Exam 5: Health: Tax Issues in Life Insurance

If an individual receives benefits from a "qualified" long-term care insurance policy, how are these benefits treated in terms of taxation?

The premiums that an insured chooses to contribute to their life insurance cash value are made with __________ dollars.

A __________ is an official contract between an individual and an insurance company for a guaranteed interest bearing policy that provides tax-deferred earnings and includes optional guaranteed income choices.

If an insured individual has an estate that is valued at $4 million and the estate tax exemption in the year of their death is $1 million, how much of their estate will be subject to estate taxes?

With regard to group life insurance, the IRS has deemed that the first __________ of death benefit coverage may be excluded from the employee's compensation.

If a person earns $50,000 per year and they own an individual health insurance policy, how much would that individual need to spend on his or her medical expenses in order to deduct such expenses on their tax return?

With a Modified Endowment Contract, or MEC, distributions (including policy loans) are subject to income tax to the extent that the gross cash value of the policy exceeds the policy owner's basis in the contract. In addition, a penalty of __________ may also apply if the distribution was made prior to the recipient attaining the age of 59 ½.

A(n) __________ is a special type of life insurance trust that is set up for the purpose of excluding life insurance proceeds from an individual's estate, thus shielding these dollars from estate taxes.

If a life insurance policy lapses due to nonpayment of premiums or from borrowing too much from the policy, all policy loans are treated as being "forgiven" by the IRS, meaning that the loan is no longer considered to be a loan and the funds are not required to be paid back. In this case, then, forgiven loan amounts are treated as __________.

If an individual leaves life insurance proceeds to __________, then these proceeds will not be subject to taxation in their estate at the time of the individual's death.

Withdrawal of a life insurance policy's cash value is typically only taxable when __________.

Are the benefits received from a health insurance policy taxable?

The premiums paid for life insurance coverage in a qualified retirement plan will be __________ by the plan sponsor.

Under which circumstances could the proceeds of a life insurance policy be included in the decedent's taxable estate?

Why do individual life insurance policy beneficiaries receive death benefits free from income taxation?

The cash value in a permanent life insurance policy typically grows on a __________ basis.

A __________ will allow for the direct transfer of money from a non-qualified annuity from one insurance company to another without incurring an IRS penalty or taxation.

In order for life insurance in a qualified retirement plan to be considered incidental, it will have to meet which of the following tests:

Under IRS Section 1035 rules, a life insurance policy may be exchanged penalty-free for a(an) __________.

An insured individual owns a life insurance policy with a face amount of $100,000. If they have a need for long-term care services and they access $40,000 from their life insurance policy in the form of "living benefits" to pay for the cost of the nursing home, upon withdrawal of these funds, how much will be subject to income taxation?