85. Which of the following plans will provide a death benefit to the policy's beneficiary income tax free?
Answer: B
Whole Life provides a death benefit to the policy's beneficiary income tax free.
Whole Life insurance policies are designed to provide a death benefit that is generally paid out to beneficiaries free from income tax. This feature makes Whole Life a favorable option for those looking to ensure their loved ones receive financial support without tax implications upon the policyholder's death.
A) Annuity.
Annuities typically provide income payments during the policyholder's lifetime and may have tax implications upon withdrawal or upon the death of the annuitant. The death benefit from an annuity may not be entirely tax-free, depending on the circumstances and the structure of the annuity, thus making it less ideal for this purpose.
B) Whole Life.
Whole Life insurance offers a death benefit that is paid to beneficiaries income tax free, making it a suitable option for individuals seeking to leave a tax-free legacy. This characteristic is a significant advantage of Whole Life policies, as it ensures that the full benefit amount is received by the beneficiaries without tax deductions.
C) Qualified Retirement.
Qualified retirement plans, such as 401(k)s or IRAs, generally do not provide a death benefit directly to beneficiaries. Instead, the remaining account balance may be subject to income tax when disbursed, undermining the tax-free benefit that the question specifically seeks.
D) Tax Sheltered Annuity.
While Tax Sheltered Annuities (TSAs) may provide some tax advantages during the accumulation phase, the death benefits are not always paid out income tax free. Depending on the structure, beneficiaries may still incur tax liabilities, which does not meet the criteria of the question.
Conclusion
Whole Life insurance stands out as the only option that guarantees an income tax-free death benefit to beneficiaries. In contrast, Annuities, Qualified Retirement plans, and Tax Sheltered Annuities either do not provide death benefits or may incur tax liabilities, making them unsuitable for this specific need. Therefore, Whole Life is the definitive correct answer.