LLQP Life Insurance · Component 1.1 · 35% of the exam
A farming client wants the land to pass to the child who works it. The agent should note that:
- Athe deemed disposition rules do not apply to any property used in a business
- Bfarm property always passes free of tax to any child the owner chooses to name
- a rollover may be available for qualifying farm property, and the other children may need equalizing
- Dfarmland cannot be transferred at death without first being sold on the open market
Correct answer: C) a rollover may be available for qualifying farm property, and the other children may need equalizing
Qualifying farm property can roll to a child on a tax-deferred basis, which keeps the operation intact. Children who do not receive the land often need to be equalized, and insurance is the usual funding source.
Why the other options are wrong
- AThe deemed disposition applies to business property generally.
- BThe rollover applies to qualifying property and qualifying recipients.
- DFarmland passes by the will without any requirement to sell it.
Exam tip
Farm rollover keeps the land intact; insurance equalizes the other children.
Common mistake
Assuming all farm property transfers are automatically tax-free.
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.