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Video: What is the Difference Between Revocable & Irrevocable Trusts?

September 25, 2015

Filed under: Irrevocable Life Insurance Trusts,Revocable Living Trusts,Trusts,Wills — Neel Shah @ 11:52 pm

What is the Difference Between Revocable & Irrevocable Trusts? Hear Attorney Neel Shah Explain in this quick video.

For your Free consultation with Attorney Neel Shah, click here

Estate Taxes on Life Insurance & Life Insurance Trusts (“ILITs”)

October 17, 2014

Filed under: Estate Planning,Estate Taxes,ILIT,ILITs,Irrevocable Life Insurance Trusts,Life Insurance,Life Insurance Policies — Tags: , , — Neel Shah @ 1:18 am

Many Americans may be unaware of what an irrevocable life insurance trust (“ILIT”) is, let alone the benefits it may provide to them.

Typically, life insurance policy proceeds are not subject to income taxation. However, they are included in the calculation of a person’s gross taxable estate. This is where the ILIT comes in. If a person puts their life insurance policy into an ILIT, the proceeds of the policy are kept out of his or her taxable estate. The proceeds will therefore be available to his or her heirs free of income and estate tax.

Additionally, ILITs are a great way to provide cash to help pay for the taxes that will be levied on your estate. Beneficiaries of your ILIT can use some of the proceeds to pay the taxes owed on your estate. By doing this, your actual estate is kept in tact. This strategy is especially beneficial to those whose estate consists largely of illiquid assets such as a business or real estate. Through setting up an ILIT, you can ensure that your family will not have to sell the illiquid assets in your estate in order to satisfy the estate taxes.

Call us at 732-521-9455 or email at info@LawEsq.net to discuss the right way to own your life insurance.

When Considering Life Insurance

October 31, 2013

Filed under: Estate Planning,Irrevocable Life Insurance Trusts,Life Insurance,Life Insurance Policies — Neel Shah @ 9:00 am

Life insurance is a simple concept. A person takes out a policy in order to provide funds to his or her loved ones upon his or her death. However, life insurance can get complicated by the various products that life insurance companies offer. A recent article attempts to assist insurance customers in understanding how to make good decisions concerning their life insurance.

The article first suggests that people consider life insurance as financial plan insurance. The term itself is rather misleading, considering that life insurance cannot bring you back once you have passed on. Rather, life insurance provides for the financial future of your loved ones.

Here is one rule of thumb: when purchasing life insurance, first calculate how much money you believe your family would need to live comfortably without you. Factor in any mortgage or car payments, college tuition for children, and supplemental income. When you have factored in all of these assets, consider how long your family will have these specific needs. Often, a level term policy that expires at the same time that your working career would be over is the best option.

Life insurance replaces your income, so consider how long of a working career you believe you will have. For example, if you plan on retiring at age 65, calculate your income until that date. After which, there is no anticipated income to protect.

Wait, I Did What?!?! Are You Second-Guessing Your ILIT?

October 1, 2013

Filed under: Estate Planning,Estate Taxes,Irrevocable Life Insurance Trusts,Life Insurance,Trusts — Neel Shah @ 2:40 pm

Many Americans let out a sigh of relief when the American Taxpayer Relief Act of 2012 was finally signed into law. The signing of the act put an end to much of the uncertainty that previously surrounded estate planning where taxes are concerned. As a recent article explains, one consequence of this newfound certainty is that individuals who planned meticulously in order to avoid death taxes are now attempting to back-pedal .

One product that many individuals are now second-guessing is the Irrevocable Life Insurance Trust (“ILIT”). As the term “irrevocable” implies, ILITs are relatively inflexible. However, there are certain ways through which estate-planning attorneys can soften the terms of an ILIT.

Options such as adding a spousal access clause, adding a special trustee clause, or increasing the discretionary power of the trustee allow the trust creator to exercise more control over the trust. Some state governments have also attempted to make ILITs flexible by enacting “decanting” statutes that provide for the transfer of assets from an old ILIT to a new, less restrictive one.

If you would like to modify or revoke your ILIT, it is important to examine the originating documents carefully. Be sure to consider the legal, tax, financial, and insurance components of any planned adjustment. Importantly, any changes to your trust should comply with its terms and make financial sense.

 

Advantages Of An Irrevocable Life Insurance Trust

May 8, 2013

Filed under: Estate Planning,Estate Taxes,Inheritance,Irrevocable Life Insurance Trusts,Life Insurance,Trusts — Neel Shah @ 6:02 pm

Many Americans may be unaware of what an irrevocable life insurance trust (“ILIT”) is, let alone the benefits it may provide to them. A recent article discusses several of the benefits offered by ILITs.

Typically, life insurance policy proceeds are not subject to income taxation. However, they are included in the calculation of a person’s gross taxable estate. This is where the ILIT comes in. If a person puts their life insurance policy into an ILIT, the proceeds of the policy are kept out of his or her taxable estate. The proceeds will therefore be available to his or her heirs free of income and estate tax.

Additionally, ILITs are a great way to provide cash to help pay for the taxes that will be levied on your estate. Beneficiaries of your ILIT can use some of the proceeds to pay the taxes owed on your estate. By doing this, your actual estate is kept in tact. This strategy is especially beneficial to those whose estate consists largely of illiquid assets such as a business or real estate. Through setting up an ILIT, you can ensure that your family will not have to sell the illiquid assets in your estate in order to satisfy the estate taxes.

Using a Flexible Irrevocable Life Insurance Trust to Shelter Life-Insurance Proceeds

January 23, 2013

Filed under: Estate Planning,Estate Taxes,Irrevocable Life Insurance Trusts,Life Insurance,Trusts — Neel Shah @ 2:01 pm

Many people do not realize that life insurance proceeds are in fact taxed. Although these proceeds escape income taxes, they ARE  counted as part of your taxable estate. An article in The Wall Street Journal discusses one way to shelter such proceeds from estate taxes, the Irrevocable Life Insurance Trust.

In order to avoid such tax consequences, you may choose to transfer ownership of your existing life insurance policy to an Irrevocable Life Insurance Trust (“ILIT”). By transferring such ownership, the ILIT is removed from your estate. Once established, an ILIT also allows you to split death benefits among several beneficiaries any way you wish. You also retain the power to decide how and when the benefits will be distributed to your heirs.

If you believe that an ILIT is right for you, you should act sooner, rather than later. Existing policies transferred to ILITs are subject to a three-year look-back period, meaning that if you die within three years of its creation, your life insurance proceeds will revert back to your name and be included within your taxable estate (Although this is not the case for new policies purchased directly by the life insurance trust.

An ILIT is usually used for life insurance policies that were set up for the sole benefit of the heirs. If you need to own or access your life insurance policy at anytime, an ILIT may still be a good solution for you, but it must be drafted with that goal in mind.