This quiz is part of the introductory curriculum for the graduate course Personal Financial Planning 5325 "Introduction to Charitable Planning" from Texas Tech University. For free downloads of the audio lectures and PowerPoint slides for this course, or to learn about the online Graduate Certificate in Charitable Financial Planning at Texas Tech University, go to www. EncourageGenerosity. Com
Giving an existing policy to charity
Creating a new policy to give to charity with charity as sole death beneficiary, where future donations will be made to the charity, allowing the charity to make future premium payments
Replacing wealth for heirs who were initially disadvantaged by the use of a charitable planning technique
Creating a new policy to give to charity where future premium payments (deductible as charitable gifts) on the policy owned by the charity will be made by the donor to the insurance company, and where the charity will receive all death benefits of the policy
Creating a new policy to give to charity where future premium payments (deductible as charitable gifts) on the policy owned by the charity will be made by the donor to the insurance company, and where some of the death benefit of the policy will be given to the donor’s children.
I & II
I, II & IV
I, II & V
III only
III, IV, & V
Because the Charitable Remainder Trust produces a stream of income that can be used to pay for life insurance premiums
Because the Charitable Remainder Trust produces an initial charitable tax deduction, the value of which could help to pay for life insurance premiums
Because the Charitable Remainder Trust leaves its principal to charity at death, exclude the heirs, and life insurance naming the heirs can help to mitigate this loss of inheritance
Because the ILIT owned life insurance can pass estate tax free to heirs, whereas the assets transferred to the Charitable Remainder Trust may have been heavily taxed if left to the heirs
Because the Irrevocable Life Insurance Trust is a charitable entity preventing the payment of income taxes on the appreciation of the underlying life insurance policy
Capital gains taxes
Estate taxes
Income taxes due to a charitable deduction
All of the above
None of the above
Because the remainder interest generates lifetime income
Because the remainder interest avoids the payment of capital gain tax if the donor’s remaining interest is sold at a profit
Because the gift of a remainder interest in farmland to charity generates an immediate income tax deduction
Because the gift of a remainder interest is a partial interest gift, and thus not deductible for income tax purpose
Because the gift of a remainder interest in farmland to charity reduces the payment of estate taxes due to the charitable deduction
Because, unlike the ILIT, the shares of stock will create capital gains tax liability at death
Because, unlike the ILIT, the shares of stock will create income tax liability at death
Because the ILIT life insurance death benefit can pass to the heir without the payment of estate taxes
Because the ILIT can be funded without consideration of gift tax implications
Because the potential post-death appreciation is higher for the ILIT distribution
If the donor bought too much insurance for actual or current needs
If the donor bought insurance for children who are no longer dependent
If the donor is terminally ill and knows the charity will surrender the policy for its cash value
If the donor bought insurance for a buy-sell agreement that is no longer needed
If the donor does not need the cash value in the life insurance policy
Use the first premium paid for fair market value of a paid up policy and replacement cost for the value of a newly-issued policy.
Use the interpolated terminal reserve plus the unused part of the last premium for fair market value of a paid-up policy and the first premium paid for the value of a newly-issued policy.
Use the interpolated terminal reserve plus the unused part of the last premium for fair market value of a newly-issued policy and the first premium paid for the value of a paid-up policy.
Use the first premium paid for fair market value of a newly-issued policy and replacement cost for the value of a paid up policy.
Use the replacement cost for the fair market value of a newly-issued policy and the interpolated terminal reserve plus the unused part of the last premium for fair market value of a paid-up policy
IRS Form 8283 Noncash Charitable Contributions
A statement from the life insurance company or agent indicating the fair market value of the policy
A note from the charity before taxes are filed or due indicating the date, location, and description of the property and that “no goods or services were provided in exchange for these gifts”
Summary of a qualified appraisal attached to the tax return
The donor’s own reliable records of the gift, the charity, the date, the place, and fair market value
$0
$2,000
$98,000
$100,000
$102,000
Ask the donor to continue to pay premiums
Surrender it for cash value
Pay premiums from the charity’s funds if this maximizes the expected net return from the policy
Sell the policy in the life settlement market
Ask the donor to continue to pay premiums in exchange for leaving the donor’s children as beneficiaries of the policy
The donor creates a new policy owned by the charity
The donor makes gifts to the charity which the charity can use to make premium payments
The donor makes payments to the insurance company to pay the premiums on the policy owned by the charity
The death benefit on the policy is payable to the charity
The death benefit on the policy is payable half to the charity and half to the donor’s child
The donor creates a new policy owned by the charity
The donor makes gifts to the charity which the charity can use to make premium payments
The donor makes payments to the insurance company to pay the premiums on the policy owned by the charity
The death benefit on the policy is payable to the charity
The charity provides receipts to the donor reflecting the gifts given to pay for the policy premiums
Donors may give less in current gifts to the charity because they are also making premium payments (i.e., current giving is cannibalized)
The charity may not, under state law, have an insurable interest sufficient to justify a new policy of the intended size
Depending on policy structure, the donor may give for years, and charity receives nothing due to later policy lapse
The charity may prefer to have current gifts today, rather than waiting to receive a benefit at the death of the donor
Premium payments made by the donor directly to the life insurance company will not result in ongoing charitable deductions for the donor
Require policies with a relatively short-term before they are projected to no longer need additional premium payments
Require policies from highly rated insurance companies
Require that policy projections on reaching the point where additional premium payments are no longer needed must be based upon reasonable interest rates
Require that the donor give money for term life insurance policies only
Require that policy projections on reaching the point where additional premium payments are no longer needed must be based upon the donor living to age 100, rather than a younger age such as 80