Did you realize that life insurance is included in the owner’s taxable gross estate on death at the face value? After you have completed your basic estate plan, you may want to consider an irrevocable life insurance trust (ILIT).
There are many advantages to holding life insurance for children in an ILIT not the least of which is that it will be forever exempt from estate taxes. The ILIT is completed by the Grantor who sets forth the ages and stages for the children to receive the proceeds of the life insurance after his or her death. The Trustee then purchases the life insurance and it never becomes part of the taxable estate of the Grantor because the children effectively own it from the get go.
The Grantor does gift the premium to the children annually through gift letters where the Grantor deposits the amount of the premium in a trust account, and the trustee sends a letter giving the kids a present right to withdraw the amount for a period of approximately 30 days, after which time the Trustee pays the premium. This qualifies the premium payment made by the Grantor to the children for the annual gift tax exclusion (presently $13,000).
If you own life insurance or are considering getting insurance and you want the proceeds to be nontaxable at death call the law offices of Hoffman & Hoffman, P.A. before you purchase the policy. We can explain whether or not an ILIT is the vehicle for you and help you to set it up properly.
For an initial consultation with one of our experienced attorneys call 305-372-2877 or 877-858-2977 or fill out the contact form on the right side of this page.
