The Basics of Trusts Choosing a Trustee Trusts, the Advantages Some of the advantage of establishing a trust include: Privacy: A conventional Last Will and Testament becomes a public document upon death and its contents enter the public record during the probate process. However, assets held in trust remain confidential. Creditor protection: As an independent entity, an irrevocable trust may protect the assets it holds from creditor claims, whether yours or your beneficiary's. Assets in revocable living trusts, however, are still considered your property and are subject to the claims of your creditors. Tax advantages: Assets placed in an irrevocable trust generally aren’t counted as...
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Life Insurance or Family Trust? The Benefits of Both May Be Worth Exploring It’s an unfortunate fact that many people — clients and financial advisors alike — run for the hills when the words “life insurance” enter a conversation. Let’s face it: No one wants to talk about his or her demise. The stereotyped image of the beady-eyed insurance salesman in a plaid suit (think Ned Ryerson in the movie Groundhog Day) doesn’t paint a positive picture, either. However, if you can move past all of that, you can see that life insurance can be a versatile financial planning tool and asset class. Most people don’t realize that potential tax-advantaged...
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Irrevocable Life Insurance Trust An irrevocable life insurance trust (ILIT) is an irrevocable trust set up to own and be beneficiary of life insurance policies. The life insurance can be on one individual or be a second-to-die survivorship policy where death proceeds are payable at the second death. Generally, the insured(s) will pay the premiums on the life insurance held by the ILIT by making cash gifts to the ILIT. In order to make these gifts “present interest” gifts that qualify for the annual gift tax exclusion ($14,000 in 2015 per beneficiary or $28,000 when a spouse also consents to the gift) the trust will include “Crummey Provisions” named after the party who successfully...
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A Life Insurance Trust is a trust designed to be the owner or beneficiary of your life insurance. There are two types of trusts that are used to hold life insurance: 1) irrevocable trust or 2) revocable trust. Under a revocable trust, you can have a lot of flexibility and control, but the death benefit value of the life insurance will be included in your gross estate for estate tax purposes. With irrevocable trusts, assuming that you are not the trustee and have no significant control, the assets in the irrevocable trust will not be included in your gross estate for estate tax purposes. I will cover both trusts in more detail below. Prior to the 2017 Tax and Jobs Act (the “Act...
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How to Fund a Trust with Life Insurance A life insurance policy can fund a trust that eventually creates some available cash for future expenditures, such as anticipated estate taxes. Life insurance policies come in many flavors, and they guarantee a reasonably large cash payout down the road for a relatively small investment now. No matter what type, life insurance policies may be acquired by a trust in two ways: The trustee may purchase a policy on the life of the grantor, or the grantor may transfer ownership of an existing policy into the trust. Because life insurance trusts are generally not funded with large amounts of cash or securities, the grantor typically gifts a large enough sum...
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Gainesville VA Irrevocable Life Insurance Trust Lawyer Experienced Handling of Estates and Life Insurance Trusts in Virginia When exploring your options for preserving your assets for your future and the future of your loved ones, it is important to examine all options, including irrevocable life insurance trusts. These are trusts that are set up for the purpose of owning a life insurance policy. If you have questions or concerns about an irrevocable life insurance trust, turn to me, attorney and former CPA Laura Moldowan. I am the founder of Dominion Wealth Law, PLLC, and am committed to helping clients understand their rights and obligations in estate and tax matters. I strive to...
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Despite the increase in the federal estate tax exemption amount, estate and gift tax management remains an important aspect of planning for your clients. On top of federal taxes, 20 states impose their own estate or inheritance tax. Strategic lifetime gifting can be an effective way to alleviate the estate tax, helping clients pass the maximum amount of money to their beneficiaries—who may eventually need your assistance managing those funds. Strategic gifting can also help clients efficiently transfer appreciating assets, such as the family business, or benefit grandchildren with 529 education plans, while accomplishing estate tax planning goals. To help guide your planning discussions...
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Avoiding Taxes on Life Insurance Proceeds: The Irrevocable Life Insurance Trust (“ILIT”) If you own a life insurance policy, you may not realize that all of the policy proceeds will be included in your estate for federal estate tax purposes at your time of death. This means that if you own a $3 million term life insurance policy, the $3 million of proceeds will be included in your estate. If the total value of your other federal estate assets (business, cash, stocks, retirement account, real estate, etc.) already exceeds the $5.34 million threshold, the full $3 million will be subject to the federal estate tax, which begins at 40 percent. Thus, your effort to provide for your loved ones by...
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If you are able to withdraw or borrow the cash value, pledge the policy for a loan, surrender, cancel or assign the policy, or change the policy beneficiary, you are deemed to have “incidents of ownership” which will subject the policy and its proceeds at your death to the estate tax system. Fortunately, proper planning can help shield these assets from estate taxation and preserve the benefits of your planning. One way to eliminate any “incidents of ownership” and keep life insurance policies and proceeds outside of your taxable estate is to establish an Irrevocable Life Insurance Trust (ILIT) for your policies. An ILIT is a unique trust established to be both the owner and beneficiary of...
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Life Insurance Trusts in Oklahoma An irrevocable life insurance trust in Oklahoma is a trust created to be the owner and beneficiary of life insurance policies with the purpose of keeping life insurance policies out of your taxable estate. Often known as an ILIT, an irrevocable life insurance trust must meet all requirements: The insured should not have any ownership rights in the policy; The insured shouldn't be a beneficiary of this policy; and The insured should not be the trustee of the trust; The trust and transfers are irrevocable and can't be changed. Once an insured transfers an existing insurance coverage to the ILIT, the IRS will consider it a gift, and if the insured dies within...
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