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Old 11-09-2011, 04:59 PM
 
Location: Near a river
16,042 posts, read 18,978,143 times
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Quote:
Originally Posted by Wilson513 View Post
The means around this is an irrevocable life insurance trust whereby a trust is formed, the grantor gives a gift equal to the insurance premium to the beneficiaries, who decline it in favor of the trustee who then pays the premium. When the grantor dies, the insurance is paid to the beneficiaries and not includible in the gross estate.
Can you slow down and elaborate on this?

The grantor gives the gift while still living, and the beneficiaries declines it, etc.???

In the bolded word above, "premium," did you mean "principal"?
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Old 11-09-2011, 05:05 PM
 
Location: Near a river
16,042 posts, read 18,978,143 times
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Quote:
Originally Posted by Wilson513 View Post
So if the policy is owned by someone else and the decedent has no rights, it is not includable in the decedent's gross estate.
Please elaborate on the "Irrevocable Life Insurance Trust." Can this co-exist with a "Revocable Trust" on an estate? How costly is it to set up? "Irrevocable" sounds a little scary (?)
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Old 11-09-2011, 05:15 PM
 
Location: Near a river
16,042 posts, read 18,978,143 times
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Quote:
Originally Posted by Wilson513 View Post
The policy benefit passes outside of probate but is still taxable as included in the estate if the policy was owned by the decedent and the taxes are still an obligation of the probate estate.

OK now I'm more confused.

You said, in an above post, that (outside any kind of trust), a policy on an individual (the insured) that is owned by someone who is NOT the insured, upon the insured person's death, is NOT taxable.

But the payout IS taxable if the policy was owned by the decedent?

Seems like it should be the other way around? Clarify? Thanks.
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Old 11-10-2011, 07:15 AM
 
10,139 posts, read 23,295,544 times
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OK, let's start at the beginning. There is an income tax and there is a federal estate tax and there are state death taxes.

Income tax
Life insurance benefits paid as a consequence of the death of the insured are not taxable regardless of whether they are paid to the decedent's estate or a named beneficiary.

Estate and Death Taxes
Life insurance benefits paid as a consequence of the death of the insured are includible in the gross estate of the insured and subject to federal estate tax and most state death taxes if either (i) the insured's estate was the beneficiary, or (ii) the insured retained any rights under the policy such as the right to change beneficiaries, policy ownership, etc.

Irrevocable life insurance trust
To avoid inclusion of the benefits in the gross estate most planners use an irrevocable life insurance trust.

Questions?
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Old 11-10-2011, 04:05 PM
 
10,139 posts, read 23,295,544 times
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Irrevocable life insurance trusts are available for free from insurance companies. While an attorney must author a trust, insurance companies get around this by providing a "sample" agreement. I always believe in getting legal advice, but if you already know what you need, this is one way to get it.
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Old 08-21-2013, 06:07 AM
 
Location: Near a river
16,042 posts, read 18,978,143 times
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Thought I'd revive "this old thread" as others may find the discussion interesting.
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Old 08-21-2013, 06:31 AM
 
Location: Whereever we have our RV parked
8,787 posts, read 7,707,284 times
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I know have life insurance through work, which I will lose when I retire. After that I will not carry any life insurance. After 60 or so, the rate will be so high, there's no point. Life insurance is for making sure that if you die, your spouse will have a cushion when you die to help raise children and replace some of your income, so she's not totally destitute. We have savings, she'll be on SS. So she has her cushion. No need for life insurance.
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Old 08-21-2013, 06:37 AM
 
29,782 posts, read 34,871,258 times
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We have employer provided life insurance that started out as 100 percent of our final salary that decreased 10 percent per year until it reached 50 percent which it remains at until payout. It has no COLA so the real value decreases with inflation.
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Old 08-21-2013, 08:29 AM
 
Location: Northern panhandle WV
3,007 posts, read 2,172,300 times
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One thing that I did not see mentioned in all these pages of comments was anything about the Estate Tax Exemptions, which I belive for a spouse is unlimited. I think that for most of us here, that would be the case, not of course for those who are single. The problems then arise when the other spouse dies.
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Old 08-21-2013, 08:57 AM
 
8,199 posts, read 11,915,499 times
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Quote:
Originally Posted by newenglandgirl View Post
My term is up next month. I checked with my home/auto agency and they ran the premium figures on $100K policy, the least they will cover. For 10 years it's $46/month, for 15 it's $72, for 20 it's $96.

I'm thinking I might do the 10 years, just to leave to the kids along with the house and some other assets, but then I'd have to kick off within 10 years. Opinions??
Quote:
Originally Posted by newenglandgirl View Post
Thought I'd revive "this old thread" as others may find the discussion interesting.
So what did you end up doing?
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