Life insurance trust: Will it affect your borrowing?
by Guest » Mon Apr 07, 2008 10:42 am
I am about to apply for a life insurance, would like to know something in this regard. What is a life insurance trust? Would it affect my borrowing under any circumstances?
Total Comments: 10
Posted: Mon Apr 07, 2008 11:11 am Post Subject:
Hey..a life insurance trust is all about your possessing a life insurance policy. If you have a life insurance (with the ownership in your name) then the policy-proceeds would be subject to tax deductions after you pass away. On the other hand, if you pass on the ownership to a trust, then the policy-proceeds would not be subject to any estate taxation. Also, remember that the proceeds would be free from any income tax deductions.
Also, remember that the premiums that you pay them would consume the estate tax exemptions. No, you can't really lend from your policy incase the ownership is with the trust.
However, it depends upon your connections with your trust. If they allow you to borrow you would be regarded as a deemed owner of the coverage regarding the estate taxes. So, you see it depends!
RiverQuaii
Posted: Mon Apr 07, 2008 11:18 am Post Subject:
Guys!
I agree that with permission from the trust it may be possible to lend from the policy. But till the point you are older by 3 years, I don't think you can hope to transfer your policy in the name of the trust. Got it boys! :)
keep this thread up & open..
Ruggedbod
Posted: Tue Apr 08, 2008 06:02 am Post Subject: irrevocable
It has to be irrevocable life insurance trust as it seems!
Once you're with this trust, then you can't regain the policy. An uninsurable person would certainly need to depend on this trust as his only life insurance.
Thanx..Plasmahectic
Posted: Fri Apr 11, 2008 10:52 am Post Subject:
BelmontLa,
An Irrevocable Life Insurance Trust (ILIT) is set up when some has a Federal Estate Tax problem, see chart below:
Life insurance proceeds are included in a deceased person's estate for Estate Tax purposes if you have any incidents of ownership of the policy.
This is affectionately known in the business as "Taxation without Respiration."
The ILIT is set up to remove any incidents of ownership by the owner/insured so that the life insurance itself does not become part of the taxable estate and futher compound the tax burden.
Please note the event that triggered the tax.
Mom or Pops died.
Since Mom or Pops died the Gubment now wants only a maximum of 55% (2011) of the total value of their Estate that exceeds the exemption to be paid in cash nine months from the date of death.
Hmmmmm, how do you say.... confiscatory.
Posted: Sun Apr 13, 2008 01:55 pm Post Subject:
You guys have given a great explanation of the life insurance trust, I had never even heard of the term before reading this post. Seems like something that you should definitely know if you are going to purchase life insurance. Do agents usually come out and advise on this topic when doing a policy for the first time, or is this something that you should typically ask about? I have never heard the term before is why I ask?
Posted: Mon Apr 14, 2008 09:59 am Post Subject:
goodnatured,
An individual person would have to have an estate in excess of $2 million in 2008 or $3.5 million in 2009 before the estate tax comes into play.
A married couple by using an A-B trust could exempt $4 million in 2008 and $7 million in 2009, although that strategy will become inadequate in 2011 and will have to be revisited.
I've been advising all my clients to target 2010 for their death as the estate tax is repealed for that one (1) singular year BEFORE it comes back in 2011 with only a $1 million exemption.
But don't worry, come 2009, regardless if Hill & Bill, Osama or McCain't gets elected the first thing the "new" congress will do is further convoluted the tax code.
Posted: Mon Apr 14, 2008 10:11 am Post Subject: insurance trust
Do you have to own some kind of property (ie..house, land,etc) for this to be in affect?
The Gross Estate of the decedent consists of an accounting of everything you own or have certain interests in at the date of death (Refer to Form 706).
The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them.
The total of all of these items is your "Gross Estate." The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets.
Keep in mind that the Gross Estate will likely include non-probate as well as probate property.
Posted: Mon Apr 14, 2008 02:52 pm Post Subject:
So sdchargers, guess it is everything, including any land or property you own.
Posted: Tue Apr 15, 2008 12:30 am Post Subject:
Yes indeed.....
Federal Estate Taxes are consistent with the "new" two (2) question simplified tax form beginning in 2009.
