Deck 45: Planning For The Future: Wills,Trusts,And Insurance

Question 1

Jacob has been quite ill.When three of his neighbors come to visit one day,he tells them that he is dying and that he wants them to witness his oral will.In some states,he can validly dispose of his personal property by his witnessed,oral statements.

Answer 1

True

Question 2

Property of a person who dies without a will is distributed according to intestacy laws.

Answer 2

True

Question 3

Victor purchased $1 million of insurance on his home even though the house was only worth $500,000.Victor's house was destroyed by lightning.Under the insurance policy,Victor will be able to recover $1 million.

Answer 3

False

Question 4

A later will revokes a prior will only if that revocation is clearly stated.

Question 5

April purchased a life insurance policy on herself.On her death,the proceeds of the insurance were to be paid to her minor child,Ryan.Ryan is the beneficiary.

Question 6

Jose and Juanita are first cousins.Jose lives in San Francisco,California; Juanita lives in Toronto,Canada.The two have met only once in life,and may never meet again.Nonetheless,because they are blood relatives,Juanita has an insurable interest in Jose's life.

Question 7

In purchasing life insurance,Kelsey concealed the fact that she has a muscular disease.The insurance company can void the policy if the muscular disease is found to be a material fact.

Question 8

Myron had two children,Cheryl and Pete,who predeceased him.Cheryl had three children and Pete had one child.Myron died testate.Which of the following is true?

A) If Myron's will indicates that the issue are to inherit per stirpes, Pete's child will receive one half of Myron's estate.
B) If Myron's will indicates that the issue are to inherit per stirpes, Pete's child will receive one fourth of Myron's estate.
C) If Myron's will indicates that the issue are to inherit per capita, Pete's child will receive one half of Myron's estate.
D) If Myron's will indicates the issue are to inherit per capita, each of Cheryl's children will receive one sixth of Myron's estate.

Question 9

The percentage of people dying without a will is approximately:

A) 5%.
B) 25%.
C) 60%.
D) 90%.

Question 10

The only function of a will is to dispose of a person's property upon death.

Question 11

Reva prepares and signs a document that she intends to be her will.If she has not followed the legal technicalities of her state regarding executing a will,the court may not enforce the will.

Question 12

A trust created in a will is:

A) an inter vivos trust.
B) a constructive trust.
C) a testamentary trust.
D) a probate trust.

Question 13

Per capita means each heir gets an equal share of an estate.

Question 14

Legal requirements for a will depend on state law,but generally include all but which of the following?

A) A writing.
B) Signatures of at least three witnesses.
C) The testator's signature.
D) Witnesses who will not inherit under the will.

Question 15

Estate planning has two primary goals: to ensure property is distributed as the owner desires and to minimize estate taxes.

Question 16

Which of the following property is not affected by a will?

A) Life insurance.
B) Joint tenancy property.
C) Retirement benefits.
D) All of the above.

Question 17

Parents may not disinherit their minor children without good reason.

Question 18

An executor who is related to the testator is not entitled to compensation.

Question 19

The Uniform Probate Code has been adopted in all states.

Question 20

A spouse is entitled to a forced share of a decedent's estate.

Question 21

Insurance obtained by a limited partnership on the life of the general partner would be:

A) double indemnity insurance, because both the limited partnership and the general partner are insured.
B) key-person insurance, because the general partner is a key person, contributing a great deal to making the business successful.
C) a co-insurance policy because both the limited partnership and the general partner are insured.
D) whole life or straight life insurance which builds a cash value.

Question 22

Pamela applies for a life insurance policy with Forever Young Insurance Company.When completing the application form about past surgeries,Pamela forgot about a past outpatient surgery when she had an infected hang-nail removed and her toe treated.One year after issuing the policy,Pamela died suddenly from a brain aneurysm.Forever Young denies payment under the policy based on misrepresentation.If Pamela's sister,Paula,sues Forever Young,she will:

A) win, because once an application has been accepted, an insurer may not use a misrepresentation on the application to avoid liability.
B) win, because Pamela's misrepresentation was not a material fact and did not increase Forever Young's risk in insuring Pamela's life.
C) lose, because Pamela's application contained a misrepresentation of material fact.
D) lose, because an insurer can always use any misrepresentation on an application to avoid paying.

Question 23

Which of the following is true about wills?

A) A will can be amended to change specific terms by execution of a codicil.
B) The testatrix cannot disinherit her minor children without stating a reason in the will.
C) If the will meets the legal technicalities, the surviving spouse cannot override it.
D) Once a will is written, it cannot be changed.

Question 24

In order to travel extensively and not worry about handling her affairs,Lee transfers most of her assets into a trust,with her bank serving as trustee.She has created:

A) a travel trust.
B) a testamentary trust.
C) a constructive trust.
D) an inter vivos trust.

Question 25

Joel is displeased with his son's lifestyle choices and,instead of dividing his estate,Joel wants to leave all of his property to his daughter,Marie,when he dies.Joel:

A) may not leave everything to his daughter and nothing to his son. If Joel tries to do this, his son can take a forced share of his father's estate.
B) may disinherit his son, but he must indicate in the will his reason for doing so.
C) may disinherit his son for any reason as long as Joel indicates in the will that the son was omitted on purpose.
D) may disinherit his son only if Joel leaves the son a nominal amount, such as $1.

