As you create your new estate plan, it is important to consider your currently existing life insurance policies as well as any future policies you are contemplating purchasing. The proceeds from these policies may be included in the calculation of your estate for tax purposes when you die. This means that even families of moderate wealth may suddenly find themselves facing an estate tax problem. In some cases, it may make sense to consider using an irrevocable life insurance trust to hold this valuable asset.
Five Important Benefits
Irrevocable life insurance trusts are commonly used—and with good reason. They offer many important benefits to people who are creating an estate plan. These benefits include the following:
- A properly drafted and administered irrevocable life insurance trust can reduce or even eliminate the estate tax due after the death of the creator of the trust. This is because assets held in an irrevocable trust are generally not counted as part of the assets of the estate for purposes of calculating the estate tax due.
- An irrevocable life insurance trust can provide much needed liquidity to your estate. Life insurance assets are often accessible much more quickly than other assets. This liquidity may be important with regard to the payments necessary for your funeral, legal fees, and other estate administration costs.
- An irrevocable life insurance trust can protect your assets from being reachable by parties that you did not intend to receive them. This includes creditors of your beneficiaries and ex-spouses of your beneficiaries.
- A carefully designed irrevocable life insurance trust will ensure that your assets are distributed in the manner that you wanted and not otherwise.
- In addition to the benefits that an irrevocable life insurance trust provides on its own, this trust can also be used to further other estate planning goals by providing liquidity and a readily available asset pool. For example, if you set up another trust to make charitable donations, the proceeds of the life insurance policy may be used to fund those donations. The charity can be of your choosing, whether it is one of the many admirable institutions in the Anaheim area or another organization located across the country.
If you are interested in exploring this valuable estate-planning tool more thoroughly, we are here to answer your questions. Reach us at any time that is convenient for you by sending an email, starting an online chat, or calling us today. We look forward to getting to know you.