Using an irrevocable life insurance trust to avoid estate taxes

The word success means different things to different people. For many, attaining a certain level of financial independence and freedom that allows one to live well and provide for future generations is a mark of success. Individuals, who work hard, invest wisely and make sound financial decisions should take comfort in knowing that the wealth and assets they’ve earned will continue to benefit future generations. Unfortunately, without proper estate planning, an individual’s wealth can quickly be eroded by estate taxes.

For the 2015 tax year, individuals who die with estate assets in excess of $5.43M will be subject to a 40 percent federal estate tax on those assets. For individuals who wish to take steps to protect against estate taxes, it’s wise to consult with an estate planning attorney who can provide advice and assist in helping an individual protect wealth and achieve estate planning goals.

Depending on an individual’s situation, there are several methods that can be used to help decrease one’s estate tax liability. One possible option is to set up an irrevocable life insurance trust. This option is attractive for individuals who may otherwise teeter on the current $5.43M asset estate tax threshold and also provides a way to ensure that assets from an irrevocable life insurance trust directly benefit named beneficiaries while also affording an individual control over how and when such assets are distributed.

Normally, upon an individual’s death, proceeds from any life insurance policies are included and factored into an estate’s total assets. Establishing an irrevocable life insurance trust, however, effectively transfers ownership of these assets to a trust, thereby exempting an individual and his or her loved ones from paying any estate taxes that may otherwise apply.

There are strict directives that must be followed when establishing and maintaining an irrevocable life insurance trust. For these reasons, it’s important to consult with an estate planning legal professional who can ensure that all requirements are met and also provide additional advice on benefits afforded via an irrevocable life insurance trust.

Source:, “The Irrevocable Life Insurance Trust,” 2015

Bankrate, “Estate tax and gift tax amounts,” 2015

Additional resources provided by the author

For more information, please contact estate planning attorney Regina Kiperman:
Phone: 917-261-4514
Or visit her at her new location:
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Suite 304
New York, NY 10038

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