LLQP Life Insurance · Component 1.1 · 35% of the exam
A client wants insurance to fund a bequest to a charity but also wants the donation credit during her lifetime. Which arrangement achieves that?
- ALeaving the policy to her estate with instructions in the will to donate the proceeds to the charity once the estate has been settled
- Transferring ownership to the charity and continuing to pay the premiums, which then earn donation receipts
- CCancelling the policy and donating the cash value, so that she receives a receipt for the full amount now
- DNaming the charity as beneficiary, so that the estate receives a credit for the proceeds at death
Correct answer: B) Transferring ownership to the charity and continuing to pay the premiums, which then earn donation receipts
When a charity owns the policy, the donor's premium payments are gifts that generate annual receipts. Naming the charity as beneficiary instead produces a credit at death. Which is better depends on the client's tax position now versus at death.
Why the other options are wrong
- ALeaving it to the estate produces no charitable credit unless the will directs a gift.
- CCancelling funds nothing.
- DA beneficiary designation gives the credit at death, not during life.
Exam tip
Charity as owner = credits during life; charity as beneficiary = credit at death.
Common mistake
Assuming both arrangements produce the same tax result.
What this tests
CISRO competency component 1.1 — Assess the client's needs and situation — which is weighted at 35% of the Life Insurance module. Written against the published curriculum.
More from component 1
- A client's existing policies were all sold by another agent who has left the business. The reviewing agent should:
- A client supports an adult child with a permanent disability who will never be self-sufficient. In the needs analysis this is:
- A self-employed client's income fluctuates widely year to year. When determining the income to replace, the agent should:
- A 58-year-old client plans to retire at 65 and has a pension that will pay a survivor benefit. How does time to retirement affect the life insurance need?
- Which of the following is a capital expense arising at death, rather than an ongoing income need?
- A client is the sole income earner in a household with a stay-at-home spouse and two young children. The greatest risk that life insurance on the client addresses is:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.