1. Uninsured Motorist coverage:
A) provides first-dollar coverage for damage to the insured's own autos
B) protects the insured against fmancially irresponsible drivers who have no auto liability msurance
C) doubles the premium for liability coverage
D) is available only to drivers with excellent driving records
2. Which one of the following is not usually involved in the provision of funding for college expenses?
A) Needs based life insurance
B) Life insurance trust
C) Section 529 plan
D) All of the above
3. Which of the following statements is false?
A) People with a small amount of assets do not typically need a will.
B) A parent can use a will to appoint a guardian for hislher children.
C) A valid will can minimize probate problems.
D) A legally enforceable will must be made when a person is of sound mind.
4. Which of the following is !lQt a business use of life insurance?
A) To protect a business against loss caused by the death of a key person
B) To provide a means of rewarding and retaining valuable personnel
C) To lower business losses when an employee is fired
D) To provide some amount oflife insurance to employees
5. All of the following are typical business uses of life insurance except:
A) protect the business against loss caused by the death of a key person
B) provide a means of rewarding and retaining valuable employees
C) provide severance pay to employees when jobs are terminated
D) protect the value of the partnership at the death of an owner/insured
6. For which year(s) is (are) the Federal Unified Estate Taxes known?
A) 2011
B) 2012
C) 2011 and 2012
D) All years after 2011
7. To properly handle the orderly transfer of business ownership at death, it is necessary to have:
A) an unfunded buy-and-sell agreement
B) a life insurance contract to fund the purchase and a buy-and-sell agreement
C) a verbal understanding of the valuation method
D) a verbal commitment of the heirs to sell the business
8. Federal Estate Taxes:
A) are also called uniform transfer taxes
B) are different from state to state
C) are levied on the fair market value of the gross estate
D) are levied on the taxable estate
9. The main financial problem associated with the early adult years is:
A) compensating for loss of income to the family in the event of a premature death of main wage earner
B) loss of retirement income in the event ofa premature death of main wage earner
C) the problem of paying estate taxes
D) providing lifelong income for the children
10. Purchasing life insurance on the homemaker:
A) makes no sense because the homemaker generates no income
B) should not be done because of the moral hazard it creates in the working spouse
C) makes sense in many cases due to the cost of service replacement and it would help the family maintain a "normal" lifestyle
D) is very necessary when the homemaker has no minor children
11. When a person dies, the gross estate is:
A) taxed at the rate of 50%
B) adjusted for certain gifts made during the decedent's lifetime
C) subject to the federal estate and gift tax
D) not taxed if death bed gifts are made to eligible children
12. Which formula shows the needs based method of estimating the amount of life insurance needed?
A) Life insurance needed = present value of future income
B) Life insurance needed = burial + education - food - shelter
C) Life insurance needed = income + social security - savings
D) Life insurance needed = total needs - existing assets to meet the needs
13. Which of the following statements is false concerning the taxation oflife insurance?
A) Beneficiaries receive death benefits free from any federal taxation.
B) The value of the life insurance death benefit is always included in the insured's estate.
C) If a non-insured/owner dies, the value included in the decedent's estate is approximately the cash value of the insurance contract.
D) Interest earned on settlement proceeds is taxable.
14. When an insured dies with an incident of ownership in a life insurance contract:
A) the face amount is included in the gross estate
B) the face amount is not taxed at all due to a loophole in estate tax laws
C) only the cash value at death is included in the estate
D) only is taxed due to the spouse's assumed half ownership
15. The text mentioned several reasons for purchasing "business" life insurance. Which of the following reasons was not mentioned?
A) Business continuation
B) Fringe benefits
C) Key person insurance
D) Protection from creditors' claims
16. Which of the following would !!Q1 be considered a need in the needs-based approach?
A) Burial fund
B) Fund to cover the equity in the home
C) College education fund
D) Debt retirement fund
17. A business firm may utilize life insurance to protect against loss caused by the death of:
A) a key employee
B) a limited partner, not employed by the firm
C) a main supplier
D) a stockholder in a public corporation
18. Which of the following is true?
A) The government discourages retirement saving by providing no tax incentives.
B) To discourage the pre-retirement withdrawal of tax advantaged retirement savings plans, the government imposes a 20% early withdrawal penalty.
C) To discourage the pre-retirement withdrawal of tax advantaged retirement savings plans, the government imposes a 10% early withdrawal penalty on withdrawals made before age 62.
D) If a 40-year-old person becomes disabled, she may be allowed to withdraw tax advantaged savings without paying a tax penalty.
19. Mr. & Mrs. Minetti are in their 80s. They have saved millions of dollars and need to begin taking steps to minimize their estate tax liability. They have asked you for advice, and you tell them, "Give each of your children, grandchildren, and great-grandchildren a cash gift to start spending down your estate." Is this correct?
A) Yes
B) No, because they still will have to pay income taxes on the gifts
C) No, because they will still be subject to the uniform transfer tax
D) No, because there are limits to yearly gifts
20. A "Certified Financial Planner":
A) is a widely recognized financial planning credential
B) can assist people in the financial planning process
C) is not an existing credential
D) A and B above
21. Sound financial planning requires a trade off between:
A) risk and return alternatives
B) gratification and savings
C) investment and saving alternatives
D) fees and returns
22. Which of the following needs for life insurance would be considered permanent?
A) Education fund for surviving children
B) Income fund for surviving children
C) Debt-retirement fund
D) Burial fund
23. Which of the following is one of the three largest financial problems facing middle income Americans?
A) Financing a teenager's automobile
B) Financing college
C) Financing the income needs of a surviving spouse with children
D) Financing the early working years
23. Choose the answer that best describes the purpose of a Section 529 Plan:
A) funding retirement with tax-deferred dollars
B) funding retirement with completely tax-free dollars
C) funding a college education
D) funding retirement
24. With respect to a trust fund, what is the role of the trustee?
A) Provide the initial funding for the trust
B) Receive the benefits of the trust
C) Provide management of the trust's property
D) Determine the beneficiary of the trust
25. "Probate" is best-defined as:
A) choosing investments for a trust fund at death
B) selecting the beneficiary of a trust fund after death of the donor
C) administration of an estate following death of an individual
D) supervising the transfer of property at death