New City Living Trust Attorney
If there will be estate taxes to pay after your death, life insurance can provide liquidity to pay those taxes. With proper planning, an insurance policy will pay the taxes at pennies on the dollar.
Because the proceeds of life insurance policies are includable in your estate for estate tax purposes, only if you own the policies, it may be valuable to have the policies owned by an irrevocable life insurance trust. A properly structured life insurance trust will exclude the insurance proceeds from your taxable estate, and from your spouse's taxable estate as well.
A life insurance trust is an irrevocable trust created during your lifetime to purchase or hold a policy of insurance on your life. Each year, you give money to the trustee to pay the premiums. If properly done, the life insurance proceeds will not be subject to estate taxes at your death and can pass intact to your heirs, either outright or in further trust.
Kantrowitz, Goldhamer & Graifman, P.C., can help you create a life insurance trust that meets the needs of your family. To arrange a consultation with our Rockland County life insurance planning attorneys, please call 800-660-7843 or contact us online.
Protect Your Spouse and Heirs From Estate Taxes
Although transferring ownership of a life insurance policy to your spouse or children is likely to exclude the proceeds from your taxable estate, that type of transfer might not be the best option. An insurance policy owned by an individual is subject to the claims of that individual's creditors. By creating an irrevocable trust to own the policy, the trust will collect funds tax free if the trust purchased it or if the policy was transferred in and held for at least three years prior to the death. The proceeds can be available to loan money to or purchase assets from the estates to ease liquidity problems such as paying estate taxes.
Life insurance trusts may own policies on your life or on your spouse's life alone or in the form of a survivorship policy. A survivorship policy would not pay off until the death of the second of the spouses, which is when their heirs would need cash to pay estate taxes.
A life insurance trust can be particularly valuable if much of a person's assets are invested in closely held businesses or illiquid investments. If the policy is on the life of only one spouse, the other spouse can be the income beneficiary of the trust following the first spouse's death, and the trust may also provide that the surviving spouse may receive principal as well.
To discuss individual, joint and survivor life insurance trusts with one of our lawyers, call us in New York or New Jersey at 800-660-7843.