The AE Team
Irrevocable Life Insurance Trust
- What is an Irrevocable Life Insurance Trust?
- Why use life insurance to pay estate taxes?
- How is life insurance “structured” to avoid taxes?
- Do you have to use an Irrevocable Trust to own life insurance?
- Why use an Irrevocable Trust?
- How does an Irrevocable Life Insurance Trust work?
- Are there any limits to the gifts made each year?
- What does the Trustee do with the gifts received?
- What happens when the Grantor (Insured) dies?
- What if Congress changes the exemption amounts?
What if Congress changes the exemption amounts?
Congress has established, and from time to time has changed the amount of a decedent’s estate which may be excluded from Federal Estate Taxes. In 2008, the first $2 million in assets are excluded from Estate Taxes. In 2009, the excluded amount is $3.5 million. In 2010, a decedent may leave an unlimited amount of assets free from Estate Taxation. Ind 2011 and 2012, the first $5,000,000 are excluded from estate tax. However, the current law is set to expire in 2013, reducing the excluded amount of assets down to only $1 million.
With the uncertainty over permanent estate tax repeal, clients are looking for more flexibility in their Irrevocable Life Insurance Trusts. If the Estate Tax is repealed for good, clients want to have the ability to get some or all of their contributions back. Married couples can now enjoy the flexibility they desire with a properly drafted Spousal Access ILIT.