Four years ago, Evelyn created an irrevocable life insurance trust, transferred a life insurance policy that named her as the insured to the trust, and funded it with interest-bearing bonds. Income from trust assets is used to pay the premiums on the life insurance policy. The beneficiary of the trust is Evelyn's son, Bruce. The trustee is the trust department of a bank. What is one advantage of this trust arrangement for Evelyn? A) She avoids having all income from the trust taxed to her during her lifetime.
Four years ago, Evelyn created an irrevocable life insurance trust, transferred a life insurance policy that named her as the insured to the trust, and funded it with interest-bearing bonds. Income from trust assets is used to pay the premiums on the life insurance policy. The beneficiary of the trust is Evelyn's son, Bruce. The trustee is the trust department of a bank. What is one advantage of this trust arrangement for Evelyn? A) She avoids having all income from the trust taxed to her during her lifetime.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question ID: 1251821
Four years ago, Evelyn created an irrevocable life insurance trust, transferred a life insurance policy that named her as the insured to the trust, and funded it with interest-bearing bonds. Income from trust assets is used to pay the premiums on the life insurance policy. The beneficiary of the trust is Evelyn's son, Bruce. The trustee is the trust department of a bank.
What is one advantage of this trust arrangement for Evelyn?
A)
She avoids having all income from the trust taxed to her during her lifetime.
B)
She removed the proceeds of the insurance policy from her gross estate by transferring the policy to the trust.
C)
She avoided all gift tax liability on the insurance policy by transferring it into the trust.
D)
She will maintain control over the policy even though it is transferred to the trust.
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