What does a life insurance trust do?
An irrevocable life insurance trust lets you reduce or even eliminate estate taxes, so more of your estate can go to your loved ones. It also gives you more control over your insurance policies and the money that is paid from them. 2. What are estate taxes? Estate taxes are different from, and in addition to, probate expenses and final income taxes (which must be paid on income you receive in the year you die). Some states also have their own death/inheritance taxes. Federal estate taxes are expensive – in 2003 they start at 41% and quickly go up to 49%. And they must be paid in cash, usually within nine months after you die. Since few estates have this kind of cash, assets often have to be liquidated. But estate taxes can be substantially reduced or even eliminated – if you plan ahead. 3. Who has to pay estate taxes? Your estate will have to pay estate taxes if its net value when you die is more than the “exempt” amount set by Congress at that time. Here is the current schedule: Year
Related Questions
- Why is it better to have an irrevocable life insurance trust purchase alife insurance policy on the donor, rather than have the heirs themselves own a permanent life insurance policy with the premium paid by the heirs with gifts by the now- living donor?
- Can I add a new life insurance policy to an existing ILIT (Irrevocable Life Insurance Trust)?
- Can I put a life insurance policy that includes critical illness cover, in trust?
