This article is a second in a series of estate planning articles related to Irrevocable Life Insurance Trusts.
Irrevocable Life Insurance Trusts aren’t just for the rich with over $5.25 million in assets. This type of Trust may be useful for asset protection for medium-sized plantations to provide protection from potential lawsuits and claims.
For example, when a life insurance policy is held by a trust, the cash value (if any) and the proceeds are also protected from potential creditor claims. As part of your Plantation Planning, you can set up a certain amount of savings that will be transferred to the trust each year and the funds in the Irrevocable Trust will be used to pay for the policy. Over time, a large amount of value can be created in an Irrevocable Life Insurance Trust.
For example, one of my forty-two (42) year old clients has income large enough to transfer a maximum of $14,000 per year with no gift tax consequences. Therefore, as part of his Estate Planning, we set up a Life Insurance Trust for him to obtain the following asset protection benefits:
- Money deposited annually is transferred annually and plan proceeds are fully protected against potential creditor claims and lawsuits.
- Transferred money works similarly to a 401k plan where the money grows and is added without income tax.
- Any guardianship requirements can be withdrawn from the cash value of the policy.
- After his death, the proceeds of the plan will be available to his family avoiding income or estate taxes.
Creating an Irrevocable Life Insurance Trust can be a viable option in your Plantation Planning process when using an appropriate asset protection method against creditors, thereby protecting your family property from future legal action. There are several options to explore in the Plantation Planning process and a Life Insurance Trust is just one of the many instruments worth looking at with an attorney who specializes in asset protection.
Therefore, prior to creating an Irrevocable Life Insurance Trust for your estate plan, you may wish to meet with an attorney to discuss and handle drafting your inheritance planning instrument to ensure maximum benefits from an Irrevocable Life Insurance Trust are achieved by the insured.
FULL DISCLOSURE
This article reflects only my personal views and is not construed to create a lawyer-client relationship. The special case information contained in this article is for illustrative and educational purposes only. This article is not intended to provide specific legal advice. Article topics may or may not be updated and entries may be out of date by the time you view them.