Posted: Mon Apr 07, 2008 11:11 am Post Subject:
Hey..a life insurance trust is all about your possessing a life insurance policy. If you have a life insurance (with the ownership in your name) then the policy-proceeds would be subject to tax deductions after you pass away. On the other hand, if you pass on the ownership to a trust, then the policy-proceeds would not be subject to any estate taxation. Also, remember that the proceeds would be free from any income tax deductions.
Also, remember that the premiums that you pay them would consume the estate tax exemptions. No, you can't really lend from your policy incase the ownership is with the trust.
However, it depends upon your connections with your trust. If they allow you to borrow you would be regarded as a deemed owner of the coverage regarding the estate taxes. So, you see it depends!
RiverQuaii
Posted: Mon Apr 07, 2008 11:18 am Post Subject:
Guys!
I agree that with permission from the trust it may be possible to lend from the policy. But till the point you are older by 3 years, I don't think you can hope to transfer your policy in the name of the trust. Got it boys! :)
keep this thread up & open..
Ruggedbod
Posted: Tue Apr 08, 2008 06:02 am Post Subject: irrevocable
It has to be irrevocable life insurance trust as it seems!
Once you're with this trust, then you can't regain the policy. An uninsurable person would certainly need to depend on this trust as his only life insurance.
Thanx..Plasmahectic
Posted: Fri Apr 11, 2008 10:52 am Post Subject:
BelmontLa,
An Irrevocable Life Insurance Trust (ILIT) is set up when some has a Federal Estate Tax problem, see chart below:
Life insurance proceeds are included in a deceased person's estate for Estate Tax purposes if you have any incidents of ownership of the policy.
This is affectionately known in the business as "Taxation without Respiration."
The ILIT is set up to remove any incidents of ownership by the owner/insured so that the life insurance itself does not become part of the taxable estate and futher compound the tax burden.
Please note the event that triggered the tax.
Mom or Pops died.
Since Mom or Pops died the Gubment now wants only a maximum of 55% (2011) of the total value of their Estate that exceeds the exemption to be paid in cash nine months from the date of death.
Hmmmmm, how do you say.... confiscatory.
Posted: Sun Apr 13, 2008 01:55 pm Post Subject:
You guys have given a great explanation of the life insurance trust, I had never even heard of the term before reading this post. Seems like something that you should definitely know if you are going to purchase life insurance. Do agents usually come out and advise on this topic when doing a policy for the first time, or is this something that you should typically ask about? I have never heard the term before is why I ask?
Posted: Mon Apr 14, 2008 09:59 am Post Subject:
goodnatured,
An individual person would have to have an estate in excess of $2 million in 2008 or $3.5 million in 2009 before the estate tax comes into play.
A married couple by using an A-B trust could exempt $4 million in 2008 and $7 million in 2009, although that strategy will become inadequate in 2011 and will have to be revisited.
I've been advising all my clients to target 2010 for their death as the estate tax is repealed for that one (1) singular year BEFORE it comes back in 2011 with only a $1 million exemption.
But don't worry, come 2009, regardless if Hill & Bill, Osama or McCain't gets elected the first thing the "new" congress will do is further convoluted the tax code.
Posted: Mon Apr 14, 2008 10:11 am Post Subject: insurance trust
Do you have to own some kind of property (ie..house, land,etc) for this to be in affect?
Posted: Mon Apr 14, 2008 12:02 pm Post Subject:
Below is a quote from THIS Gubment site.
What is included in the Estate?
The Gross Estate of the decedent consists of an accounting of everything you own or have certain interests in at the date of death (Refer to Form 706).
The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them.
The total of all of these items is your "Gross Estate." The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets.
Keep in mind that the Gross Estate will likely include non-probate as well as probate property.
Posted: Mon Apr 14, 2008 02:52 pm Post Subject:
So sdchargers, guess it is everything, including any land or property you own.
Posted: Tue Apr 15, 2008 12:30 am Post Subject:
Yes indeed.....
Federal Estate Taxes are consistent with the "new" two (2) question simplified tax form beginning in 2009.
Form 1040-$XX$
Line 1, Q. How much did you make last year?
Line 2, A. _______________
Line 3, Q. How much do you owe?
Line 4, A. See: Line 2 above.
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