Understanding Viatical Settlements FINAL EXAM (CT 6000112034) (2023)

Ellen cannot perform two of the activities of daily living without substantial assistance. Under HIPAA, she is considered

Which of the following correctly defines the viator in a viatical settlement arrangement?

Large Settlements Inc., a major life settlement broker, knew that a prospective viator had purchased a life insurance policy through clean sheeting. In order to be able to sell the policy in the secondary market without risking rescission, it has chosen to wait until the contestable period expires. What viatical settlement fraud is Large Settlements Inc. committing?

Who is the intended victim in a dirty sheeting viatical fraud scheme?

Helen wants to exchange her life insurance policy for a long-term care policy under IRC §1035. When did/will such a tax-free exchange first become available under the Internal Revenue Code?

Ellen has exchanged her existing life insurance policy for a new life insurance policy under IRC §1035. The contestable period under the replaced policy had expired. Which of the following statements is correct concerning the contestable period under her new coverage?

What would be the approximate reserve under a whole life insurance policy if the present value of future premiums were $100,000 and the present value of benefits promised under the policy were $150,000?

Peter paid total premiums of $15,000 for his life insurance policy, which has a cash value of $17,500. The policy is not a modified endowment contract. If he borrowed $3,000 from the policy, how much of the loan will he be required to recognize as income?

Harley’s life insurance policy is not a modified endowment contract. How much, if any, of the $5,000 withdrawal he took from it must he include in his income if his total paid premiums were $12,000 and his cash surrender value was $15,000 at the time of the withdrawal?

Sheila’s life insurance policy is a modified endowment contract and, as such, is subject to unfavorable LIFO tax treatment. Its cash value is $15,000 and her cost basis in the policy is $12,000. How much, if any, of a $13,000 withdrawal she took from the policy must she include in her income?

Bill’s life insurance policy is a modified endowment contract for which he paid aggregate premiums of $25,000. At the time that $750 in dividends was applied to his policy to purchase paid-up additions, his cash surrender value was $27,000. How much, if any, of the dividends is Bill required to include in his income?

What is the process under which a terminally ill insured’s life insurance policy is purchased in the secondary market?

Under the NAIC Viatical Settlements Model Act, life settlement providers and life settlement brokers must be licensed

Under the NAIC Viatical Settlements Model Act, how soon following the date a viator executes documents changing the ownership of a life insurance policy to a life settlement provider must the provider notify the insurer of the transaction?

Monolithic Enterprise, Inc., has sent flyers to all the local senior centers in the state offering seniors a way to make money. In exchange for $5,000 in cash, the senior will apply for a $350,000 life insurance policy on his or her life, with the premiums to be financed. After two years, the policy is sold to investors who will collect the death proceeds at the senior’s death. What is this arrangement?

A STOLI arrangement violates which of the following principles of insurance contract law?

Based on the following characteristics, which of the following is NOT a likely candidate for a STOLI arrangement?

Helen purchased her life insurance policy last year. She just applied for a life settlement and has been advised that her life insurance policy is a non-conforming policy. What has she been told?

Jean, a registered representative for a large broker-dealer, has received written approval from her broker-dealer to participate in a life settlement transaction for a customer. What is the broker-dealer’s responsibility with respect to the transaction?

John has just signed and sent the life settlement closing documents, including the assignment forms to change ownership of his policy, to the life settlement provider. He has asked you how soon he can expect his settlement check. Which of the following is correct under the NAIC Viatical Settlements Model Act?

When an insured meets the definition of terminally ill or chronically ill, HIPAA extends the tax-free treatment of death benefit proceeds from a life insurance policy to

Audrey is contemplating the sale of her life insurance policy under a life settlement. How will the proceeds she receives under the life settlement be taxed?

Which of the following is responsible for payment of life insurance policy premiums following a policyowner’s sale of the policy in a life settlement?

Ellen has been diagnosed with a terminal illness and has decided to try to sell her life insurance policy in a viatical settlement. Ellen’s life expectancy is only 18 months. Her policy’s death benefit is $100,000, and there is an outstanding policy loan of $20,000. Which of the following settlement amounts is likely to be appropriate?

Bill received a life settlement check on June 1 but has decided he made a bad decision. Under the NAIC Viatical Settlements Model Act, what is the last day that he can rescind the sale?