Planning Your Life Insurance?

Consult Our Estate Planning Attorneys

Photo of a senior couple walking

We understand that life insurance can seem overwhelming, and with good reason. It involves complicated policies that have a significant effect on your loved ones’ futures. To be sure that your life insurance benefits go where you want them to, contact our estate planning lawyers. We can help you figure out the best plans for your family and ensure that you save as many tax dollars as possible.

Life Insurance Trusts and Estate Taxes

If you have estate taxes to pay after your death, life insurance can provide liquidity to pay those taxes. With proper estate planning, an insurance policy will pay the taxes at pennies on the dollar. To avoid having the proceeds of insurance on your life included in your estate for tax purposes, you might transfer ownership of an existing policy to an irrevocable life insurance trust (called an “ILIT”), or you might have the ILIT purchase a new policy, instead of purchasing the policy yourself. A properly structured life insurance trust will remove the insurance proceeds from both your own taxable estate and your spouse’s, saving substantial tax dollars in the process.

As indicated by its name, an ILIT is a type of irrevocable trust created during your lifetime. Each year, you pay the Trustee to pay the premiums. If done properly, neither your estate nor your heirs will have to pay taxes on your policy, and your life insurance benefits will pass to your heirs intact. They may receive the benefits either outright or in further trust.

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.  If you expect the insurance proceeds to provide liquidity for payment of estate taxes or debts, you may want those proceeds to be collected by the Trustee of an ILIT, who can use them to purchase assets from your Estate or to lend funds to your Executor.  An individual insurance beneficiary might upset your careful planning.

Survivor Life Insurance Policies

Life insurance trusts may own policies on your life or your spouse’s life alone or in the form of a survivorship policy. A survivorship policy would not pay off until both spouses have died, which is when their heirs would need cash to pay estate taxes.

Contact our Estate Planning Lawyers Today

To discuss individual, joint and survivor life insurance trusts, contact our estate attorneys in New York or New Jersey at 800-660-7843.

Kantrowitz, Goldhamer & Graifman, P.C., can help you create a life insurance trust that meets your family’s needs. To arrange a consultation with our Bergen and Rockland County life insurance planning attorneys, please call 800-660-7843 or contact us online.

Comments are closed.