A gift inter vivos policy is set up with cover of 拢200,000 in the first year....?

A gift inter vivos policy is set up with cover of 拢200,000 in the first year. How much cover will apply in the final year of the policy?
A. 拢34,000
B. 拢40,000
C 拢80,000
D 拢120,000

I know the answer but I am interesed in the working out. How did u get to your answer?

To understand Inter-Vivos you have to realise what a PET is.

If someone gives a gift to another person this is a Potentially Exempt Transfer (PET). If the first person dies then the second person incurs a tax liability of 40% - this liability gives them an insurable interest in the life of the donor. In this case the gift must be 拢500,000.

However each year that the donor lives after giving the gift reduces the liability to pay tax until after 6 years there is no liability remaining - the gift is tax exempt. The insurable interest therefore decreases by a sixth each year until in the final year it is a sixth of the original liability.

Thus an inter-vivos insurance policy is a decreasing term policy on the life of the donor by the recipient for the tax liability on the death of the donor.

Tags

　　Renting & Real Estate 　　Personal Finance 　　Investing 　　Insurance 　　Credit 　　Corporations 　　Other - Careers & Employment

Related information

Cancellation of health insurance due to work-related injury, is that legal?

Only if your primary carrier was used for a work-related injury that would have been covered by workers comp

...

Insurance for an engagement ring?

You need to get a Personal Article Floater for your home/renter's insurance. That's what I did. You pay an additional annual premium, and the ring is covered to the deductible you choo...

What if you have done drugs in the past and know looking for life insurance that requires a blood test?

Number one, you need to be honest with your insurance broker. If they are good, they should understand they need to find a good company that can handle your situation better than most. Here i...

Can kids under 18 apply for any type of medical care?

Derek... I don't have an answer to your question but I was wondering.... do you go to South County? In Virginia? Fairfax County??? Because there is a guy named Derek that looks exactly li...

Can someone help me ...?

You just call the insurance company and ask.

...

Can anyone from LIC tell me if there is any Policy for car workshop mechanics.Premium must be low.?

Not at that price. That's not a reasonable price for the risk.

...

Would you deal directly with an insurance adjuster if injured in a car accident or get a lawyer?

Why hire a lawyer - ie, give up 30%, if the adjuster is going to do it for you?? Try the adjuster first. Ask YOUR AGENT for advice second. The lawyer should be last resort.

...

Would this be a pre existing condition? (insurance question)?

Did you disclose the leg injury on your application for the new policy? If you didn't, your new policy can be voided completely. If you did disclose the leg injury on the application and w...