There’s a good chance that you’ve heard that federal estate taxes are scheduled to disappear in 2010, yet return in 2011. Many people expect major changes before then. What these changes will be is anyone’s guess. Some investors have taken the “wait and see attitude” when it comes to estate planning since they think the tax will go away. However, with the looming federal deficit, Congress could be hard-pressed to repeal the federal estate tax.
Some investors with estates large enough to be impacted by estate taxes will utilize irrevocable life insurance trusts (ILITs) to provide the needed funds to pay these taxes. These trusts can also be used to convert funds that are otherwise taxable into a tax free death benefit for their heirs. Some couples might shy away from an ILIT because of the inability to get at money that they may need for other purposes. There is, however, another type of trust that could provide both such access.
A survivor access trust allows a beneficiary tax-free access to the cash value of life insurance within the trust. The amount that can be withdrawn is described as enough to preserve the lifestyle that the beneficiary is accustomed to living. The grantor spouse pays the premiums and cannot touch the cash value. This keeps the death benefits out of his or her taxable estate. Of course, the death benefit of the life policy could be reduced by any amounts withdrawn by the beneficiary.
To remove the proceeds from the beneficiary’s estate, a trustee must be used. This can be an institution, such as a bank, or a family member other than the grantor or his or her spouse. Also, the beneficiary cannot contribute to the trust.
No one knows whether or not the estate tax will be permanently repealed in 2011. It is important to have an estate plan that is flexible. For a free illustration on how life insurance could possibly provide for your survivors and reduce estate taxes, call 781-890-3045 ext. 408 today!
Note: Life insurance is subject to medical underwriting and death benefits will vary based among other things upon your age, health, and premiums. Fees and other expenses will apply with the purchase of life insurance, and surrender charges may be applicable on money withdrawn or benefits reduced after the policy purchase date. Insurance benefits and premiums do vary from company to company. Insurance guarantees are subject to the claims-paying ability of the issuing company.
Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker-dealer and registered investment advisor. Insurance offered through Lincoln Financial Services and Insurance Brokerage of New England, Inc., and other fine companies. Supervising office: Lincoln Financial Advisors, 115 Glastonbury Blvd., Glastonbury, CT 06033, Phone: 860.734.0400. This information is provided as a service to you. It is not our position to offer legal or tax advice. CRN200602-1005466
