Irrevocable Life Insurance Trust

04 February 2010 Categories: All Blogs, Estate Planning

One of the most common assumptions that my clients have is that life insurance proceeds are not included in your Gross Estate when it is time to pay Estate Taxes. When I ask clients about the value of their Estate, about half do not include life insurance policies.

For example, let’s assume the Estate Tax exemption amount is one million dollars, as it will be in 2011. If the value of your home, mutual funds, IRAs and all other assets is just under one million dollars, your Estate will not be subject to taxation. But, if you have a $500,000 life insurance policy, that amount will push your Estate over one million dollars and it will be taxed at rates up to 45%. That could potentionally eat away half of your life insurance policy.

This can all be avoided by having your Estate Attorney draft an Irrevocable Life Insurance Trust. If done correctly, by having an Irrevocable Life Insurance Trust drafted and naming the Trust as the beneficiary of the life insurance policy, none of the proceeds of the Life Insurance policy will be subject to Estate Tax. The proceeds of your Life Insurance policy will pass directly to its intended beneficiaries as it was designed to do.

If you would like to learn more about Irrevocable Life Insurance Trusts, feel free to contact McNulty & Associates and we will be happy to assist you.

The information and materials on this site are not to be considered legal advice. They are intended for informational purposes and are not specific to any certain case or legal matter. The information is used for promotional and advertising purposes and seeks to provide, but not guarantee, general information regarding a wide range of legal matters. If your matter requires legal representation, you should act quickly and contact a Tennessee attorney to ensure your rights are protected.

Comments are closed.