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?
Are there any limits to the gifts made each year?
The gifts are usually intended to qualify as tax-free gifts under the annual exclusion for gifts of $12,000 or less per donee per year. For example, if Rich Smith creates a trust naming his two children as beneficiaries, he can gift up to $24,000 per year to the trust. If Rich is married and his spouse consents to gift splitting, they can both contribute a total of $48,000 per year as gifts to the trust without anyone incurring any gift, estate or income tax liability.