Estate Tax Planning
Irrevocable Life Insurance Trusts
How do you protect your assets from the estate tax if they exceed the $1 million exemption scheduled to go into effect on January 1, 2011? One of the easiest, cheapest and most effective ways is to purchase life insurance. Life insurance has the additional benefit of providing liquidity for payment of taxes and expenses upon the passing of the insured individual. The problem is that normally the life insurance proceeds are themselves taxable. That means that they will be reduced by anywhere from 37% to 50% depending upon the size of your estate.
The answer is to purchase your policy in the name of
(or assign an existing policy to) an irrevocable life
insurance trust, also known as an ILIT. You would have
to name either one of your children or another friend or
relative as the trustee of the trust, but your children can be
the beneficiaries and use the money to pay the estate tax
and to keep the balance. There are a number of IRS requirements which need to be met, but this tried and true procedure can make the transition from you to your heirs as inexpensive as possible.
"We will explain all of your options to you and help you to pick one that best suits your estate and your family."