Homeowners Insurance

the Personal Auto Policy

Life Insurance Policies

Standard Life Insurance Contract Provisions And Options

Annuities

Medical Expense and Disability Insurance

Advanced Topics in Risk Management

Commercial Property Insurance

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Bonding,Crime Insurance and Reinsurance

Employee Benefits

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