Who Needs a Life Insurance Trust?
If you are single and have a net worth over $1,000,000 (including life insurance proceeds upon death), or if you are married and have a net worth over $2.0 million (again, including life insurance), you should seriously consider a life insurance trust. Let us consider an example: Let us say you are single, with a total net worth of $1,000,000. In addition, you own a $500,000 life insurance policy – a total estate of $1,500,000. Without a life insurance trust, the $500,000 of life insurance would be included in your taxable estate – and your estate would have to pay $210,000 in estate taxes. On the other hand, if your $500,000 policy were instead owned by your life insurance trust, the $500,000 in insurance would not be included in your estate. Because your other assets would equal the $1,000,000 estate tax exemption ($1,500,000 in 2003 and 2004, back down to $1,000,000 in 2011), no estate taxes would be due. That means that $210,000 would go to your beneficiaries, instead of to Uncle S
