Deck 44: Planning for the Future: Estates and Insurance

Question 1

Jose and Juanita are first cousins.Jose lives in San Francisco,California;Juanita lives in Toronto,Canada.The two have met only once in life,and may never meet again.Nonetheless,because they are blood relatives,Juanita has an insurable interest in Jose's life.

Answer 1

False

Question 2

Which of the following property is NOT affected by a will?

A)life insurance
B)personal property
C)anatomical gifts
D)individual bank accounts

Answer 2

A

Question 3

Estate planning has two primary goals: to ensure property is distributed as the owner desires and to minimize estate taxes.

Answer 3

True

Question 4

The percentage of a decendent's estate that a spouse can claim is called a forced share.

Question 5

A trust created in a will is

A)an inter vivos trust.
B)a constructive trust.
C)a testamentary trust.
D)a probate trust.

Question 6

Myron had two children,Cheryl and Pete,who predeceased him.Cheryl had three children and Pete had one child.Myron had a will.Which of the following is true?

A)If Myron's will indicates that the issue are to inherit per stirpes, Pete's child will receive one half of Myron's estate.
B)If Myron's will indicates that the issue are to inherit per stirpes, Pete's child will receive one fourth of Myron's estate.
C)If Myron's will indicates that the issue are to inherit per capita, Pete's child will receive one half of Myron's estate.
D)If Myron's will indicates the issue are to inherit per capita, each of Cheryl's children will receive one sixth of Myron's estate.

Question 7

Property of a person who dies without a will is distributed according to intestacy laws.

Question 8

April purchased a life insurance policy on herself.On her death,the proceeds of the insurance were to be paid to her minor child,Ryan.Ryan is the beneficiary.

Question 9

Legal requirements for a will depend on state law,but generally include all but which of the following?

A)A writing
B)Signatures of at least three witnesses
C)The testator's signature
D)Witnesses who will not inherit under the will

Question 10

Reva prepares and signs a document that she intends to be her will.If she has not followed the legal technicalities of her state regarding executing a will,the court may not enforce the will.

Question 11

In purchasing life insurance,Kelsey concealed the fact that she has a muscular disease.The insurance company can void the policy if the muscular disease is found to be a material fact.

Question 12

An executor who is related to the testator is not entitled to compensation.

Question 13

Victor purchased $1 million of insurance on his home even though the house was only worth $500,000.Victor's house was destroyed by lightning.Under the insurance policy,Victor will be able to recover $1 million.

Question 14

The Uniform Probate Code has been adopted in all states.

Question 15

Per capita means each heir gets an equal share of an estate.

Question 16

Parents may not disinherit their minor children without good reason.

Question 17

Jacob has been quite ill.When three of his neighbors come to visit one day,he tells them that he is dying and that he wants them to witness his oral will.In some states,he can validly dispose of his personal property by his witnessed,oral statements.

Question 18

The only function of a will is to dispose of a person's property upon death.

Question 19

A later will revokes a prior will only if that revocation is clearly stated.

Question 20

The percentage of people dying without a will is approximately

A)5%.
B)25%.
C)65%.
D)90%.

Question 21

Joel is displeased with his son's lifestyle choices and,instead of dividing his estate,Joel wants to leave all of his property to his daughter,Marie,when he dies.Joel may

A)not leave everything to his daughter and nothing to his son.If Joel tries to do this, his son can take a forced share of his father's estate.
B)disinherit his son, but he must indicate in the will his reason for doing so.
C)disinherit his son for any reason as long as Joel indicates in the will that the son was omitted on purpose.
D)disinherit his son only if Joel leaves the son a nominal amount, such as $1.

Question 22

Lying on her hospital bed alone one night,Phyllis grabs a pen and paper.With the last of her strength,she wrote her last will and testament leaving all her worldly possessions to her next-door neighbor,Aaron.This type of will is

A)a nuncupative will.
B)a disinherited children's share will.
C)a holographic will.
D)illegal in all states.

Question 23

Which of the following is generally covered under casualty insurance?

A)Employee theft or embezzlement
B)Disability
C)Transportation insurance
D)Vandalism to property

Question 24

The major disadvantage of a trust is

A)expense.
B)lack of privacy.
C)an often lengthy probate process.
D)lack of control.

Question 25

Insurance obtained by a limited partnership on the life of the general partner would be

A)double indemnity insurance, because both the limited partnership and the general partner are insured.
B)key person life insurance, because the general partner is a key person, contributing a great deal to making the business successful.
C)a co-insurance policy because both the limited partnership and the general partner are insured.
D)whole life or straight life insurance which builds a cash value.

Question 26

Sarah has car insurance.While driving her automobile,Sarah negligently ran a red light and hit Vi's car.Which type of coverage will pay for the damage done to Vi's car?

A)liability insurance
B)comprehensive insurance
C)accident insurance
D)uninsured motorist insurance

Question 27

Darcy buys a life insurance policy on her own life,under which she pays the annual premiums.The insurance is issued for a specific period,but is renewable for similar periods.Darcy is covered only as long as she makes the payments.There is no cash value portion to the policy.Darcy probably owns

A)whole life insurance.
B)key-person life insurance.
C)term life insurance.
D)an annuity.

