Insurance trust

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Insurance Trust

An irrevocable trust set up by a policyholder in which he/she places his/her life insurance policy. This removes the policy from the policyholder's estate, shielding it from estate taxes. Importantly, the insurance trust must be set up at least three years prior to the death of the policyholder in order to exclude it from the estate. One might set up an insurance trust in order to set aside cash to pay estate taxes otherwise owed, or to provide for the policy's beneficiaries without concern for the tax. Normally, one sets up an insurance trust when one expects to have an estate worth more than the maximum exclusion figure. It is also called an irrevocable life insurance trust.

Insurance trust.

You set up an insurance trust to own a life insurance policy on your life. When you die, the face value of the policy is paid to the trust.

That keeps the insurance payment out of your estate, while making money available to the beneficiary of the trust to pay any estate tax that may be due, or to use for any other purpose.

If you're married, you may set up an insurance trust to buy a second-to-die policy, which pays the face value of the policy at the death of the second spouse. That allows the first to die to leave all assets to the other, postponing potential estate tax until the survivor dies. At that point, the insurance benefit is available to pay any tax that might be due.

References in periodicals archive ?
flexible technology allows users to develop templates for eight unique client types, including individuals, trusts, ERISA plans, foundations and endowments, charitable trusts, and irrevocable life insurance trusts.
Beginning with an overview of the major sections of estate planning practice, the volume covers ethics in estate planning, establishing attorney-client relationships, wills, trusts, transfer taxes, non-taxable gifts, credit shelter trusts, marital deductions, irrevocable life insurance trusts, elder law, Medicaid, guardianships, estate administration, and will caveats.
They may want to create a business succession plan, credit shelter trusts, GST trusts, special-needs trusts, income-only trusts, incentive trusts, a private family foundation or irrevocable life insurance trusts.
One way to do this is to put life insurance policies inside irrevocable life insurance trusts.
But for those clients who are familiar with irrevocable life insurance trusts or dynasty trusts, buying LTCI through an irrevocable trust can provide multiple benefits.
Tell me about irrevocable life insurance trusts," Ike asks.
For families looking to avoid tax liabilities and estate tax issues (though this tool may be used by families of any income level), Dale suggests considering setting up Irrevocable Life Insurance Trusts (ILITs, sometimes called Crummey Trusts) that include special needs language.
This article is adapted from his book A Practical Guide to Drafting Irrevocable Life Insurance Trusts (Second Edition), ALI/ABA (www.
Many situations involving girls to irrevocable life insurance trusts may meet the procedure's restrictions.
Offshore irrevocable life insurance trusts are another viable option.
The ALI-ABA has also published A Practical Guide to Drafting Irrevocable Life Insurance Trusts, a book written to help attorneys draft ILITs that lower their clients' estate taxes.
Consider using an IDIT with irrevocable life insurance trusts or other irrevocable trusts with high-income beneficiaries.