CAP Risk Assessment & Underwriting 2

Question 1

Which underwriting factor most directly influences the premium for a charitable gift annuity?

Accepted Answer

The annuitant's age and life expectancy

Answer

Gift annuity rates are primarily determined by the annuitant's age because life expectancy dictates how long payments will be made.

Question 2

A donor establishes a charitable remainder unitrust (CRUT) and names a 45-year-old beneficiary. The primary underwriting concern is:

Accepted Answer

The long payout period due to the beneficiary's young age

Answer

A young beneficiary creates a very long distribution period, substantially increasing the risk that trust assets will be depleted before the charity receives any remainder.

Question 3

In the context of split-interest trusts, what does the '5% probability test' evaluate?

Accepted Answer

Whether there is at least a 5% chance the charitable remainder will receive something

Answer

The IRS 5% probability test ensures there is at least a 5% chance the charity will receive a remainder interest, preventing abusive arrangements.

Question 4

A philanthropic advisor reviews a donor's proposed pooled income fund contribution. Which risk factor is MOST unique to pooled income funds compared to CRATs?

Accepted Answer

The donor cannot predetermine the exact income payment amount

Answer

Pooled income fund payments fluctuate with the fund's actual earnings, so donors cannot guarantee a fixed payment unlike a CRAT with its fixed annuity rate.

Question 5

When underwriting a life insurance policy intended to replace a charitable bequest, the insurer will LEAST likely consider:

Accepted Answer

The charity's tax-exempt status

Answer

Insurers focus on the insured's insurability and the economic justification for the death benefit, not the beneficiary charity's tax status.

(CAP) Certified Philanthropic Advisor Practice Test

(CAP) Certified Philanthropic Advisor Practice Test

CAP Risk Assessment & Underwriting 2