Question 28

Liability policies,such as personal liability,professional malpractice,or business liability insurance,do NOTprotect the insured against

A)a personal injury on the insured's property, such as the mail carrier who slips and falls on the owner's sidewalk.
B)intentional harm caused by the insured.
C)claims for property damaged by the insured.
D)someone injured by the insured away from home or business.

Question 29

Abraham has just purchased his first car.His bank,First State Bank,loaned him the money to buy the car and has required him to purchase insurance to protect the car as the collateral for the loan.Which basic types of coverage should Abraham buy to satisfy the bank requirement and to best protect himself from the risks of operating an automobile?

A)collision coverage only
B)collision and comprehensive coverage only
C)collision, uninsured motorist, and comprehensive coverage
D)collision, uninsured motorist, comprehensive, and liability coverage

Question 30

Under the Uniform Anatomical Gift Act,

A)an individual may indicate the desire to be an organ donor by putting a provision in his will.The provision will take effect after probate of the will.
B)the willingness to be an organ donor may be indicated by signing an organ donation card in the presence of one disinterested witness.
C)family members of a decedent have no right to make a gift of the decedent's organs if the decedent did not make an affirmative indication of the desire to be a donor during her lifetime.
D)an effective donation may be made by an individual in a will or on a witnessed organ-donation card or by family members after the person's death as long as the person did not indicate a desire not to be a donor.

Question 31

In order to travel extensively and not worry about handling her affairs,Lee transfers most of her assets into a trust,with her bank serving as trustee.She has created ________ trust.

A)a travel
B)a testamentary
C)a constructive
D)an inter vivos

Question 32

Under which of the following does the insurer promise to pay the insured a fixed yearly amount,as guaranteed income,after the insured attains a specified age?

A)straight life policy
B)whole life policy
C)universal life policy
D)deferred annuity contract

Question 33

Dr.Gavornne advises his very ill patients to prepare a living will.The purpose of a living will is to

A)make a disposition of property.
B)express a desire not to have extreme medical treatment that would prolong their lives.
C)transfer life insurance.
D)consent to organ donation.

Question 34

Pamela applies for a life insurance policy with Forever Young Insurance Company.When completing the application form about past surgeries,Pamela forgot about a past outpatient surgery when she had an infected hang-nail removed and her toe treated.One year after issuing the policy,Pamela died suddenly from a brain aneurysm.Forever Young denies payment under the policy based on misrepresentation.If Pamela's sister,Paula,sues Forever Young,she will most likely

A)win, because once an application has been accepted, an insurer may not use a misrepresentation on the application to avoid liability.
B)win, because Pamela's misrepresentation was not a material fact and did not increase Forever Young's risk in insuring Pamela's life.
C)lose, because Pamela's application contained a misrepresentation of material fact.
D)lose, because an insurer can always use any misrepresentation on an application to avoid paying.

Question 35

Which of the following does NOTact as a revocation of a will?

A)Creating a codicil
B)The testator's putting an X through it
C)Physically destroying the will by intentionally shredding it
D)Signing a new will that expressly revokes prior wills

Question 36

Which of the following is true about wills?

A)A will can be amended to change specific terms by execution of a codicil.
B)The testatrix cannot disinherit her minor children without stating a reason in the will.
C)If the will meets the legal technicalities, the surviving spouse cannot override it.
D)Once a will is written, it cannot be changed.

Question 37

Which of the following insurance policies continues for a stated period of time with the premiums increasing with the age of the insured?

A)double indemnity
B)term insurance
C)annuity contract
D)comprehensive insurance

Question 38

An insurance policy must meet which of the following?

A)state statutory requirements for tort law
B)federal statutory requirements for tort law
C)common law requirements for contracts
D)common law requirements for tort law

Question 39

If Walter becomes incompetent to manage his affairs,

A)his chosen attorney-in-fact can make decisions for him if he appointed the person in a durable power of attorney with a springing power to become effective upon Walter's incompetence.
B)a court will allow an immediate family member to manage his affairs.
C)his will becomes effective, and his executor or executrix will manage his business and personal decisions.
D)?his property will be placed in a trust until such time as he is able to manage his affairs himself.

Question 40

Which of the following is NOTrequired to create a valid trust?

A)Legal age and sound mind of the grantor
B)Witnesses
C)A beneficiary(ies)
D)Property transferred to the trust

Question 41

Mountain Ridge Bank has been named trustee for a $100,000 trust Fred and Martha Betts established for "the living children of the grantors." List the requirements for establishing a trust.Identify the primary obligation of the trustee and discuss the fiduciary duty of the trustee.

Question 42

Discuss the differences between a will and a trust.

Question 43

Singleton,an eighty-year-old widower,remarried.The next day,he made a will leaving everything to his son,Joey.A week after his marriage,Singleton died.How will his estate be handled?

Question 44

Insurance policies often contain a covenant of good faith and fair dealing.Even if the clause is not in the policy,often courts will imply it.Explain the covenant of good faith and fair dealing and provide an example illustrating when an insurance company might breach this covenant.

Question 45

Identify four ways a trust can be terminated.