That means the heirs are liquidating about $600k of the estate to pay the remaining taxes. He has left $1.25mm in life insurance to deal with that bill. So, reality is that he has a $2.5mm taxable estate and his life insurance adds $1.25mm leaving a taxable estate of $3.75mm. Unfortunately, because of the ownership, the life insurance gets added to the total estate rather than being there to pay the taxes. Estate taxes due, about $1.25mm, so the person takes out a $1.25mm policy with himself as owner. There is a $2.5 exemption which leaves $2.5mm taxable at about 50%. So, in real numbers, let’s assume you have a $5mm estate. During that period the policy has built in the additional insurance to cover the larger estate value due to improper ownership of the policy. This allows time for even the slowest attorney to set up a trust, a change of ownership to the trust to be accomplished, and the three year look back period to expire. It is an estate protection policy that, for the first four years, has double the death benefit. Several companies have provided a vehicle for this very issue. If you happen to die next month, do you think he is going to step in and provide your heirs the millions they would have received if there was life insurance in force? I’m not thinking that’s not happening. He is suggesting that you just chill until he gets around to your trust. Well guys, let’s be real about the attorney. On the other hand you have an estate tax attorney working at a snail’s pace to put together an irrevocable life insurance trust, warning you not to buy life insurance until the trust is in place. So what if you are stuck? On the one hand you have an estate planner telling you need life insurance for estate tax protection. This could potentially put millions in estate value into a taxable situation. Does Cigar Use Affect Life Insurance Rates?Īs explained in a previous post, if the owner of a policy sets up a life insurance trust and changes the ownership and beneficiary to the trust, and a death occurs within three years of that change, the IRS will roll the clock back to original ownership and beneficiary.How Soon After I Quit Smoking Can I Get Non-Smoker Rates?.Can A Life Insurance Decline Or Rating Be Changed?. Life Insurance Death Benefit Tax Free Status!.
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