Question 26

Lying on her hospital bed alone one night,Phyllis grabs a pen and paper.With the last of her strength,she wrote her last will and testament leaving all her worldly possessions to her next-door neighbor,Aaron.This type of will is:

A) a nuncupative will.
B) disinherited children's share will.
C) holographic will.
D) None of the above.

Question 27

The major disadvantage of a trust is:

A) expense.
B) lack of privacy.
C) it may have to go through an often lengthy probate process.
D) lack of control.

Question 28

Dr.Gavornne advises his very ill patients to prepare a living will.The purpose of a living will is:

A) to make a disposition of property.
B) to express a desire not to have extreme medical treatment that would prolong their lives.
C) to transfer life insurance.
D) to consent to organ donation.

Question 29

Under the Uniform Anatomical Gift Act:

A) an individual may indicate the desire to be an organ donor by putting a provision in his will. The provision will take effect after probate of the will.
B) the willingness to be an organ donor may be indicated by signing an organ donation card in the presence of one disinterested witness.
C) family members of a decedent have no right to make a gift of the decedent's organs if the decedent did not make an affirmative indication of the desire to be a donor during her lifetime.
D) an effective donation may be made by an individual in a will or on a witnessed organ-donation card or by family members after the person's death as long as the person did not indicate a desire not to be a donor.

Question 30

Darcy buys a life insurance policy on her own life,under which she pays the annual premiums.The insurance is issued for a specific period,but is renewable for similar periods.Darcy is covered only as long as she makes the payments.There is no cash value portion to the policy.Darcy probably owns:

A) whole life insurance.
B) key-person life insurance.
C) term life insurance.
D) an annuity.

Question 31

Which of the following does not act as a revocation of a will?

A) Destruction of the will by a house fire.
B) The testator's putting an X through it.
C) Physically destroying the will by intentionally shredding it.
D) Signing a new will that expressly revokes prior wills.

Question 32

Which of the following insurance policies continue for a stated period of time with the premiums increasing with the age of the insured?

A) Double indemnity.
B) Term insurance.
C) Annuity contract.
D) Term insurance.

Question 33

Abraham has just purchased his first car.His bank,First State Bank,loaned him the money to buy the car and has required him to purchase insurance to protect the car as the collateral for the loan.Which basic types of coverage should Abraham buy to satisfy the bank requirement and to protect himself from the risks of operating an automobile?

A) Collision coverage only.
B) Collision and comprehensive coverage only.
C) Collision, uninsured motorist, and comprehensive coverage.
D) Collision, uninsured motorist, comprehensive, and liability coverage.

Question 34

If Walter becomes incompetent to manage his affairs:

A) his chosen attorney-in-fact can make decisions for him if he appointed the person in a durable power of attorney with a springing power to become effective upon Walter's incompetence.
B) a court will appoint a guardian if Walter had no power of attorney.
C) his will becomes effective, and his executor or executrix will manage his business and personal decisions.
D) Both a and b are correct.

Question 35

Sarah has car insurance.While driving her automobile,Sarah negligently ran a red light and hit Vi's car.Which type of coverage will pay for the damage done to Vi's car?

A) Liability insurance.
B) Comprehensive insurance.
C) Collision insurance.
D) Uninsured motorist insurance.

Question 36

Liability policies,such as personal liability,professional malpractice,or business liability insurance,do not protect the insured against:

A) a personal injury on the insured's property, such as the mail carrier who slips and falls on the owner's sidewalk.
B) intentional torts.
C) a negligent act or omission by the property owner.
D) someone injured by the insured away from home or business.

Question 37

Which of the following is generally covered under casualty insurance?

A) Employee theft or embezzlement.
B) Disability.
C) Transportation insurance.
D) Vandalism.

Question 38

Under which of the following does the insurer promise to pay the insured a fixed yearly amount,as guaranteed income,after the insured attains a specified age?

A) Straight life policy.
B) Whole life policy.
C) Universal life policy.
D) Annuity contract.

Question 39

An insurance policy must meet which of the following?

A) State statutory requirements for tort law.
B) Federal statutory requirements for tort law.
C) Common law requirements for contracts.
D) Common law requirements for tort law.

Question 40

Which of the following is not required to create a valid trust:

A) mental capacity of the grantor.
B) witnesses.
C) a beneficiary(ies).
D) property transferred to the trust.

Question 41

Discuss the differences between a will and a trust.

Question 42

Singleton,an eighty-year-old widower,remarried.The next day,he made a will leaving everything to his son,Joey.A week after his marriage,Singleton died.How will his estate be handled?

Question 43

Insurance policies often contain a covenant of good faith and fair dealing.Even if the clause is not in the policy,often courts will imply it.Explain the covenant of good faith and fair dealing and provide an example illustrating when an insurance company might breach this covenant.

Question 44

Identify four ways a trust can be terminated.

Question 45

Mountain Ridge Bank has been named trustee for a $100,000 trust Fred and Martha Betts established for "the living children of the grantors." List the requirements for establishing a trust.Identify the primary obligation of the trustee and discuss the fiduciary duty of the trustee.