LUTCF cheat sheet

Death benefits paid to a named beneficiary are generally income-tax-free under IRC §101(a); estate inclusion depends on incidents of ownership.

Whole life uses level premiums and guaranteed cash value; universal life separates mortality, expense, and interest components and may require higher premiums if crediting falls.

A policy loan is not taxable while the policy remains in force; unpaid principal and interest reduce cash value and the death benefit.

IRC §1035 permits tax-free exchanges of life-to-life, life-to-annuity, and annuity-to-annuity; annuity-to-life exchanges do not qualify.

A modified endowment contract fails the 7-pay test; lifetime distributions are taxed income first and may incur a 10% penalty before age 59½.

For a nonqualified annuitized payout, exclusion ratio = investment in the contract ÷ expected return; it sets the tax-free portion of each payment.

Life-only annuitization pays the highest periodic income; adding a period certain or survivor benefit reduces the payment.

Incontestability and suicide clauses generally expire after two years; a reinstated policy may restart contestability for statements in the reinstatement application.

Dividends on participating policies are treated as a return of premium and are generally not taxable until cumulative distributions exceed the owner's basis.

ACA-compliant individual and small-group plans must guarantee issue, cover essential health benefits, and cannot impose annual or lifetime dollar limits on essential benefits.

Metal tiers reflect actuarial value: bronze 60%, silver 70%, gold 80%, and platinum 90%; cost-sharing reductions are available only on silver plans.

HSA contributions are tax-deductible, qualified withdrawals are tax-free, funds roll over, and eligibility requires a qualified high-deductible health plan and no disqualifying coverage.

COBRA generally applies to employers with 20 or more employees; maximum continuation is usually 18 months, extended to 29 months for disability and 36 months for certain events.

Own-occupation disability pays when the insured cannot perform their own occupation; any-occupation pays only when unable to perform any gainful occupation, and own-occ costs more.

Medicare Part A covers hospital care, Part B covers outpatient medical care, Part C is Medicare Advantage, and Part D covers prescription drugs; initial enrollment is a 7-month period around age 65.

Coordination of benefits determines which plan pays first; the secondary plan pays up to its limit but not more than total charges.

Flexible spending accounts are use-it-or-lose-it, but an employer may offer a 2½-month grace period or a $500 carryover, not both.

HIPAA special enrollment generally allows 30 days after marriage, birth, or adoption and 60 days after loss of other coverage to enroll in group health coverage.

In a cross-purchase buy-sell, each owner buys a policy on the other owners; surviving owners purchase the deceased owner's interest directly and generally take a basis equal to the purchase price.

In an entity redemption buy-sell, the business owns the policies and buys back a deceased owner's interest; entity basis and alternative minimum tax issues may apply.

Key person insurance is owned by the business; premiums are generally not deductible, and death proceeds are usually income-tax-free to the business.

For employer-provided group term life insurance above $50,000 of coverage, the value of the excess coverage is imputed income to the employee under IRC §79.

Split-dollar arrangements divide premium and death benefit between a business or trust and an insured; economic benefit or loan treatment determines taxable income.

Business overhead expense disability insurance reimburses covered fixed operating expenses during an owner's disability; benefits are taxable when premiums were deducted.

The annual gift tax exclusion for 2025 is $19,000 per donee; gifts above that amount generally use the unified credit or require a gift tax return.

Nonqualified deferred compensation is not deductible by the employer until paid and is subject to IRC §409A rules on elections, funding, and distributions.

Buy-sell premiums are generally not deductible; proceeds may be tax-free, but transfer-for-value and basis rules can affect the tax result.

A fiduciary must act in the client's best interest, disclose conflicts, and avoid self-dealing; a producer's fiduciary status varies by state and activity.

Suitability requires a recommendation to be appropriate for the client's needs, objectives, financial situation, and risk tolerance based on disclosed information.

A producer must hold a state license for the lines sold and, where required, be appointed by the insurer before soliciting or transacting business.

Twisting is inducing a policyholder to lapse or surrender a policy through misrepresentation or incomplete comparison to sell a replacement policy.

Rebating is offering part of a commission or an inducement not stated in the policy to a buyer; it is generally illegal and may lead to license discipline.

Misrepresentation is a false or misleading statement about policy terms, benefits, or insurer finances; it is an unfair trade practice and may support rescission or regulatory action.

Confidentiality requires protecting client nonpublic personal information and using it only for authorized purposes under privacy laws and insurer policies.

Unfair claim settlement practices include unreasonable delay, failure to investigate, and offering far less than owed; state laws prohibit these practices and may impose penalties.