Annuities and Insurance Products in Retirement Flashcards
6 cards from real CRPC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Annuities and Insurance Products in Retirement flashcards as text
What is the primary role of permanent life insurance in retirement income planning?
Answer: To provide a tax-free death benefit, supplement retirement income via policy loans, and create an estate legacy
Permanent life insurance accumulates cash value accessible tax-free through loans and withdrawals, can supplement retirement income, and leaves a legacy for heirs.
How does an Indexed Universal Life (IUL) policy function as a retirement planning tool?
Answer: It is a permanent life policy with index-linked cash value growth and tax-free income potential via policy loans
IUL policies provide permanent death benefit protection combined with index-linked cash value accumulation accessible tax-free via policy loans in retirement.
What is the primary risk when using life insurance policy loans as a retirement income source?
Answer: Excessive loans can cause the policy to lapse, creating a large taxable event on outstanding loan balances
If outstanding loans and accrued interest grow to exceed the cash value, the policy lapses, making all outstanding loan balances immediately taxable as ordinary income.
What is a split-dollar life insurance arrangement?
Answer: An arrangement where two parties share premium costs and policy benefits, typically employer and employee
In a split-dollar arrangement, two parties—typically employer and employee—share both the premium payments and the benefits of a life insurance policy.
What is the federal annual gift tax exclusion amount for 2024?
Answer: $18,000
The annual gift tax exclusion for 2024 is $18,000 per recipient, allowing individuals to gift up to this amount to any number of recipients without gift tax implications.
What is the primary estate planning benefit of an Irrevocable Life Insurance Trust (ILIT)?
Answer: Life insurance proceeds are excluded from the taxable estate while providing liquidity for estate taxes
Because an ILIT owns the life insurance policy rather than the insured, death proceeds bypass the insured's taxable estate while providing liquidity to pay estate taxes or benefit heirs.