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Quiz 44 :

Planning for the Future: Estates and Insurance

Quiz 44 :

Planning for the Future: Estates and Insurance

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ETHICS Donna and Carl Nichols each bought term life insurance from Prudential Insurance Company of America. These policies contained a provision stating that if the insured became disabled, the premiums did not have to be paid and the policy would still stay in effect. This term is called a waiver of premium. Carl became totally disabled, and his premiums were waived. Some years later, two Prudential sales managers convinced the Nicholses to convert their term life insurance policies into whole life policies. They promised that, once Carl made the conversion, he would only have to pay premiums on the new policy for a six-month waiting period. They even wrote "WP to be included in this policy" on the application form. "WP" stood for waiver of premium benefit. Only after the new policy was issued did the Nicholses learn that Prudential would not waive the premium. The Nicholses had exchanged a policy on which they owed nothing further for a policy on which they now had to pay premiums that they could not afford. Do the Nicholses have a claim against Prudential? Regardless of the legal outcome, did Prudential have an ethical obligation to the Nicholses?
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DN and CN bought life insurance from the PR insurance company. The provision within the policy stated that, premium need not be paid under insured party being disabled by any means. Later, when CN became disabled, the insurance company did not claim for the rest of the premiums as per provision. Some years later, the company asked CN to convert his term life insurance to whole life, and asked him to pay only for the new policy for a six-month waiting period. Waiver of premium provision was also included under this policy. This led CN to pay premiums at the time he could not afford, as the provision included the clause that CN has to pay premium for the waiting period of six months.
Yes, CN can claim against PR insurance company. The policies should be under the control of the branch managers. Sales managers have no right to convert term insurance into whole life policies. Waiver of premiums should be included and excluded only under the provision of branch manager. Here, no agent can make a change in contract. So, the PR insurance company does not hold any ethical obligation to their customers, as it is the branch manager's responsibility to monitor the actions of their sales managers.

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Billionaire Warren Buffett said that children should inherit enough money so that they can do anything, but not so much that they can do nothing. Is it good for people to inherit money? How much? At what age? How much would you like to leave your children?
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Asset protection trust: This is an irrevocable trust, which allows the beneficiary to be on safe zone from the effect of taxation, bankruptcy, etc. Here, the beneficiary of the trust might hold title of the asset. Asset protection trust has a spendthrift clause, which states the creditors cannot sign an agreement for receiving any sort of benefits from the beneficiary of the trust, before the beneficiary receives them.
Asset protection trust is helpful for the beneficiary of the trust. The benefits are as follows:
• Holds an individual's assets free from creditors
• Helps in seeking divorce protection
• Helps in facing uncertain circumstances
In most of the regions this sort of asset protection trust allows the individual to create a self-trust under law statute being satisfied.
A wealthy person can use this trust against an authentic creditor to safeguard the assets. The ethics of an individual is crucial. If the motive is to make money unethically, and to safeguard from lawsuits the individuals can waive the debts of creditor using these sorts of trusts.
If an individual being a state legislator come across the approval of asset protection trust legislation, the advice is to focus on the benefits rather than disadvantages, as disadvantage is linked with the ethical aspects of an individual using such trusts.
An individual having substantial assets can use an asset protection trust to safeguard their property from pitfalls and risks. Sometimes claims are made by the creditors to make money, so deploying in such trusts will significantly reduce the risks.
The life principles to be focused are responsibility, suffering and freedom. These principles linked with ethics put forth points as follows:
• Individuals should focus on their responsibilities before indulging in any activity
• Individuals have the right to defend their sufferings
• Individuals have the freedom to do what is right

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Should you have a will? Do you have one?
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DN and CN bought life insurance from the PR insurance company. The provision within the policy stated that, premium need not be paid under insured party being disabled by any means. Later, when CN became disabled, the insurance company did not claim for the rest of the premiums as per provision. Some years later, the company asked CN to convert his term life insurance to whole life, and asked him to pay only for the new policy for a six-month waiting period. Waiver of premium provision was also included under this policy. This led CN to pay premiums at the time he could not afford, as the provision included the clause that CN has to pay premium for the waiting period of six months.
Yes, CN can claim against PR insurance company. The policies should be under the control of the branch managers. Sales managers have no right to convert term insurance into whole life policies. Waiver of premiums should be included and excluded only under the provision of branch manager. Here, no agent can make a change in contract. So, the PR insurance company does not hold any ethical obligation to their customers, as it is the branch manager's responsibility to monitor the actions of their sales managers.

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If your grandparents were to die leaving a large estate, and all of their children were also dead, would you have a larger inheritance under a per stirpes or a per capita distribution?
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ETHICS Is an asset protection trust right? Should wealthy people be able to avoid paying legitimate creditors? What about perpetual trusts that avoid estate taxes forever? Legislators pass such laws to attract trust business from out of state. Trusts generate billions of dollars in fees each year. If you were a state legislator, how would you vote when this legislation came up for approval? If you had substantial assets, would you put them in such a trust? What Life Principles apply here?
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YOU BE THE JUDGE WRITING PROBLEM Linda and Eddie had two children before they were divorced. Under the terms of their divorce, Eddie became the owner of their house. When he died suddenly, their children inherited the property. Linda moved into the house with the children and began paying the mortgage that was in Eddie's name. She also took out fire insurance. When the house burned down, the insurance company refused to pay the policy because she did not have an insurable interest. Do you agree? Argument for the Insurance Company: Linda did not own the house; therefore, she had no insurable interest. Argument for Linda: She was harmed when the house burned down because she and her children had no place to live. She was paying the mortgage, so she also had a financial interest.
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