Is it true that Georgia owns an insurance policy on the life of Jake, with Scarlet as the designated beneficiary, and upon Scarlet's death, no transfer tax consequences result?
False is the correct answer.
Explanation:
Georgia owns an insurance policy on the life of Jake with Scarlet as the designated beneficiary. This means that the insurance policy was taken out by Georgia, but in the event of Jake's death, the benefits would go to Scarlet as long as she is still alive.
Transfer Tax Consequences:
When it comes to life insurance payouts, the proceeds are generally not subject to income tax. However, there may be estate or transfer tax consequences depending on the circumstances. In this case, the statement mentions that upon Scarlet's death, no transfer tax consequences result.
Transfer tax is a tax on the passing of property from one person to another, either during lifetime through gifts or upon death through inheritance. These taxes can be considerable and can significantly reduce the amount of wealth transferred to the beneficiary.
In the scenario provided, it states that no transfer tax consequences result upon Scarlet's death. This means that when Scarlet passes away and the life insurance proceeds from Jake's policy are transferred to her, there will be no additional tax implications for Scarlet or her estate.
Conclusion:
In conclusion, the statement that Georgia owns an insurance policy on Jake's life with Scarlet as the beneficiary, and upon Scarlet's death, no transfer tax consequences result, is false. This scenario implies that there would be no additional tax burden or consequences upon Scarlet's death in relation to the life insurance policy.