by Guest » Thu Jun 26, 2008 10:21 am
The life insurance trust is considered as a good option to avoid paying estate taxes on the proceedings of a life policy. However, this arrangement is pretty rigid. The policy holder, after shifting the rights to the trust, loses all control over the policy.
Still, how many of you feel that its important to set up the life insurance trust for future benefits?
Thanks in advance.
- You can't change the name of the beneficiary after you shift the rights to the trust.
- You can't take a loan out of the plan at the time of need.
- If the policy holder dies within three years of setting up the trust, he will be considered as the owner of the plan. And hence, the life policy benefits will become taxable.
- The life trust once set is an irrevocable life insurance trust.
- The money forwarded to the trust for making the premium payments for the policy may use up your estate tax exemption.
Still, how many of you feel that its important to set up the life insurance trust for future benefits?
Thanks in advance.
Posted: Mon Jun 30, 2008 07:38 am Post Subject:
An Irrevocable Life Insurance Trust (ILIT) is usually set up only when one has a Federal Estate Tax problem.
In 2008 the Federal Estate Tax exemption is $2 million per person and a married couple could exempt up to $4 million by using an A-B Trust.
With those facts in mind most of your bullets points are non-issues.
You can't change the name of the beneficiary after you shift the rights to the trust.
Because you don't own the policy...the trust does.
You can't take a loan out of the plan at the time of need.
Because you don't own the policy or the resulting cash value, the trust does.
If the policy holder dies within three years of setting up the trust, he will be considered as the owner of the plan. And hence, the life policy benefits will become taxable.
True and FALSE.
This would only be true if you transfered ownership of a policy you owned personally to the trust.
That's NOT the way these are set up. The Trust is established FIRST, and is the Owner-Applicant of the life insurance. The Trust buys the policy on the insured, that way the Insured never has any incidents of ownership of the policy then three year rule doesn't apply.
The life trust once set is irrevocable.
Well, yeah, of course, unless you want the life insurance to be INCLUDABLE in your Federal Estate Tax bill.
The money forwarded to the trust for making the premium payments for the policy may use up your estate tax exemption.
Well sometimes one must choose between the lesser of two evils. Pay dollar for dollar out of your own pocket to pay the Federal Estate Tax or pay a life insurance premium to pay the tax with discounted dollars.
Posted: Tue Jul 01, 2008 05:12 pm Post Subject:
Gary is right on the money, which, it is inevitable, is what the trust is all about. The tax money, that is.
Think about this for 1 second, No life insurance trust, 10 Million policy-at death, included in your estate-heirs pay 5 Million or so in taxes. Life insurance trust established-not includable-no estate taxation.
Simple, no?
An irrevocable life insurance trust is the way to go for those above the threshold.
Posted: Thu Jul 03, 2008 11:48 am Post Subject: insurance
That's a bit confusing, GARY. How can the Trust own ITSELF? I thought the policy owner controls whatever is written on the policy. Can you explain alittle more...thanks.
Posted: Thu Jul 03, 2008 09:49 pm Post Subject:
sdchargersfan,
A trust is its own separate legal entity just like a corporation is its own separate legal entity. They are not natural person legal entities. They are created out of paper, words on the paper, signatories to those words and to make it really official a notary public ink stamp and a couple of witnesses.
How does Microsoft Corporation own a building? Microsoft Corporation is nothing more than a notebook of paper sitting in Bill Gates office that contain the articles of incorporation.
So when the Grantor of the Trust signs the piece of paper known as the Irrevocable Life Insurance Trust he/she created a legal entity and granted authority to the Trustee of the trust to carry out the provisions of the Trust piece of paper with words on it for the beneficiaries of the trust.
The Trustee of the Trust is the applicant for life insurance on the life of Grantor who will be the insured and the trust will be the OWNER of the life insurance policy.
The TRUSTEE has legal title to all property owned by the trust.
Posted: Sun Jul 06, 2008 11:45 am Post Subject:
More information from a Florida attorney:
Source LINK.
Posted: Sat Jul 12, 2008 11:11 am Post Subject: insurance
Looking for GOOD Life Insurance can be difficult. I've looked at SOO many companies. Seems like I tell them what I want, but...they try to 'upgrade' me into something I don't want or can't afford right now. I'm not saying some Insurance Companies are NOT good ones. It can be upsetting when companies won't listen.
Posted: Tue Jul 15, 2008 09:42 am Post Subject:
thanks for that information....
you really gave all the important news related to life insurance.....
can you give me a specific site where i can find some more information...
please reply as soon as possible
Posted: Wed Jul 16, 2008 10:46 am Post Subject: insurance
ANY kind of insurance ( if you don't have a 'grasp' on it..) can be confusing. Just trying to find out which policy is best for me, at this 'time in my life'.
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